[Senate Hearing 113-113]
[From the U.S. Government Publishing Office]
S. Hrg. 113-113
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
APPROPRIATIONS FOR FISCAL YEAR 2014
=======================================================================
HEARINGS
before a
SUBCOMMITTEE OF THE
COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
ON
H.R. 2610/S. 1243
AN ACT MAKING APPROPRIATIONS FOR THE DEPARTMENTS OF TRANSPORTATION AND
HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES FOR THE FISCAL YEAR
ENDING SEPTEMBER 30, 2014, AND FOR OTHER PURPOSES
__________
Department of Housing and Urban Development
Department of Transportation
Nondepartmental Witnesses
__________
Printed for the use of the Committee on Appropriations
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.gpo.gov/fdsys/browse/
committee.action?chamber=senate&committee=appropriations
__________
U.S. GOVERNMENT PRINTING OFFICE
78-075 PDF WASHINGTON : 2014
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800
DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC,
Washington, DC 20402-0001
COMMITTEE ON APPROPRIATIONS
BARBARA A. MIKULSKI, Maryland, Chairwoman
PATRICK J. LEAHY, Vermont RICHARD C. SHELBY, Alabama, Vice
TOM HARKIN, Iowa Chairman
PATTY MURRAY, Washington THAD COCHRAN, Mississippi
DIANNE FEINSTEIN, California MITCH McCONNELL, Kentucky
RICHARD J. DURBIN, Illinois LAMAR ALEXANDER, Tennessee
TIM JOHNSON, South Dakota SUSAN M. COLLINS, Maine
MARY L. LANDRIEU, Louisiana LISA MURKOWSKI, Alaska
JACK REED, Rhode Island LINDSEY GRAHAM, South Carolina
FRANK R. LAUTENBERG, New Jersey \1\ MARK KIRK, Illinois
MARK L. PRYOR, Arkansas DANIEL COATS, Indiana
JON TESTER, Montana ROY BLUNT, Missouri
TOM UDALL, New Mexico JERRY MORAN, Kansas
JEANNE SHAHEEN, New Hampshire JOHN HOEVEN, North Dakota
JEFF MERKLEY, Oregon MIKE JOHANNS, Nebraska
MARK BEGICH, Alaska JOHN BOOZMAN, Arkansas
Charles E. Kieffer, Staff Director
William D. Duhnke III, Minority Staff Director
------
Subcommittee on Transportation and Housing and Urban Development, and
Related Agencies
PATTY MURRAY, Washington, Chairman
BARBARA A. MIKULSKI, Maryland SUSAN COLLINS, Maine
RICHARD J. DURBIN, Illinois RICHARD C. SHELBY, Alabama
PATRICK J. LEAHY, Vermont LAMAR ALEXANDER, Tennessee
TOM HARKIN, Iowa LINDSEY GRAHAM, South Carolina
DIANNE FEINSTEIN, California MARK KIRK, Illinois
TIM JOHNSON, South Dakota DANIEL COATS, Indiana
FRANK R. LAUTENBERG, New Jersey \1\ ROY BLUNT, Missouri
MARK PRYOR, Arkansas JERRY MORAN, Kansas
JACK REED, Rhode Island JOHN BOOZMAN, Arkansas
Professional Staff
Alex Keenan
Meaghan L. McCarthy
Rachel Milberg
Dabney Hegg
Heideh Shahmoradi (Minority)
Ken Altman (Minority)
Jason Woolwine (Minority)
Rajat Mathur (Minority)
Administrative Support
Dan Broder
----------
\1\ Died on June 3, 2013.
C O N T E N T S
----------
Thursday, April 11, 2013
Page
Department of Housing and Urban Development: Office of the
Secretary...................................................... 1
Thursday, April 18, 2013
Department of Transportation:
Federal Aviation Administration.............................. 51
Office of Inspector General.................................. 51
Tuesday, June 4, 2013
Department of Housing and Urban Development:
Federal Housing Administration............................... 125
Office of Inspector General.................................. 125
Nondepartmental Witnesses........................................ 185
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
APPROPRIATIONS FOR FISCAL YEAR 2014
----------
THURSDAY, APRIL 11, 2013
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 10 a.m., in room SD-138, Dirksen
Senate Office Building, Hon. Patty Murray (chairman) presiding.
Present: Senators Murray, Collins, Coats, and Blunt.
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Secretary
STATEMENT OF HON. SHAUN DONOVAN, SECRETARY
opening statement of senator patty murray
Senator Murray. Good morning. The subcommittee will come to
order.
This morning, we welcome Secretary Donovan to the
subcommittee to discuss the President's fiscal year 2014 budget
request for the Department of Housing and Urban Development
(HUD).
As we begin our discussion of next year's budget, we have
to really acknowledge where we are today. Because of the
unwillingness of some in Congress to compromise on fair and
balanced deficit reduction, we are now living with
sequestration and the arbitrary cuts to Federal spending that
it requires.
Some here in Washington, DC, have claimed that the impact
is minimal. That is not the story that people all across the
country who have to live with sequestration's consequences are
telling.
The truth is these cuts are having an impact. And in so
many cases, it is an impact that is being felt by the most
vulnerable in our society.
The cut to HUD's section 8 voucher program, for example, is
more than $938 million, forcing housing authorities to make
difficult choices to stay within their reduced budgets.
On the ground, that means tens of thousands of fewer
vouchers to help our low-income families find safe, affordable
housing.
In my home State of Washington, the King County Housing
Authority announced it will not be reissuing vouchers, leaving
our low-income Washington families without access to affordable
housing. Stephen Norman, who is the King County Housing
Authority director, said immediately after he was forced to
make these cuts that, ``Because rents are so high, many of
these families may, quite literally, find themselves out on the
street as a result of these arbitrary cuts.''
They are not alone. Many housing authorities across the
country are being forced to make similar decisions.
In other communities, families that were in the process of
finding a place to live after spending months or years on a
waiting list have been told their voucher has been withdrawn.
They are losing hope and relief of finally having access to
affordable housing. Instead, they are left with frustration and
uncertainty.
Those families are paying the price for the fact that
Washington, DC, continues to lurch from crisis to crisis
instead of compromising around a balanced deficit reduction
plan.
As we continue to debate the future of the Federal budget,
they are a clear reminder that our decisions have consequences,
because this debate is about more than just numbers, it is
about people's lives and the Nation's values.
This debate is also occurring at a critical time for our
economy. After struggling through the great recession, the
economy is finally growing. But recent jobs reports highlight
how fragile our recovery is and that we cannot afford to push
off the hard choices a budget deal requires.
Our focus needs to be on creating jobs today, while laying
a strong foundation for the future.
A responsible plan will reduce the Nation's deficit. But it
cannot be at the expense of the most vulnerable or investments
in things like infrastructure and education that are essential
for a strong economy.
The budget we recently passed in the Senate provides a path
forward that balances responsible spending cuts with necessary
investments. And I look forward to working with my colleagues
in both the House and the Senate to try to enact a responsible
budget compromise.
This will require hard choices on all sides, but the
American people expect action.
So as we continue to work on the budget, we also have to
begin our work on the fiscal year 2014 appropriations bills.
And today, this subcommittee begins its work by examining HUD's
budget request.
The majority of HUD's budget supports a critical part of
the Nation's safety net--housing assistance. This includes
funding for section 8 vouchers, project-based section 8, public
housing, and homeless assistance grants.
These programs have long provided low-income Americans with
safe, affordable housing and shelter in time of crisis. These
programs are even more important today as families struggle to
find affordable housing.
According to HUD's recent report on the worst-case housing
needs, in 2011, there were over 8.5 million low-income renters
who spent more than 50 percent of their income on housing,
lived in severely substandard housing, or both.
Perhaps even more troubling is the fact that this number
has grown by 43.5 percent since 2007.
As we struggle to address the growing housing needs with
limited resources, Federal programs must be smarter and more
agile. Neither the taxpayers nor the millions of people who
rely on these programs can afford waste or inefficiency.
So it is incumbent upon HUD and this subcommittee to ensure
accountability. We have to look for ways to improve program
oversight and delivery by ensuring people are following the
rules, eliminating outdated regulations, streamlining programs,
and improving coordination across Government programs to make
the best use of scarce resources.
Improving Federal programs goes beyond ensuring compliance.
It also means focusing on outcomes.
Successful housing programs are those that create new
opportunities for their residents so they can improve their
lives and those of their children.
In Washington State, I have seen exciting partnerships
among housing authorities, schools, community colleges, and
employers designed to reduce poverty and its lasting impacts.
These partnerships are built on an understanding that
housing can and should do more than meet the basic need for
shelter.
Housing in strong, safe neighborhoods with access to good
schools, jobs, services, and transportation can help transform
people's lives.
The President's budget includes an initiative called
Ladders to Opportunity, which is focused on creating jobs,
attracting private investment, improving educational outcomes,
and increasing economic activity in high-poverty communities
across the Nation.
Several proposals in HUD's budget support this initiative,
including Choice Neighborhoods, the Rental Assistance
Demonstration, and the Neighborhood Stabilization Initiative.
In addition, the budget includes a new pilot program to
help address the needs of the growing low-income elderly
population, funding to combat mold in Indian country, and
expansion of the successful Jobs-Plus program for public
housing residents.
While all of these proposals address important issues
facing urban and rural communities across the country, we must
evaluate both their budgetary cost and HUD's capacity to take
on new initiatives.
HUD cannot effectively manage new initiatives at the cost
of the performance and oversight of their existing programs.
The Department must improve its oversight of public housing
authorities and other grantees; deliver on the needed
investments in its information technology (IT) systems; and
continue to strengthen the Federal Housing Administration's
(FHA) Mutual Mortgage Insurance (MMI) Fund, which the budget
anticipates needing to draw on taxpayer funds for the first
time in its history.
As our housing market continues its recovery, now is the
time to be thinking of the future of the Nation's housing
policy.
This conversation is appropriately focused on reforming our
housing finance system to ensure a strong housing market,
supported primarily by the private market. But this
conversation must also address the future of affordable rental
housing.
Recently, the Bipartisan Policy Center's Housing Commission
released recommendations for the future of housing policy. My
friend, former Senator Kit Bond, was a member. Their
recommendations support homeownership and the need to reform
our Nation's housing finance system.
The commission also reaffirmed the importance of affordable
housing. Its recommendations provide a very good foundation for
beginning the discussion of our Nation's housing policy, which
I look forward to continuing today.
PREPARED STATEMENT
And with that, I will turn it over to my partner, Senator
Collins.
[The statement follows:]
Prepared Statement of Senator Patty Murray
The subcommittee will come to order. This morning we welcome
Secretary Donovan to the subcommittee to discuss the President's fiscal
year 2014 budget request for the Department of Housing and Urban
Development (HUD). As we begin our discussion of next year's budget, we
must acknowledge where we are today.
sequestration's impact on the most vulnerable
Because of the unwillingness of some in Congress to compromise on
fair and balanced deficit reduction, we are now living with
sequestration and the arbitrary cuts to Federal spending it requires.
And while some here in Washington, DC, have claimed that the impact
is minimal, that's not the story that people all across the country who
have to live with sequestration's consequences are telling. The truth
is these cuts are having an impact. And in so many cases it's an impact
that's being felt by the most vulnerable in our society.
The cut to HUD's section 8 voucher program, for example, is more
than $938 million, forcing housing authorities to make difficult
choices to stay within their reduced budgets. On the ground, this means
tens of thousands of fewer vouchers to help low-income families find
safe, affordable housing.
In my home State of Washington, the King County Housing Authority
announced that it will not be re-issuing vouchers, leaving low-income
Washington families without access to affordable housing. Stephen
Norman, the King County Housing Authority director, said immediately
after he was forced to make these cuts that ``Because rents are so
high, many of these families may, quite literally, find themselves out
on the street as a result of these arbitrary cuts.''
And they are not alone. Many housing authorities across the country
are being forced to make similar decisions. In other communities,
families that were in the process of finding a place to live after
spending months or years on a waiting list have been told that their
voucher has been withdrawn. They are losing the hope and relief of
finally having access to affordable housing. Instead they are left with
frustration and uncertainty. These families are paying the price for
the fact that Washington, DC, continues to lurch from crisis to crisis
instead of compromising around a balanced deficit reduction plan. As we
continue to debate the future of the Federal budget, they are a clear
reminder that our decisions have consequences.
Because this debate is about more than just numbers, it is about
people's lives and the Nation's values. This debate is also occurring
at a critical time for our economy. After struggling through the Great
Recession, the economy is finally growing. But recent jobs reports
highlight how fragile our recovery is and that we cannot afford to push
off the hard choices a budget deal requires.
Our focus needs to be on creating jobs today, while laying a strong
foundation for the future. A responsible plan will reduce the Nation's
deficit. But it cannot be at the expense of the most vulnerable or
investments in things like infrastructure and education that are
essential for a strong economy.
The budget we recently passed in the Senate provides a path forward
that balances responsible spending cuts with necessary investments. I
look forward to working with my colleagues in both the House and Senate
to try to enact a responsible budget compromise. This will require hard
choices on all sides, but the American public expects action.
As we continue work on the budget, we must also begin our work on
the fiscal year 2014 appropriations bills. And today, this subcommittee
begins its work by examining HUD's budget request.
The majority of HUD's budget supports a critical part of the
Nation's safety net--housing assistance. This includes funding for:
--section 8 vouchers;
--project-based section 8;
--public housing; and
--homeless assistance grants.
These programs have long provided low-income Americans with safe,
affordable housing and shelter in times of crises. These programs are
even more important today as families struggle to find affordable
housing.
According to HUD's recent report on the worst case housing needs,
in 2011, there were over 8.5 million low-income renters who spent more
than 50 percent of their income on housing, lived in severely
substandard housing, or both. Perhaps even more troubling is the fact
this number has grown by 43.5 percent since 2007.
improving performance and accountability
As we struggle to address the growing housing needs with limited
resources, Federal programs must be smarter and more agile. Neither the
taxpayers nor the millions of people who rely on these programs can
afford waste or inefficiency. So it is incumbent upon HUD and this
subcommittee to ensure accountability. We must look for ways to improve
program oversight and delivery by:
--Ensuring people are following the rules;
--Eliminating outdated regulations;
--Streamlining programs; and
--Improving coordination across Government programs to make the best
use of scarce resources.
Improving Federal programs goes beyond ensuring compliance. It also
means focusing on outcomes. Successful housing programs are those that
create new opportunities for their residents so that they can improve
their lives and those of their children.
In Washington State, I have seen exciting partnerships among:
--Housing authorities;
--Schools;
--Community colleges; and
--Employers designed to reduce poverty and its lasting impacts.
These partnerships are built on an understanding that housing can
and should do more than meet the basic need for shelter. Housing in
strong, safe neighborhoods with access to good schools, jobs, services,
and transportation can help transform people's lives. The President's
budget includes an initiative called ``Ladders to Opportunity'', which
is focused on:
--Creating jobs;
--Attracting private investment;
--Improving educational outcomes; and
--Increasing economic activity in high poverty communities across the
Nation.
Several proposals in HUD's budget support this initiative,
including:
--Choice Neighborhoods;
--The Rental Assistance Demonstration; and
--The Neighborhood Stabilization Initiative.
In addition, the budget includes a new pilot program to help
address the needs of the growing low-income elderly population, funding
to combat mold in Indian Country, and expansion of the successful Jobs-
Plus program for public housing residents.
While all of these proposals address important issues facing urban
and rural communities across the country, we must evaluate both their
budgetary cost and HUD's capacity to take on new initiatives.
HUD cannot effectively manage new initiatives at the cost of the
performance and oversight of existing programs. The Department must:
--Improve its oversight of public housing authorities and other
grantees;
--Deliver on the needed investments in its IT systems; and
--Continue to strengthen FHA's Mutual Mortgage Insurance Fund, which
the budget anticipates needing to draw on taxpayer funds for
the first time in its history.
As our housing market continues its recovery, now is the time to be
thinking of the future of the Nation's housing policy. This
conversation is appropriately focused on reforming our housing finance
system to ensure a strong housing market, supported primarily by the
private market. But this conversation must also address the future of
affordable rental housing.
Recently, the Bipartisan Policy Center's Housing Commission
released recommendations for the future of housing policy. My friend,
former Senator Kit Bond, was a member. Their recommendations support
homeownership and the need to reform our Nation's housing finance
system.
The Commission also reaffirmed the importance of affordable
housing. Its recommendations provide a good foundation for beginning
the discussion of our Nation's housing policy, which I look forward to
continuing today.
With that I turn it over to my partner, Senator Collins.
STATEMENT OF SENATOR SUSAN M. COLLINS
Senator Collins. Thank you, Madam Chairman.
First of all, let me say that I am delighted to be working
with you once again this year, as we start the fiscal year 2014
appropriations process under the new leadership of both
Chairman Mikulski and Vice Chairman Shelby, as well as the
members of this subcommittee, including our colleagues, Senator
Coats and Senator Blunt, who have joined us today. I am always
glad to see strong representation on the Republican side of the
dais here.
Mr. Secretary, it is also a great pleasure to see you
again. I am very happy that you are apparently going to be
staying on in the second administration, at least for a while,
since I have found you to be a real straight-shooter and
dedicated to improving housing opportunities for the people of
this country. And I look forward to continuing to work with
you.
Obviously, we still have very serious budget issues to deal
with. And we must find a careful balance to ensure that we deal
with the ongoing unsustainable $16.7 trillion debt, while
providing housing for our most vulnerable citizens.
As we begin to construct this spending bill, we continue to
face difficult decisions given these fiscal constraints.
Sequestration is going to make some of these decisions even
tougher.
I am concerned for the Maine housing authority directors,
with whom I recently met, who told me they are being forced to
reduce spending at the expense of families in need. Some of
them told me that they were actually turning back vouchers
because they did not have sufficient administrative funds. And
that certainly is of great concern.
Yet, even though sequestration cuts have already taken
effect, the deficit continues to rise. The budget that HUD has
submitted is $47.6 billion for fiscal year 2014 and an increase
of nearly $4.2 billion, or 6.67 percent, over the fiscal year
2013 sequestration levels.
What would be helpful to me today, however, is to have you
describe the total resources that are available to HUD,
including offsetting receipts, and to give us a comparison to
the pre-sequestration levels, as well. And I understand that
you are prepared to do that.
The vast majority of this funding will support renewals for
rental and homelessness assistance. The budget also provides
for investment to revitalize neighborhoods and support economic
development initiatives in communities throughout the country.
As we prepare the budget, it is critical that we address
the ongoing challenges with homelessness, which remains a
personal top priority of mine.
Chairman Murray and I continue to share this commitment,
particularly for our Nation's veterans. One out of every six
men and women in homeless shelters are veterans. And
unfortunately, veterans are 50 percent more likely to fall into
homelessness compared to other Americans.
I am pleased that the budget continues funding for HUD's
Veterans Affairs Supportive Housing, the HUD-VASH program, at
$75 million. This level of funding, I am told, will allow us to
serve an additional 10,000 veterans.
And it is important to note that this program is working,
that veterans' homelessness has fallen, and it fell by nearly
7.2 percent from 2011 to 2012. That demonstrates that programs
like this work.
And that needs to be our focus. We need to focus like a
laser on what kinds of housing programs work, give us the
biggest bang for the buck, and what kind really have outlived
their usefulness, are not expansive, and, most of all, are not
effective in serving families in need.
In addition to programs that serve the homeless, HUD
provides important support for affordable rental housing.
Another important issue which we discussed at length is the
oversight and monitoring of HUD's programs. In that regard, Mr.
Secretary, I want to thank you for your work on an
investigation in Maine into the Maine State Housing Authority
section 8 voucher program last year. I requested an
investigation into the troubling cases of serious code
violations and other poor conditions that were uncovered in
Oxford County, Maine, and brought to me by the attention of a
local fire chief who was so concerned. And I appreciate so much
the work of your Department in addition to the work of the
inspector general.
It is critical that federally subsidized properties comply
with all health, safety, and quality standards. After all, it
is inexcusable that we are putting residents in units and
apartments that had serious violations of welfare and safety
and health standards. But it is doubly offensive when the
taxpayers are subsidizing those unfit units.
So those are just some of the issues. I am pleased with the
increased funding levels for section 202 housing for the
elderly. This program has provided over 400,000 affordable
homes for very low-income elderly individuals through a number
of different financing structures.
Many people are surprised to learn that Maine has one of
the largest elderly populations in the country. In fact, if you
look at the median age, we are the oldest State in the Nation,
older than Florida even. That raises certain challenges.
There is one area that I want to highlight in closing, and
that is the funding level for the community development block
grant (CDBG) program. As you know, I believe that the level of
$2.79 billion is truly disappointing. I am told that, if
enacted, this would be the lowest level of funding since 1976.
And yet, this program remains the most adaptable, the most
welcomed community and economic development Federal program for
meeting the unique needs of communities throughout this
country.
PREPARED STATEMENT
These are just some of the many issues we are going to have
to tangle with this year, and I look forward to working with
the chairman and the members of this subcommittee as we
consider HUD's fiscal year 2014 budget request.
Thank you.
[The statement follows:]
Prepared Statement of Senator Susan M. Collins
Thank you, Chairman Murray. I am delighted to join you as we start
the fiscal year 2014 appropriations process under new leadership of
both Chairman Mikulski and Vice Chair Shelby, as well as the new
members of this subcommittee.
Mr. Secretary, it is nice to see you again. I look forward to
continuing to work with you to meet the housing and economic
development needs of families and communities throughout the Nation and
I look forward to your testimony as we consider the Department of
Housing and Urban Development's (HUD's) fiscal year 2014 budget
request.
As we begin to construct this spending bill, we continue to face
difficult decisions given the fiscal constraints we remain under.
Sequestration will make these decisions even tougher. I am also
concerned for the public housing authorities who are being forced to
reduce spending at the expense of families in need. While sequester
cuts have already taken effect, the deficit continues to rise. We must,
however, find a careful balance to ensure that the Nation's most
vulnerable are provided for.
The President's fiscal year 2014 HUD budget request is $47.6
billion, an increase of nearly $4.2 billion or 6.67 percent above
fiscal year 2013 enacted levels. The vast majority of this funding will
support the renewals for rental and homelessness assistance. The budget
also provides for the investment to revitalize neighborhoods and
support economic development in communities throughout the country.
As we prepare the budget for fiscal year 2014, it is critical that
we address the ongoing challenges with homelessness, which remains a
top priority of mine. Chairman Murray and I continue to share this
commitment, particularly for our Nation's veterans. One out of every
six men and women in homeless shelters are veterans, and unfortunately,
veterans are 50 percent more likely to fall into homelessness compared
to other Americans. I am pleased the budget continues funding for HUD's
Veterans Affairs Supportive Housing (HUD-VASH) program at $75 million.
This level of funding will serve an additional 10,000 veterans
nationwide. Veterans' homelessness fell by nearly 7.2 percent from 2011
to 2012, demonstrating that programs like HUD-VASH work.
I continue to support the Homeless Assistance Grants program to
prevent and end homelessness. The budget proposes $2.38 billion for
this program, which is $575 million over current levels.
In addition to programs that effectively serve the homeless, HUD
also provides support for affordable rental housing. The budget
proposes nearly $20 billion for the Tenant-Based Rental Assistance
program, of which $1.685 billion is available for administrative costs.
Another important issue is the oversight and monitoring of HUD's
programs. Mr. Secretary, I want to thank you for your work into the
investigation of Maine State Housing Authority's section 8 voucher
program. Last year, I requested an investigation into the troubling
cases of code violations and other poor conditions that were uncovered
in Oxford County. I appreciate the work of your Department, in addition
to that of Inspector General Montoya. It is critical that federally
subsidized properties comply with all health, safety, and quality
standards.
It is bad enough that taxpayers were charged for substandard units,
but it is appalling that residents were forced to live in such horrible
conditions. The welfare and safety of tenants must be safeguarded, and
federally subsidized properties must represent fair value to the tenant
and the taxpayer alike.
Nationwide, more than 5.4 million families receive housing
assistance through the many programs offered at HUD. Altogether, more
than 65 percent of HUD-assisted households are elderly or disabled. I
am pleased to see the increased funding levels for the Section 202
Housing for the Elderly program. This program has provided over 400,000
affordable homes for very-low-income elderly individuals through a
number of different financing structures in the past. Maine has one of
the largest elderly populations in the United States. In fact, Maine
has the oldest median age population in the United States.
Finally, the funding level for the Community Development Block
Grant (CDBG) program, which is proposed at $2.79 billion is truly
disappointing. If enacted, this would reach the lowest level of funding
since 1976. With 1,100 grantees served by an estimated 7,000 local
governments across the country, CDBG remains the largest and most
adaptable community and economic development Federal program for
meeting the unique needs within these communities.
These are just some of the many issues we are confronted with on
our subcommittee this year. Chairman Murray, I look forward to working
with you as we consider HUD's fiscal year 2014 budget request.
Senator Murray. Thank you very much. And, Senator Collins,
I appreciate the opportunity to work with you again this year
on a subcommittee we both care passionately about. It is great
to work with you.
Senator Coats, do you have an opening statement?
STATEMENT OF SENATOR DAN COATS
Senator Coats. Madam Chairman, I do.
I thank you. I look forward to serving on this subcommittee
with you and our ranking member.
Not to repeat, but I will repeat Senator Collins' point
that we are operating during a time where the game has changed.
Instead of coming here every year on the Appropriations
Committee and saying, ``how much more are we going to spend
this year?'' we are faced with a fiscal crisis which requires
us to say, how can we take better care of the taxpayer dollars
that are being sent here? How can we better manage our
Departments? How can we be more efficient with perhaps less to
spend or not as much to spend as we would like? How can we
separate the essential from the ``well, we would like to do
this but can't afford it right now,'' from the ``why are we
doing that in the first place?'' Or maybe that had a sufficient
function going forward at one time, but we just cannot justify
that program.
All of this to address the fiscal issue in one of two ways:
One, how can we save money and turn it back and reduce our debt
and deficit? Second, how can we better transfer this money to
essential programs instead of wasting it on programs that do
not seem to work very well?
Let me just mention a couple things.
Mr. Secretary, I am not sure my time will allow me to be
here to ask this direct question, but I will just put it out
there and you can address it in a general way.
In 2012, the Government Accountability Office (GAO) found
that the Federal Government is operating 160 separate housing
assistance programs and tax expenditures within 20 departments,
agencies, costing about $170 billion. Is there room here to
eliminate some of this duplication or to consolidate some of
this, so that we do not have to have each separate entity here
staffed all the way down through the administrative positions,
and so forth? Is there room for this type of consolidation and
coordination?
Every business in America has had to do this since the 2008
collapse. And when we mentioned sequester, they say, ``Five
percent, 7 percent? I mean, we have had to do 15 percent. We
have had to do 18 percent. But we are a much more leaner, more
efficient organization now.''
We see that everywhere in the private sector, but we do not
see that in the Federal Government.
HUD provided a community development block grant in the
amount of $505,000 to a private entity, Sergeant's Pet Care
Products, Inc., which specializes in pet shampoo and
toothpaste. Now, maybe there is justification for this small
business. I do not know. But it is a private company. They are
expected to bring in revenue of $140 million in 2012. Why are
we giving CDBG grants to private companies who are earning
revenues of over $100 million?
And last, according to HUD's own inspector general, for
2012 fiscal year, he said HUD could have put over $3.2 billion
to better use and has paid over $1.3 billion in questionable
costs. So that is $4.5 billion in public funds that perhaps
could have shifted to provide better housing or more effective
housing, or not spent at all.
So just in a general way, Mr. Secretary, address the
broader question. You do not have to provide it here exactly
the details of this particular loan or justify this or that.
The larger question of what is HUD doing, what are you doing,
to try to make your Department more efficient, more effective,
given the scarcity of funds that we have, and the fact that we
need to be more careful with the taxpayer dollars. So when you
have a chance to address that, I would appreciate it.
And, Madam Chairman, thank you.
Senator Murray. Thank you very much.
Senator Blunt.
STATEMENT OF SENATOR ROY BLUNT
Senator Blunt. Chairman, thank you for conducting the
hearing.
Secretary, thank you for being here. I look forward to
working with you and Senator Collins on this important
subcommittee.
And I have a statement for the record, and I will just
submit it for the record.
[The referenced statement was not available at press time.]
Senator Murray. Thank you very much.
With that, Secretary Donovan, we will turn it over to your
opening statement. And we do have a vote around 11 o'clock, but
I think we have sufficient time for your statement and
questions from those of us who are here this morning. I will
turn it over to you.
SUMMARY STATEMENT OF HON. SHAUN DONOVAN
Secretary Donovan. Thank you.
Chairman Murray, Ranking Member Collins, members of the
subcommittee, thank you for having me here today.
HOUSING AND COMMUNITIES
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 does this by supporting the creation and retention of
620,000 jobs.
We followed four main principles in creating our 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.
FEDERAL HOUSING ADMINISTRATION
FHA continues to play an important role in this effort,
insuring nearly 1.2 million single-family mortgage loans in
2012. However, due to reverse mortgages and other loans insured
during the economic crisis, the fiscal year 2014 budget
projects that FHA will need $943 million in support from
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 from those efforts, 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 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.
ASSISTED HOUSING
The second principle we used in developing our budget was
to protect current vulnerable residents. 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 3 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 consumes 84 percent of our proposed
budget just to keep current residents in their homes, support
homelessness prevention, and provide basic maintenance to
public housing.
And again, to echo your words, chairman, this has never
been more important with the staggering over 40 percent
increase in worst-case housing needs we have seen in just 4
years.
EXISTING PARTNERSHIP
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 made clear 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 impact and
reduce costs.
CHOICE NEIGHBORHOODS
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 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.
Our reorganized Office of Economic Resilience, to be
located within HUD's Community Development and Planning
Division, 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.
REGULATORY BURDENS
The final principle we used in creating this budget was to
increase efficiency, reduce regulatory burdens, and provide
flexibility to our partners, allowing them to better manage
resources.
SECTION 8 REFORMS
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 5 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, consolidate
programs, and save taxpayers money.
TRANSFORMATION INITIATIVES
This budget also continues the transformation initiative,
allowing us to propose increased investments 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 2 years.
VASH VOUCHERS
Because we know these programs save lives as well as
taxpayer dollars, our budget proposes 10,000 new VASH vouchers
and a significant increase in our homeless assistance grants.
Unfortunately, sequestration seriously threatens our
ability to serve families, communities, and even veterans
across the Nation with hundreds of thousands likely to lose
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 the balanced deficit reduction
plan proposed by the President.
PREPARED STATEMENT
I look forward to working with you, both on the fiscal year
2014 budget and on reversing the harmful cuts imposed by
sequestration.
Thank you for the opportunity to testify today. I look
forward to your questions.
[The statement follows:]
Prepared Statement of Hon. Shaun Donovan
Thank you, Chairman Murray and Ranking Member Collins, for this
opportunity to discuss how the Department of Housing and Urban
Development's (HUD's) fiscal year 2014 budget proposal will grow our
economy from the middle class out--not from the top down--while
supporting the recovery in our housing market and economy. The
investments in the Department's programs that this budget makes are
essential to delivering on the President's promise to make America a
magnet for jobs and manufacturing, equip every American with the skills
they need to do those jobs, and ensure that hard work leads to a decent
living.
Overall, this budget furthers the Department's mission of
supporting home ownership, access to affordable housing free from
discrimination, and community development. The 2014 President's budget
provides $47.6 billion for HUD programs to support these efforts, in
addition to a receipts projection of $14.5 billion--representing a net
decrease of $3.2 billion from the 2012 enacted level. Increases are
provided to protect vulnerable families and employ proven tools to
revitalize neighborhoods with distressed HUD-assisted housing and
concentrated poverty. To build more evidence of what works, State and
local public housing authorities are offered program flexibilities in
exchange for designing and rigorously evaluating innovative programs
and policies. The constrained fiscal environment also forced tough
choices, including funding reductions to programs that increase the
supply of affordable housing.
The Department's budget for fiscal year 2014 follows the roadmap
the President has laid out for jumpstarting our economy through
educating, innovating, and building--by targeting our investments to
the families and geographies that need them the most, and putting
American back to work. Specifically, this budget:
Supports the Mortgage Market and Helps Borrowers Who Are at Risk of
Foreclosure.--The Administration projects that the Federal Housing
Administration (FHA) will insure $178 billion in mortgage loans in
2014, supporting new home purchases and refinanced mortgages that
significantly reduce borrower payments. FHA financing was used for 27
percent of home purchase loans in 2011, including an estimated 41
percent of first-time homeowners. FHA's loss mitigation program
minimizes the risk of financially struggling borrowers going into
foreclosure, and since the start of the mortgage crisis, it has helped
more than a million homeowners. Recent increases in FHA premium levels
will boost FHA's capital reserves and increase Federal revenues.
The budget also includes $132 million for housing and homeowner
counseling through HUD and the Neighborhood Reinvestment Corporation
(NeighborWorks). Over half of these funds are dedicated to foreclosure
assistance. NeighborWorks' National Foreclosure Mitigation Counseling
program has assisted over 1.4 households since its inception in 2008.
Provides Ladders of Opportunity for Anybody Willing To Work Hard
and Play by the Rules.--The budget provides $400 million for Choice
Neighborhoods to continue to transform neighborhoods of concentrated
poverty into opportunity-rich, mixed-income neighborhoods. This funding
level, which is $280 million above 2012 enacted, will be used to
revitalize HUD-assisted housing and surrounding neighborhoods through
partnerships between local governments, housing authorities,
nonprofits, and for-profit developers. A portion of these funds will be
targeted to designated Promise Zones--high-poverty communities where
the Federal Government will partner with local leadership to create
jobs, leverage private investment, increase economic activity, reduce
violence, and improve educational opportunities. To further support
Promise Zones, the budget includes companion investments of $300
million in the Department of Education's Promise Neighborhoods program,
$35 million in the Department of Justice's Byrne Criminal Justice
Innovation Grants program, and continues to support the Strong Cities,
Strong Communities initiative as well as tax incentives to promote
investment and economic growth.
Supports Strategic Infrastructure Planning and Investments To Help
Make America a Magnet for Jobs.--In addition to the hundreds of
thousands of jobs that this budget creates both directly and
indirectly, it makes an essential contribution to the Administration's
broader effort to discourage outsourcing and encourage ``insourcing.''
Specifically, attracting new businesses to our shores depends on urban,
suburban, and rural areas that feature more housing and transportation
choices, homes that are near jobs, and transportation networks that
move goods and people efficiently--which is why this budget includes
funding for the Office of Economic Resiliency which, as part of the
Administration's multiagency partnership between HUD, the Department of
Transportation, and the Environmental Protection Agency, will
administer $75 million in Integrated Planning and Investment Grants.
These grants will create incentives for communities to develop and
implement comprehensive housing and transportation plans, such as
updates to building codes, land use, and zoning ordinances that result
in more resilient economic development, improve housing supply response
to demand, and increase affordable housing near public transit. This
funding, which builds upon the progress made through Sustainable
Communities program, would support about 30 additional regional and
neighborhood planning and implementation grants to enable communities
to plan for their economic future. This funding embodies the
President's commitment to being a new kind of Federal partner to
regions, States, and localities as they tackle planning and economic
development challenges in the 21st century.
Of course, smart planning requires sustained follow-through. That
is why HUD is committed to ensuring that its core community and housing
development work contributes to more and better transportation choices;
promotes equitable, affordable housing; helps communities address the
lingering neighborhood impacts of the foreclosure crisis; and aligns
Federal policies and funding to remove barriers to local collaboration.
The budget provides $3 billion for the Community Development Block
Grant (CDBG) program and neighborhood stabilization activities, and
proposes reforms to better target CDBG investments to address local
community development goals. This funding level includes $200 million
in new competitive funds to continue mitigating the impacts of the
foreclosure crisis. This funding will provide essential new resources
to help communities hardest hit by the foreclosure crisis while
creating jobs through rehabilitating, repurposing, and demolishing
vacant and blighted properties. The budget also maintains its support
for the proposed $15 billion Project Rebuild program, which will
leverage private capital to bring the benefits of neighborhood
stabilization to national scale.
Protects the Vulnerable Recipients of HUD Rental Assistance and
Makes Progress on the Federal Strategic Plan To End Homelessness.--The
budget includes $20 billion for the Housing Choice Voucher program to
help more than 2.2 million low-income families afford decent housing in
neighborhoods of their choice. This funding level supports all existing
vouchers and provides 10,000 new vouchers targeted to homeless
veterans. The budget also includes $10.3 billion for the Project-Based
Rental Assistance program to maintain affordable rental housing for 1.2
million families, and provides $6.6 billion in operating and capital
subsidies to preserve affordable public housing for an additional 1.1
million families.
The budget provides $2.4 billion for Homeless Assistance Grants,
$480 million above the 2012 enacted level. This funding maintains the
approximately 325,000 HUD-funded beds that assist the homeless
nationwide and expands rapid re-housing and permanent supportive
housing. Backed with new data and emerging best practices across the
United States, this evidence-based investment will make further
progress towards the goals laid out in the Federal Strategic Plan to
End Homelessness.
Puts HUD-Subsidized Public and Assisted Housing on a Financially
Sustainable Path.--This budget also recognizes that we can no longer
tolerate a federally supported rental housing system that is ``separate
and unequal''--one which expects public housing authorities (PHAs) to
house over 1 million families in public housing while subjecting them
to overly burdensome regulation and denying them access to private
capital available to virtually every other form of rental housing. To
bring the public housing program toward mainstream real estate
financing and management practices and begin to address the $26 billion
in capital needs, the Department will continue to implement the Rental
Assistance Demonstration (RAD) enacted in 2012. At the same time, the
budget provides $10 million for a targeted expansion of RAD to public
housing properties in high-poverty neighborhoods, including designated
Promise Zones, where the Administration is also supporting
comprehensive revitalization efforts.
Improves the Way Federal Dollars Are Spent and Builds Evidence of
What Works.--The budget proposes to scale up the Moving To Work (MTW)
program, which gives high-performing State and local public housing
authorities (PHAs) various flexibilities in their use of Housing Choice
Voucher and public housing funds. In exchange for this flexibility,
PHAs will help design and test innovative policies to support self-
sufficiency and other positive outcomes for families, streamline and
consolidate program delivery, and reduce long-term costs. In addition,
PHAs will report on outcomes associated with their MTW activities, and
those that choose to implement work requirements, time limits on
assistance, or major rent reform initiatives will participate in
rigorous evaluations.
The budget also modernizes the Housing Opportunities for Persons
With AIDS (HOPWA) program to better reflect the current case
concentration and understanding of HIV/AIDS and ensure that funds are
directed in a more equitable and effective manner. This update includes
a new formula that will distribute HOPWA funds based on the current
population of people living with HIV/AIDS, fair market rents, and
poverty rates in order to target funds to areas with the most need. It
also makes the program more flexible, giving local communities more
options to provide targeted, timely, and cost-effective interventions.
The budget's $332 million investment in HOPWA, in combination with the
proposed modernization, will assist local communities in keeping
individuals with HIV/AIDS housed, making it easier for them to stay
connected to treatment, and therefore improving health outcomes for
this vulnerable population.
Makes Tough Choices.--The budget provides $950 million for the HOME
Investment Partnerships Program, 5 percent below the 2012 enacted
level. At this funding level, HOME will provide grants to State and
local governments to supply almost 40,000 additional units of
affordable housing for low-income families. This funding reduction is
mitigated by the investment of $1 billion in mandatory funding for the
Housing Trust Fund to finance the development, rehabilitation, and
preservation of affordable housing for extremely low income families.
The budget provides a total of $526 million for the Housing for the
Elderly and Housing for Persons with Disabilities programs, $13.6
million below the 2012 enacted level. This funding level will support
all 150,000 existing units in these programs, but limits new
construction to $40 million for additional supportive housing units.
These investments directly support research that will build our
understanding of the intersection between supportive housing and
healthcare costs, and help identify what works best in allowing seniors
to age-in-place.
Reforms Government So That It's Leaner, Smarter, More Transparent,
and Ready To Succeed.--The American economy of the future requires a
Federal Government that is efficient, streamlined, and transparent. As
such, the budget proposes reforms to HUD rental assistance programs
that would save nearly $400 million in fiscal year 2014 without
reducing the number of families served--by streamlining programs and
reforming policies. Moreover, this budget once again calls for the
flexible use of resources through the Transformation Initiative, which
the Department will use to invest in technical assistance to build
local capacity to safeguard and effectively invest taxpayer dollars;
conduct innovative research, evaluations of program initiatives and
demonstration programs so we can fund what works and stop funding what
doesn't; and upgrade the IT infrastructure that tracks and monitors our
programs.
In short, this budget will achieve substantial results not only for
vulnerable, low-income Americans but also for hard-hit local and State
economies across the country. Its carefully targeted investments will
enable HUD programs to serve millions of families in thousands of
communities nationwide, helping to make America a magnet for jobs, and
ensuring that our workers have the skills they need for those jobs.
Consistent with its budget proposals in the first term, HUD's fiscal
year 2014 budget is structured around the five overarching goals the
Department adopted in its Strategic Plan 2010-2015. These goals reflect
the Department's--and my--commitment to ``moving the needle'' on some
of the most fundamental challenges facing America. Indeed, every month,
I hold HUDStat meetings on one or more of these goals, to assess
progress and troubleshoot problems in order to: (1) ensure that HUD is
as streamlined and effective as possible in the way that we administer
our own programs and partner with other Federal agencies; and (2) hold
our grantees accountable for their expenditure of taxpayers' hard-
earned dollars.
goal 1: strengthen the nation's housing market to bolster the economy
and protect consumers
This Administration entered office confronting the worst economic
crisis since the Great Depression--as mortgages were sold to people who
couldn't afford or understand them, while banks packaged them into
complex securities that they made huge bets on--and bonuses with--other
people's money. And while the largest factors contributing to this
crisis were market driven, the American people have turned to Congress
and the Administration for leadership and action in righting our
Nation's housing market. HUD remains firmly committed to working
together with communities and individuals to cope with these
unprecedented challenges.
Responding to the Market Disruption
The Federal Housing Administration (FHA) and Government National
Mortgage Association (GNMA) continue to have a significant impact on
the Nation's economic recovery. The activities of the Federal
Government are critical to both supporting the housing market in the
short term and providing access to homeownership opportunities over the
long term, and doing both in a way that minimizes risks to taxpayers.
In 2014, HUD is requesting $400 billion in loan guarantee authority
for the Mutual Mortgage Insurance Fund, which will provide an estimated
1.2 million single-family mortgages (at a projected $199.3 billion in
loan volume) and $30 billion in loan guarantee authority for the
General and Special Risk Insurance Fund, which will provide an
estimated 273,000 units in multifamily housing properties and an
estimated 75,700 beds in healthcare facilities. The need for this
investment is clear as FHA has stepped up in recent years to address
the unprecedented challenges wrought by the housing crisis, playing an
important countercyclical role that has offered stability and liquidity
throughout the recession. While a recovery of the housing market is
currently underway, FHA continues to act as a crucial stabilizing
element in the market, and to assure ongoing access to credit for
qualified first-time, low-wealth or otherwise underserved borrowers.
However, FHA's expanded role is and should be temporary.
FHA's share of the mortgage market has gone from a low of 3.1
percent of loan originations in 2005, up to a peak of 21.1 percent in
2010, and more recently down to 16.5 percent in the 4th quarter of 2012
(U.S. Housing Market Conditions Report, 4th Quarter 2012). In fact, the
number of FHA single family loan endorsements has declined to levels
comparable to those seen in fiscal years 2002 and 2003, when FHA's
market share was lower than it is today, indicating that FHA's current
slightly elevated market share is primarily due to a substantial
decrease in the size of the total mortgage market rather than
exceptionally high FHA loan volumes. As the market continues to recover
and private capital returns at more normal levels, FHA's role will
naturally recede.
As has been true throughout its history, FHA is particularly
important to borrowers that the conventional market does not adequately
serve, including qualified borrowers who would otherwise be shut out of
the mortgage market. Fully 60 percent of all African American and
Hispanic homebuyers using mortgages rely upon FHA financing and over 30
percent of all FHA-insured homebuyers are minorities. According to the
latest Home Mortgage Disclosure Act data, half of all African Americans
who purchased a home in 2011, and 49 percent of Hispanics, did so with
FHA financing.
Redoubling Efforts To Keep Homeowners in Their Homes
While there is work still to be done, HUD is proud of the progress
this Administration has made in tackling ongoing foreclosure
challenges. Between April 2009 and February 2013, more than 6.4 million
foreclosure prevention actions were taken--including nearly 1.7 million
FHA loss mitigation and early delinquency interventions and 1.5 million
homeowner assistance actions through the Making Home Affordable
program, including more than 1.1 million permanent modifications
through the Home Affordable Modification Program (HAMP)--saving these
households an estimated $18.5 billion in monthly mortgage payments.
As part of the Administration's commitment to help responsible
homeowners stay in their homes, we have actively sought to use our
current programs and authorities to make homeownership sustainable for
millions of American families. Examples of our efforts include:
--Streamline Refinance.--An option that allows borrowers with FHA-
insured loans who are current on their mortgage to refinance
into a new FHA-insured loan at today's low interest rates
without requiring additional underwriting, permitting these
borrowers to reduce their mortgage payments. This program
benefits current FHA borrowers--particularly those whose loan
value may exceed the current value of their home--and by
lowering a borrower's payment, also reduces risk to FHA. And,
because we see potential for more widespread use of this
product, FHA made changes to the way in which streamline
refinance loans are displayed in the Neighborhood Watch Early
Warning System (Neighborhood Watch) to encourage lenders to
offer this product more widely to homeowners with FHA-insured
mortgages.
--Changes to FHA's Loss Mitigation Waterfall.--A mortgagee letter
published on November 16, 2012, outlined changes to FHA's loss
mitigation home retention options. One of the key elements of
this update was moving FHA's Home Affordable Modification
Program (HAMP) product up in FHA's loss mitigation waterfall so
servicers could more quickly offer deeper payment relief to
struggling FHA borrowers, resulting in an increase in the
number of borrowers being able to retain their homes.
--Housing Counseling.--In 2014, HUD is requesting $55 million in
housing counseling assistance, to improve access to quality
affordable housing, expand homeownership opportunities, and
preserve homeownership, all of which are especially critical in
today's economic climate. With this funding, HUD estimates that
2,650 HUD-approved counseling agencies employing an estimated
8,000 newly certified housing counselors, will assist a total
of 2.5 million renters and owners. HUD-approved counselors help
clients learn about purchasing or refinancing a home; rental
housing options; reverse mortgages for seniors; foreclosure
prevention; loss mitigation; preventing evictions and
homelessness; and moving from homelessness to a more stable
housing situation. In 2012, 2,410 HUD-approved housing
counseling agencies, with grant funds from HUD and other
funding sources, assisted over 1.9 million renters and owners.
HUD's new Office of Housing Counseling has several initiatives to
ensure borrowers have access to all rights and remedies
afforded to them to stay in their homes. HUD has worked closely
with interested States to determine effective ways in which
funds from the National Mortgage Servicing Settlement can be
used to expand housing counseling resources, resulting in more
than $300 million in settlement funds committed to housing
counseling or legal services for affected borrowers. HUD-
approved housing counseling agencies continue to provide
foreclosure prevention services, reaching 774,000 families in
fiscal year 2012. In addition, FHA is exploring ways to further
integrate housing counseling into its loss mitigation program,
offering distressed FHA borrowers additional resources with
which to assess their options and make decisions appropriate to
their situation.
--Short Refinance Option.--In 2010, FHA made available an option that
offers underwater non-FHA borrowers, who are current on their
existing mortgage and whose lenders agree to write off at least
10 percent of the unpaid principal balance of the first
mortgage, the opportunity to refinance into a new FHA-insured
mortgage. FHA made enhancements to the program in March of last
year and announced an extension to the expiration date of the
program in order to increase the number of borrowers who will
benefit from this initiative.
--Strengthening FHA and Paving the Way for Private Capital To
Return.--The President's budget shows that FHA, while still
under stress from legacy loans, has made significant progress
and is on a sound fiscal path moving forward. Like nearly all
mortgage market institutions, FHA sustained significant losses
due to the precipitous fall in the housing market and home
prices, and is putting additional funds aside this year to
cover those legacy losses. But, again, like most mortgage
lenders, recent and future books of mortgage business are
expected to bring healthy gains.
Throughout the economic crisis, as the FHA's fiscal health faced
challenges, this Administration took swift and effective action to
protect the FHA and the American taxpayer alike, as FHA continued to
fulfill its dual mission of supporting the housing market during tough
times and providing access to homeownership for underserved
populations. FHA is currently insuring the strongest loans in its
history. In contrast to legacy loans, and thanks in large part due to
changes the Administration has put in place regarding pricing, lender
enforcement, and risk reduction, the books of business FHA has insured
since 2010 are vastly superior to any others from recent years, as
measured by early delinquencies and other metrics. In addition, the
Administration has raised annual insurance premiums for most FHA
mortgages by 0.8 percentage points, greatly increasing revenue for the
FHA fund. And healthier house prices have reduced FHA losses on
defaulted mortgages.
Due to the higher quality and large volume of current loans, we
project FHA will generate $18 billion in receipts during fiscal year
2013, including $3 billion generated from the new premium increase that
went into effect April 1, 2013, and reversal of a policy that caused
FHA to forfeit collection of mortgage insurance premium (MIP) after a
loan reached 78 percent of its original principal balance. Further, as
a result of these same changes, the fiscal year 2014 budget projects
FHA receipts of almost $13 billion, even as FHA market share and loan
volume continues to be reduced (down to 13.9 percent according to U.S.
Housing Market Conditions Report, 3rd quarter 2012).
For FHA's legacy loans, the President's budget forecasts the FHA
Mutual Mortgage Insurance (MMI) Fund, which provides the fiscal capital
to support FHA's single family and reverse mortgage guarantees, will
use $943 million of its mandatory appropriation authority to supplement
its reserves at the end of fiscal year 2013. The MMI Fund currently has
approximately $32 billion in cash available to pay claims, so this is
not a cash problem; it is one of setting the right size of loan loss
reserves aside. The $943 million figure is based on an annual Office of
Management and Budget (OMB) re-estimate of the reserves FHA will need
to hold as of September 30, 2013, for the payment of expected losses
over the next 30 years on its portfolio of guaranteed loans as of last
September, based upon Federal Credit Reform Act (FCRA) scoring. This
potential appropriation is largely due to the existing reverse mortgage
(HECM) portfolio. This product, particularly as it has been structured
to date, is sensitive to home prices and economic conditions. This
results in a negative value of $5.248 billion and a disproportionately
negative impact to the Fund from the HECM program. The actual need for
a mandatory appropriation from the Treasury General Fund to the MMI
fund will not be determined until September 2013, and will be based on
FHA's realized revenues through the end of the fiscal year. Notably,
any mandatory appropriation to FHA would not involve approval from
Congress, as all Federal loan programs have this standing authority. As
we consider this potential appropriation, let us not forget that FHA
played a crucial, countercyclical role in bringing the housing market
from the brink of collapse to a place where it is positive and growing
again.
goal 2: meet the need for quality, affordable rental homes
In an era when more than one-third of all American families rent
their homes and over 8.5 million unassisted families with very low
incomes spend more than 50 percent of their income on rent and/or live
in severely inadequate conditions, it is more important than ever to
provide a sufficient supply of affordable rental homes for low-income
families--particularly since, in many communities, affordable rental
housing does not exist without public support. HUD's fiscal year 2014
budget maintains HUD's core commitments to providing rental assistance
to some of our country's most vulnerable households as well as
distributing housing, infrastructure, and economic development funding
to States and communities to address their unique needs. Overall, 84
percent of HUD's total fiscal year 2014 budget authority requested will
provide rental assistance to over 5.4 million residents of HUD-
subsidized housing, including public housing and HUD grants to homeless
assistance programs. And, I am proud to say that, despite an era of
challenging budgets, we have increased the number of families served
through our rental assistance programs every year.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Detailed data shows how vulnerable these families are to the
economic downturn. In HUD's core rental assistance programs, including
tenant-based rental assistance (TBRA), public housing and project-based
rental assistance (PBRA): 72 percent of families are extremely low-
income (below 30 percent of area median income) and an additional 20
percent are very low-income (below 50 percent of area median income).
The devastating effect of the tough economic environment on the housing
circumstances of poor Americans was underscored this year, when HUD
released its latest Worst Case Housing Needs study results. HUD defines
worst case needs as: renters with very low incomes who do not receive
Government housing assistance and who either pay more than half their
income for rent, live in severely inadequate conditions, or both. The
report showed an increase of 43.5 percent in worst case needs renters
between 2007 and 2011. This is the largest increase in worst case
housing needs over a 4-year period in the quarter-century history of
the survey. The need for HUD investments in this area is clear.
Preserving Affordable Housing Opportunities in HUD's Largest Programs
This budget provides $20 billion for HUD's section 8 TBRA program,
which is the Nation's largest and preeminent rental assistance program
for low-income families. For over 35 years it has served as a cost-
effective means for delivering safe and affordable housing in the
private market. This 2014 funding level is expected to assist
approximately 2.2 million families by renewing existing vouchers and
issuing new incremental vouchers to homeless veterans.
The budget also provides a total of $6.6 billion to operate public
housing and modernize its aging physical assets through the public
housing operating ($4.6 billion) and capital ($2 billion) funds, a
critical investment that will help approximately 1.1 million extremely
low- to low-income households obtain or retain housing. Similarly,
through a $10.3 billion request in funding for the PBRA program, the
Department will provide rental assistance funding to privately owned
multifamily rental housing projects to serve over 1.2 million families
nationwide.
Reducing Administrative Burdens and Increasing Efficiency
This budget recognizes the need to simplify, align, and reform
programs to reduce administration burdens and increase efficiency
across programs by:
--Enabling PHAs To Combine Operating and Capital Funds.--To both
simplify the program and reduce the administrative burden on
State and local public housing authorities, the budget provides
all PHAs with full flexibility to use their operating and
capital funds for any eligible capital or operating expense.
--Providing Flexibility for Public Housing Authorities To Improve
Supportive Services for Assisted Households.--The budget
proposes streamlining and flexibility measures to help PHAs
improve supportive services for assisted families. The Family
Self-Sufficiency (FSS) program will be consolidated and aligned
to enable PHAs to more uniformly serve both TBRA and public
housing residents. This program aims to connect residents to
resources and services to find and retain jobs that lead to
economic independence and self-sufficiency. In addition, the
budget authorizes PHAs to use a portion of their public housing
and TBRA funding to augment case management and supportive
services coordination provided through FSS or provide other
supportive services to increase opportunities for residents.
--Expanding the Moving To Work (MTW) Program.--The budget proposes to
scale up the Moving To Work (MTW) program, which gives high-
performing State and local public housing authorities (PHAs)
various flexibilities in their use of Housing Choice Voucher
and public housing funds. In exchange for this flexibility,
PHAs will help design and test innovative policies to support
self-sufficiency and other positive outcomes for families,
streamline and consolidate program delivery, and reduce long-
term costs. In addition, PHAs will report on outcomes
associated with their MTW activities, and those that choose to
implement work requirements, time limits on assistance, or
major rent reform initiatives will participate in rigorous
evaluations.
Rebuilding Our Nation's Affordable Housing Stock
Over the last 75 years, the Federal Government has invested
billions of dollars in the development and maintenance of public and
multifamily housing, which serve as crucial resources for some of our
country's most vulnerable families. Despite this sizable Federal
investment and the great demand for deeply affordable rental housing,
we continue to see a decline in the number of available affordable
housing units. Unlike other forms of assisted housing that serve very
similar populations, the public housing stock is nearly fully reliant
on Federal appropriations from the Capital Fund to make capital
repairs. Funding and regulatory constraints have impaired the ability
for these local and State entities to keep up with needed lifecycle
improvements. The most recent capital needs study of the public housing
stock, completed in 2010, estimated the backlog of unmet need at
approximately $26 billion, or $23,365 per unit. Available funding is
vastly insufficient to meet accruing needs of approximately $3 billion
per year. Under the strain of this backlog, and without financing tools
commonly available to other forms of affordable housing, the public
housing inventory loses an average of 10,000 units annually through
demolitions or dispositions.
Rental Assistance Demonstration
In addition to the public housing stock, the Rental Assistance
Demonstration (RAD) program targets certain ``at-risk'' HUD legacy
programs. The 24,000 units assisted under section 8 Moderate
Rehabilitation (MR) are limited to short-term renewals and constrained
rent levels that inhibit the recapitalization of the properties. The
approximately 21,000 units assisted under Rent Supplement (RS) and
Rental Assistance Program (RAP) have no ability to retain long-term
project-based assistance beyond the current contract term. As a result,
as their contracts expire, we can no longer depend on these projects to
be available as affordable housing assets.
Conversion to long-term section 8 rental assistance, as permitted
under RAD, is essential to preserving these scarce affordable housing
assets and protecting the investment of taxpayer dollars these programs
represent. Long-term section 8 rental assistance allows for State and
local entities to leverage sources of private and public capital to
rehabilitate their properties. While the Department expects and
continues to process public housing conversions of assistance without
additional subsidy, HUD requests $10 million in fiscal year 2014 for
the incremental subsidy costs of converting assistance under RAD for
very limited purposes. Such funding will be targeted only to public
housing projects that are: (1) not feasible to convert at current
funding levels; and (2) located in high-poverty neighborhoods,
including designated Promise Zones, where the Administration is
supporting comprehensive revitalization efforts. The Department
estimates that the $10 million in incremental subsidies will support
the conversion and redevelopment of approximately 3,300 public housing
units that would not otherwise be feasible to convert and sufficiently
stabilize over the long-term, while helping to increase private
investment in the targeted projects and surrounding neighborhoods.
In addition to the funding request, each of the legislative
requests in the 2014 budget for RAD are designed to allow for maximum
participation by those PHAs and owners whose current funding levels are
sufficient for conversion. In the first component of RAD, an increase
in the 60,000 unit cap to 150,000 units, and the exclusion of section 8
MR properties from the cap will both allow for a greater portion of
both the public housing and MR stock that can convert at no cost to the
Federal Government to participate in the demonstration.
Small Building and Housing Finance Agency Securitization
Nearly a third of the Nation's renters, more than 20 million
households, live in small, unsubsidized housing. These 5- to 49-unit
properties tend to be owned by small businesses--the engines of our
communities--and are typically more affordable to low- and moderate-
income families. But these properties are at risk of continued
disinvestment because they can be expensive to finance. Small building
owners are less likely than other multifamily property owners to be
able to secure financing to make repairs and improvements. Small
properties are less likely to have mortgage financing (86 percent of
large multifamily properties are mortgaged, compared to 61 percent of
small multifamily properties). Just 14 percent of all fiscal year 2010
FHA-insured properties were for projects with fewer than 50 units.
To address this problem, the fiscal year 2014 budget includes a
legislative provision to support small building finance, and to
strengthen the Risk Share program as a rental finance tool, seeks
Congressional authority for Ginnie Mae to guarantee securities
containing FHA Multifamily Risk Share loans, thereby increasing
liquidity and decreasing cost of capital. This proposal would apply to
both State and local Housing Finance Agency Risk Share lenders under
section 542(c) and new Risk Share lending under section 542(b). The
proposal would also amend section 542(b) of the statute to allow for
flexibility in how affordability is determined in order to make it a
more effective tool to recapitalize existing naturally affordable 5-49
unit rental properties.
Increasing the Production of Affordable Housing Capital Projects
In addition to developing tools to address the growing capital
needs of America's public housing stock, HUD is committed to expanding
the supply of affordable rental homes in safe, mixed-income communities
that provide access to jobs, good schools, transportation, and most
importantly, economic self-sufficiency. Accordingly, in fiscal year
2013 HUD is working together with its partners to identify ways to make
the Low Income Housing Tax Credit (LIHTC) program a more flexible and
nimble tool for the creation and preservation of affordable housing. As
the primary tool of the Federal Government for developing and
rehabilitating affordable rental housing, the LIHTC program is
administered by State agencies with assistance and guidance from the
Treasury Department and the Internal Revenue Service. It attracts
capital to low-income rental housing by satisfying some of the Federal
income tax obligations of investors in certain low-income rental
properties.
Since its addition to the tax laws in 1986, the LIHTC program has
been used to create 1.8 million in affordable rental-housing units
across the country. Annually, the program supports 95,000 jobs and
generated $2.7 billion in State, local, and Federal revenues. In fiscal
year 2014, as part of an ongoing effort to better align Federal rental
programs, HUD, the Departments of Treasury and Agriculture, the
Domestic Policy Council (DPC), the Office of Management and Budget
(OMB), and the National Economic Council (NEC) will continue partnering
to allow greater flexibility to State and local agencies that
administer LIHTC programs, as well as to developers and investors, to
continue to enable the creation of affordable housing in markets where
it is needed the most.
Specifically, the revenue provisions of the 2014 budget update
several revenue proposals that were included in the 2013 budget, and
the budget also introduces two new proposals:
--A new proposal for Private Activity Bond Conversion authority that
will create much needed flexibility in how States implement the
LIHTC program. Specifically, this request will allow States to
convert a portion of their tax-exempt Private Activity Bond
authority (volume cap) into allocated (so-called 9 percent)
LIHTCs to accomplish several goals. First, for many complex
preservation projects this proposal eliminates the need for
going through unnecessary bond issuance procedures, which
reduces transaction costs. Second, not only does the proposal
allow States to increase their pool of 9 percent credits, but
it brings more projects into the competitive LIHTC allocation
process. This effectively gives States more authority to better
prioritize projects with limited resources. Third, it would let
States avail themselves of the greater flexibility that they
have to increase eligible basis (and thus to increase credits)
for high-priority projects that are subject to the LIHTC
allocation cap (as compared with projects subject to the tax-
exempt bond cap).
--A new proposal for a Selection Criterion for Preservation of
Affordable Housing. Adding this criterion to Qualified Action
Plans under IRC Sec. 42(m)(1)(C) will encourage States to
consider how to address the preservation needs of affordable
housing.
--A modification and permanent fix to the Congress' temporary 9
percent credit floor provisions in HERA and the American
Taxpayer Relief Act of 2012. This proposal to improve the
computation of allocated credit rates will revise the present
value formula for allocated LIHTCs to increase the annual
credit percentage rate and more accurately reflect market
practice.
--An income averaging proposal from the President's fiscal year 2013
budget that would encourage a greater range of incomes in
LIHTC-supported affordable housing by allowing developers to
choose an income-limitation requirement that would be satisfied
if households in the low-income units have an average income no
greater than 60 percent of AMI, with no household above 80
percent AMI. An additional provision would allow certain
existing tenants to remain in residence without impairing the
developer's entitlement to LIHTCs.
--A LIHTCs earned by Real Estate Investment Trusts (REITs) proposal
from the President's fiscal year 2013 budget that is designed
to diversify the pool of investors for LIHTCs and to increase
the overall demand for LIHTCs. The proposal would allow a REIT
that earns LIHTCs to provide a tax benefit to its investors by
paying them tax-exempt dividends in an amount almost triple the
amount of the REIT's LIHTCs.
Finally, the recent Worst Case Housing Needs report underscores
what has been the case since well before the recent recession, namely,
that extremely low-income renters face the most severe housing shortage
and cost burden of any Americans. The 2014 budget once again proposes
$1 billion in mandatory appropriations for the Housing Trust Fund (HTF)
to address this critical shortage of housing where it is most
desperately needed. Enacted in 2008, the HTF was designed to provide
capital resources to build and rehabilitate housing to fill this
precise--and growing--gap in the Nation's rental housing market. The
time has come for Congress to provide this crucial funding.
goal 3: utilize housing as a platform for improving quality of life
Stable housing provides an ideal platform for delivering a wide
variety of health and social services to improve economic, health, and
broad-based societal outcomes. For some, housing alone is sufficient to
ensure healthy outcomes, while others require housing with supportive
services to assist with activities of daily living or long-term self-
sufficiency, as well as proximity to crucial services. HUD's fiscal
year 2014 budget acknowledges this reality by making critical
investments in housing and supportive services, and partnering with
other Federal agencies to maximize resources and best practices.
Moreover, these investments will save money in the long term, by
avoiding overuse of expensive emergency and institutional
interventions.
Preventing and Ending Homelessness, Serving Our Nation's Most
Vulnerable
Nowhere is the relationship between housing and supportive services
clearer than in the successful efforts in communities around the
country to address homelessness, which have led to nearly 20 percent
reductions in veterans homelessness and a 10 percent reduction in
chronic homelessness over the past 2 years.
Additionally, this work has yielded a substantial body of research,
which demonstrates that providing permanent supportive housing to
chronically ill, chronically homeless individuals and families not only
ends their homelessness, but also yields substantial cost saving in
public health, criminal justice, and other systems. This year's budget
once again invests in this critical effort, by providing $2.381 billion
in Homeless Assistance Grants, including competitive programs that
annually serve over 1.5 million homeless families and individuals. This
includes funding for the Emergency Solutions Grants program, which will
continue the work of the Homelessness Prevention and Rapid Re-Housing
Program (in the form of a $60 million set aside)--funded by the
Recovery Act--that in the last 3 years alone has helped prevent or end
homelessness for over 1.4 million people nationwide.
Moreover, HUD continues to focus on the unique needs of homeless
veterans through both its targeted homeless programs and its mainstream
housing programs using successful methods and interventions. Currently,
an estimated one out of every six men and women in our Nation's
homeless shelters are veterans, and veterans are 50 percent more likely
to fall into homelessness compared to other Americans. HUD is committed
to providing affordable housing units to this unique homeless
population, and has partnered with the Departments of Health and Human
Services (HHS) and Veterans Affairs (VA) to develop targeted approaches
to serve the homeless veteran populations. Accordingly, this budget
includes $75 million for HUD's Veterans Affairs Supportive Housing
(HUD-VASH) program, which combines tenant-based voucher assistance with
case management and clinical services tailored to veterans and their
families. This funding will provide 10,000 new vouchers to help
veterans move from our streets into permanent supportive housing, in
addition to the nearly 48,000 already allocated HUD-VASH vouchers, as
well as the 10,000 vouchers that will be awarded through the fiscal
year appropriation.
Investing in Leveraging and Serving Our Most Vulnerable
This budget provides a total of $526 million for the Housing for
the Elderly and Housing for Persons with Disabilities programs, which
includes $40 million to support 4,100 additional supportive housing
units. Doing more with less, the budget proposes reforms to the Housing
for the Elderly program to target resources to help those most in need,
reduce the up-front cost of new awards, and better connect residents
with the supportive services they need to age in place and live
independently.
Historically, HUD has provided both capital advances and operating
subsidies to nonprofit sponsors to construct and manage multifamily
housing for low-income people with disabilities. In an effort to
maximize the creation of new affordable units in a time of funding
restraints, in fiscal year 2012 HUD began providing operating
assistance to State housing agencies that formed partnerships with
State healthcare agencies for service provision to low-income persons
with disabilities. These funds are used to set aside supportive units
for this target population in affordable housing complexes whose
capital costs are funded through Low-Income Housing Tax Credits, HOME
funds, or other sources. Investing section 811 funds under this
authority allows HUD to rely on the expertise of the State housing
agencies to administer the award and on the State healthcare agency to
identify the most critical population to be served and guarantee the
delivery of appropriate services. In fiscal year 2014, HUD is
requesting similar authority for the Section 202 program. Drawing on
lessons learned from implementation in the section 811 program, HUD
will take advantage of efficiencies inherent in these same agencies'
oversight responsibilities for tax credits, HOME funds or similar
housing funding.
goal 4: build inclusive sustainable communities free from
discrimination
The American economy suffers when significant numbers of its labor
force experience individualized or systemic discrimination, or when
families live in isolated neighborhoods of concentrated poverty. An
American economy built to last requires an increased supply of
affordable rental homes in safe, mixed-income communities that provide
access to jobs, good schools, transportation, high-quality services,
and most importantly, economic self-sufficiency. As such, HUD's fiscal
year 2014 budget puts communities in a position to plan for the future
and draw fully upon their resources, most importantly their people.
Each year HUD dedicates approximately 15 percent of its funds to
the capital costs of housing and economic development projects
throughout the country. Through this investment, HUD and its partners
are able to provide better opportunities for people living in
neighborhoods of concentrated poverty and segregation, and offer
choices that help families live closer to jobs and schools. Programs
such as the Community Development Block Grant (CDBG) and Choice
Neighborhoods provide funding for locally driven solutions to
overarching economic development challenges in areas of need. As with
HUD's rental assistance programs, HUD's capital grants--including the
Public Housing Capital Fund, Choice Neighborhoods, CDBG, and HOME--are
focused on assisting areas of great need, including communities with
high unemployment.
Preserving HUD's Major Block Grant Programs for Community Development
and Housing
Through both formula and competitive grants, HUD has partnered with
local organizations and State and local governments to fund innovative
solutions to community development challenges. Underpinning these
partnerships is the fundamental philosophy that local decisionmakers
are best poised to drive a cohesive development strategy, based on a
keen perception of local needs and priorities. In fiscal year 2014, HUD
is requesting a total of $3.14 billion in funding for the Community
Development Fund. These programs aim to support economic development
initiatives and projects that demonstrate the ability to connect
private sector growth to some of our country's most distressed citizens
and communities.
As part of CPD programming, the Community Development Block Grant
(CDBG) remains the largest and most adaptable community and economic
development program in the Federal portfolio for meeting the unique
needs of States and local governments. Since its inception in 1974,
CDBG has invested over $135 billion in economic development at the
local level, investing in infrastructure, providing essential public
services and housing rehabilitation, and creating jobs primarily for
low-and moderate-income families. In fiscal year 2014, HUD is
requesting that $2.8 billion in CPD funds be dedicated to the CDBG
formula program. Altogether, CDBG funding annually reaches an estimated
7,000 local governments across the country, in communities of all
shapes and sizes.
To begin to respond to concerns that CDBG formula funds need to be
better targeted to need and be used more effectively, the budget
proposes several reforms to the program. The budget includes changes to
establish a minimum CDBG grant threshold and eliminate the community
``grandfathering'' provision. This will ensure that communities receive
grants large enough to be effective in advancing the goals of the
program. Local governments affected by these changes would not lose
access to CDBG funding; funding would be available through an urban
county or State-administered CDBG program. In addition to better
targeting CDBG formula funds, the budget provides $200 million in
community development funding for a new competitive grant program
targeted to areas hardest hit by the foreclosure crisis and specific
activities that support neighborhood stabilization. Where appropriate,
these grants will be linked to the above-mentioned Promise Zones
initiative. HUD will seek input from stakeholders over the coming
months regarding further programmatic changes that would improve the
targeting of CDBG formula funds and strengthen their accountability and
performance.
Often, CDBG dollars alone are not sufficient to complete crucial
economic development projects that communities desperately need. In
those instances, HUD offers another potent public investment tool in
the form of the Section 108 Loan Guarantee program. Section 108 is the
loan guarantee provision of the CDBG program and allows States and
local governments to leverage their CDBG funds into federally
guaranteed loans in order to pursue large-scale physical and economic
investment projects that can revitalize entire neighborhoods or provide
affordable housing to low- and moderate-income persons. In fiscal year
2014, HUD is requesting Section 108 loan guarantee authority of $500
million and is proposing to implement a fee-based program that will
eliminate the need for budget authority to cover the program's credit
subsidy.
Assisting Native Americans and Native Hawaiians
Through innovative programming, HUD has found new ways to partner
with American Indian and Alaska Native tribal governments to help these
communities craft and implement sustainable, locally driven solutions
to economic development challenges. HUD recognizes the right of Indian
self-determination and tribal self-governance, and has fostered
partnerships that allow tribal recipients the flexibility to design and
implement appropriate, place-based housing programs according to local
needs and customs. In most of these communities, housing and
infrastructure needs are severe and widespread, disconnected from
transportation networks and isolated from key community assets
including jobs, schools and healthcare facilities. In fiscal year 2014,
HUD is requesting a total of $739 million to fund programs that will
directly support housing and economic development in American Indian,
Alaskan Native, and Native Hawaiian communities nationwide, including:
--$650 million for the Indian Housing Block Grant program, which is
the single largest source of funding for housing on Indian
tribal lands today
--$70 million for Indian Community Development Block Grants, a
flexible source of grant funds for federally recognized tribes
or eligible Indian entities, requested within the Community
Development Fund.
--$13 million for Native Hawaiian Housing Block Grant program, to
develop homeownership units as well as support the prevention
of foreclosures and the promotion of responsible homeownership.
--$6 million for the Indian Housing Loan Guarantee Fund.
Transforming Neighborhoods of Poverty
The President has made it clear that we must build our economy from
the middle class out. But that necessity is imperiled when a fifth of
America's children live in poverty, at a cost of $500 billion per
year--fully 4 percent of GDP--due to reduced skills development and
economic productivity, increased later life crime, and poor health, and
a growing population lives with the problems of concentrated
neighborhood poverty--high unemployment rates, rampant crime, health
disparities, inadequate early care and education, struggling schools,
and disinvestment--all of which isolate them from the global economy.
That's why HUD's fiscal year 2014 budget provides $400 million for
the proven tools in the Choice Neighborhoods Initiative, to continue
transformative investments in high-poverty neighborhoods where
distressed HUD-assisted public- and privately owned housing is located.
Choice Neighborhoods--along with RAD--is an essential element of the
President's Promise Zones initiative. This initiative will revitalize
many of America's highest-poverty communities by creating jobs,
attracting private investment, increasing economic activity, improving
affordable housing, improving educational opportunities, and reducing
violent crime. Promise Zones are key rungs on the Administration's
Ladders of Opportunity initiative, which also includes raising the
minimum wage, increasing access to high-quality preschool, redesigning
America's high schools, and promoting fatherhood and marriage.
High-need communities will engage in an open, transparent,
competitive process to apply for a Promise Zone designation. The
Promise Zone designation process will ensure rural and Native American
representation. If approved by Congress, Promise Zones will receive tax
incentives to stimulate hiring and business investment, alongside with
Federal partnership and technical assistance aimed at breaking down
regulatory barriers and using Federal funds available to them at the
local level more effectively. Promise Zones will be able to access
investments that further the goals of job creation, additional private
investment, increased economic activity, expanded educational
opportunity, and reduction in violent crime. These could include Choice
Neighborhoods at HUD, Promise Neighborhoods at the Department of
Education, and Byrne Criminal Justice Innovation at DOJ. The Promise
Zones initiative builds on the lessons learned from these existing
place-based programs, for which the budget reflects increases in
investment across agencies. Other Federal agencies that will be
aligning their work with that of local Promise Zone partners include
the Departments of Commerce, Health and Human Services, and
Agriculture.
The Choice Neighborhoods initiative is a central element of the
Administration's inter-agency, place-based strategy to support local
communities in developing the tools they need to revitalize
neighborhoods of concentrated poverty into neighborhoods of
opportunity. The Department's administration of the first rounds of
funding for Choice Neighborhoods grants exemplify how our practices
generate effective partnerships with local housing and community
development efforts. In the past, many Federal grant programs followed
a rigid, top-down, ``one-size-fits-all'' approach that dictated what
local policymakers could and could not do rather than listening to them
and providing the tools they needed to meet local needs. Having served
in local government myself, I am committed to a collaborative approach
responsive to local needs--and believe the results thus far demonstrate
that we are making good on that commitment.
Helping Cities, Towns, and Regions To Plan Their Economic Future
The President is committed to making America a magnet for jobs. But
attracting new businesses to our shores depends on urban, suburban, and
rural areas that feature more housing and transportation choices, homes
that are near jobs, transportation networks that move goods and people
efficiently, all while lowering the cost and health burdens on
families, businesses and the taxpayer. When America's metropolitan
areas and rural communities are struggling to rebound from the economic
crisis and compete for jobs on a global scale, 20th century practices
are just not sufficient to attract businesses that have the flexibility
to locate wherever they see the potential to hire committed and skilled
workers. Increasingly, mayors and business and community leaders are
instituting and demanding new economic development approaches that
simultaneously recruit businesses based on industry clusters, unique
resources available in the community, and implement community
development strategies that ensure that employees have affordable
housing choices, can get to work quickly and affordably, and are able
to enjoy a high quality of life.
The Office of Economic Resilience (OER), located within HUD's
Office of Community Planning and Development, will foster and incubate
innovative program, practice and policy throughout the Department and
with other agencies by partnering with communities to:
--strengthen and diversify their economies in ways that allow them to
effectively compete on a global stage;
--retain and recruit workers that demand high quality places with
robust local services and amenities;
--address distressed and isolated neighborhoods that minimize access
to opportunity for residents; and
--effectively align and deploy Federal, State, and local funding for
development and infrastructure.
OER will work in partnership with other Federal agencies like the
Departments of Commerce, Transportation, Agriculture and Energy, Health
and Human Services, the Environmental Protection Agency, Small Business
Administration, and others to build the capacity of local, regional,
and State governments, community organizations and business leaders to
prepare and execute data-driven community economic development and
infrastructure investment strategies. OER will fund $75 million in
Integrated Planning and Investment Grants that will seed or enhance
locally created, comprehensive blueprints that strategically direct
public and private investments in development and infrastructure to
projects that result in: attracting jobs and building diverse and
resilient economies; significant municipal cost-savings; and stronger,
more unified local leadership. These grants will create incentives for
communities to develop and implement comprehensive housing and
transportation plans, such as updates to building codes, land use, and
zoning ordinances that result in more resilient economic development,
improve housing supply response to demand, and increase affordable
housing near public transit. Integrated Planning and Investment Grants
will incorporate some of the same features of the previously funded
Regional Plans for Sustainable Communities and the Community Challenge
Grants offered by the Office of Sustainable Housing and Communities,
but using lessons learned from those programs and feedback from local
leaders and Congress, will prioritize supporting actionable economic
development strategies, reducing redundancy in federally funded
planning activities, setting and monitoring performance, and
identifying how Federal formula funds can be used smartly and
efficiently in support of economic resilience. As with the previous
efforts, priority will be placed on directing grants to rural areas,
cities, counties, metropolitan areas and States that demonstrate
economic need and are committed to building the cross-sector, cross-
disciplinary partnerships necessary to tackle the tough decisions that
help make places economically competitive.
We know how important these planning tools are to regional
economies--particularly those that rely on integrated supply chains
that cross national borders and how essential they are to meeting the
President's charge to double U.S. exports over the next 5 years. These
investments will leverage other Administration proposals (e.g.,
Infrastructure Bank, Project Rebuild) to help overhaul America's
deteriorating infrastructure and increase residential and commercial
construction around transit.
Ensuring Inclusive Housing Nationwide
An inclusive community is one in which all people--regardless of
race, ethnicity, religion, sex, disability, or familial status--have
equal access to housing and economic opportunities. Throughout its
portfolio of programs, HUD is committed to maintaining that inclusivity
and providing accountability in housing and lending practices
nationwide. Through inclusive development, education, enforcement of
fair housing laws, expanded training and language assistance, HUD will
affirmatively further fair housing and the ideals of an open society.
The Fair Housing Initiatives Program (FHIP) is critical to building
and sustaining inclusive communities. FHIP is the only grant program
within the Federal Government whose primary purpose is to support
private efforts to educate the public about fair housing rights and
conduct private enforcement of the Fair Housing Act. In fiscal year
2014, HUD is requesting approximately $44 million in FHIP funds,
representing the Department's strong commitment to fair housing,
including $28 million to support the efforts of private fair housing
organizations that conduct private enforcement of the Fair Housing Act.
The Private Enforcement Initiative (PEI) grantees investigate and test
housing providers alleged to have engaged in discrimination. The
requested amount will continue funding to support fair housing
enforcement by all statutorily eligible private fair housing
organizations. In addition it will fund fair housing education at the
local, regional, and national levels.
The Fair Housing Assistance Program (FHAP) is a critical component
of HUD's effort to ensure the public's right to housing free from
discrimination. FHAP multiplies HUD's enforcement capabilities,
allowing the Department to protect fair housing rights in an efficient
and effective manner. In fact, FHAP agencies investigate the majority
of housing discrimination complaints filed in the United States. In
fiscal year 2014, the budget provides $24.6 million in FHAP grants to
95 Government agencies, including 37 States, 60 localities, and the
District of Columbia, to enforce laws that prohibit housing
discrimination that have been reviewed and deemed substantially
equivalent to Federal law.
Ensuring That an Economy Built From the Middle Class Out Includes
Opportunities for Rural Americans
The Administration has placed a significant emphasis on ensuring
that America's rural communities are competitive in the global
economy--particularly given the reality that rural communities
generally have less access to public transportation, along with higher
poverty rates and inadequate housing. HUD serves families in small
towns and rural communities through almost every major program it
funds. The State-administered Community Development Block Grants
(CDBGs) provide approximately $692 million to rural areas, supporting
over 25,000 jobs both directly and indirectly, providing needed
infrastructure, economic development, and affordable housing. HUD also
funds over $300 million in rural areas for affordable housing and
homeownership programs through its HOME Investment Partnership program,
directly and indirectly supporting over 5,360 jobs.
As the single largest sources of funding for housing on Indian
tribal lands today, programs like Indian Housing Block Grants, Indian
Housing Loan Guarantees, and Indian Community Development Block Grants
support development in remote areas where safe, affordable housing is
desperately needed. HUD also directly supports housing and economic
development initiatives in remote areas of Hawaii, through the Native
Hawaiian Housing Block Grant Program and Native Hawaiian Loan Guarantee
Program. HUD recognizes the right of Indian self-determination and
tribal self-governance by allowing the recipients the flexibility to
design and implement appropriate, place-based housing programs
according to local needs and customs. Taken together, in fiscal year
2014 HUD is requesting $739 million to fund programs that will support
housing and development in American Indian, Alaska Native, and Native
Hawaiian communities.
In addition, HUD and the Department of Agriculture (USDA) meet
regularly through an interagency rental housing policy group to better
align and coordinate affordable rental housing programs. Altogether,
over 800,000 families in rural communities are directly assisted
through the Housing Choice Voucher program, public housing, and
Multifamily programs, with another 450,000 assisted through USDA. For
homeowners, the FHA helps first-time homebuyers and other qualified
families all over the country purchase their own homes. More than 1.5
million of the homes currently insured by the FHA are in rural areas,
and approximately $545 million in current FHA loans are to rural
healthcare facilities designated as ``critical access hospitals.'' HUD
recognizes the unique challenges in these rural areas, and continues to
develop innovative, community-based programming to meet those needs.
HUD has also entered into a memorandum of understanding with the
Department of Treasury's Community Development Financial Institutions
Fund and the Department of Agriculture--Rural Development, to expand
the capacity of organizations providing loans and investment capital in
underserved rural regions. The initiative, which is being piloted in
colonias along the United States-Mexico border, will improve the
delivery of funding from Federal agencies and private sources
supporting small business, affordable housing and community facilities.
goal 5: transform the way hud does business
A 21st century American economy that is a magnet for jobs and
equips its residents with the skills they need for those jobs demands a
government that's leaner, smarter, and more transparent. The current
economic and housing crisis; the structural affordability challenges
facing low-income homeowners and renters; and the new, multidimensional
challenges facing our urban, suburban, and rural communities all
require an agency in which the fundamentals matter and the basics
function. As such, HUD remains committed to transforming the way it
does business. This transformation is more crucial now than perhaps
ever before--HUD remains at the forefront of the Federal response to
the national mortgage crisis, economic recovery, Hurricane Sandy
recovery, and the structural gap between household incomes and national
housing prices--roles that require an agency that is nimble and market-
savvy, with the capacity and expertise necessary to galvanize HUD's
vast network of partners. HUD's 2014 budget reflects these critical
roles, by investing in transformation, research, and development that
will be implemented persistently over time.
Investing in Our Staff
HUD's greatest resource is its dedicated staff. When employees
attain skills and are motivated to use those skills to help their
organization reach goals, the capacity of the organization grows and
employees in the organization grow as well. This is why HUD is
providing its employees training and leadership development
opportunities. In addition, many internal rules and regulations have
become hurdles instead of being helpful. In response, HUD is in the
process of simplifying and combining programs, streamlining
regulations, and eliminating rules and constraints. The Department is
also in the middle of a major reform of its information technology,
human resources, procurement, and other internal support functions to
give more authority and flexibility to managers and provide better
service to HUD customers.
In fiscal year 2014, HUD is requesting $1.467 billion in salaries
and expenses, including $127.7 million for HUD's Office of Inspector
General (OIG). This funding request represents just a 0.6 percent
increase from the fiscal year 2012 enacted level, and reflects HUD's
commitment to lean and smart management. The HUD request includes
several initiatives to streamline the HUD organization, including
restructuring the accounts, increasing training for our staff, and
providing significantly more detail on how HUD staff supports programs
and strategic goals. HUD is making specific investments of more staff
to manage major rental assistance programs, increasing our ability to
enforce new fair housing rules, and providing more oversight to our
community grant programs. The Department will continue to improve
operations and create a dynamic organization capable of addressing some
of our Nation's most difficult challenges. HUD remains at the forefront
of the Federal response to the national mortgage crisis, the economic
recovery, and the structural gap between household incomes and national
housing prices. These roles require an agency that is nimble and
market-savvy, with the capacity and expertise necessary to galvanize
HUD's vast network of partners, including local officials, nonprofits,
and faith-based organizations, among others.
Carrying Out Critical Program Demonstrations and Research
HUD's ongoing transformation is a multiyear effort that can only be
achieved through the relentless focus of agency leadership, full
transparency and accountability for real results, and sustained and
flexible budget resources. The Transformation Initiative (TI) remains
the primary source of funding for this transformation. Since TI was
first enacted in 2010, it has bolstered the long-neglected areas of IT
modernization, research and evaluation, and program demonstrations
crucial for increasing the efficiency and effectiveness of the
Department's programs. Further, TI has provided a mechanism for
innovative, cross-cutting technical assistance that goes beyond program
compliance to improve grantee capacity, performance and outcomes.
While the Department's transformation is a crucial long-term
commitment, HUD continues to prioritize these efforts in a responsible
manner that ensures HUD's constituent services don't suffer at the
hands of internal transformation. This year's budget proposes a
Department-wide HUD Transformation Initiative Fund to be funded by
transfers from program accounts of up to 0.5 percent at the Secretary's
discretion. The 2014 budget requests transfers of $80 million into its
Transformation Initiative Fund for priorities such as:
Research and Evaluation.--To strategically increase efficiency and
effectiveness of the Department's programs through examining policy
questions and assessing program functioning and outcomes. TI-funded
research complements the data infrastructure created through Research
and Technology funding of national housing surveys. TI will support
research priorities developed in a 5-year Research Roadmap by the
Office of Policy Development and Research. The Roadmap reflects a year-
long process of consulting with stakeholders about the research
questions that are most relevant and crucial for housing and urban
development policy and that HUD is best positioned to advance in a
timely way. For example, one fiscal year 2014 priority project would
refine HUD's utility models to enable the Department to more accurately
account for energy usage in housing assistance programs in which
utility costs are paid by tenants, and thereby help HUD to more
effectively disburse funds for utilities that are actually consumed.
Program Demonstrations.--Demonstrations test new program approaches
in a carefully structured and rigorously evaluated manner, and are
essential mechanisms for evidence-based policy improvements. For
example, the Rental Assistance Demonstration (RAD), approved in fiscal
year 2012, supports the trial conversion of public housing and certain
multifamily properties to long-term project-based contracts. TI will
enable evaluation of outcomes. HUD is also proposing, within the Public
Housing Capital Fund, a $15 million pilot of the evidence-based Jobs-
Plus Demonstration to increase the earnings and employment of public
housing residents. A process evaluation conducted in tandem through TI
will document successful local adaptations and how this larger scale
implementation affects outcomes.
Surveys and Data Infrastructure.--The Office of Policy Development
and Research (PD&R) also provides fundamental support for informed
decisions by the Department and national policy makers through data
collection and research dissemination. PD&R has a key role in the
improvement of national housing data infrastructure and meeting other
key national information needs. In fiscal year 2014, HUD is requesting
$50 million to fund the Nation's basic data infrastructure and share
research knowledge on housing and community development. Complementing
TI, this funding to support foundational housing market surveys
continue the transformation of PD&R into the Nation's leading research
organization addressing the wide array of America's housing and urban
development challenges.
Delivering Strategic and Cross-Cutting Technical Assistance.--To
ensure HUD's funds make the most impact in the communities where they
are invested, HUD has shifted from making small investments in narrow,
compliance-focused assistance to comprehensive, results-oriented
capacity building that assists both grantees with deeply rooted
management and financial challenges, as well as those driving
innovation by being the first to implement new polices or programs. HUD
delivers intensive, place-based technical assistance, working hand-in-
hand with jurisdictions, housing authorities, and other stakeholders
that are experiencing a range of capacity challenges. HUD also provides
ongoing training and development on principles fundamental to operating
housing and community development programs effectively, such as
financial management and using data to drive decisionmaking. HUD's TA
resources and training are increasingly offered online to make access
easier for many stakeholders and to reduce the costs of providing TA.
Upgrading the Department's Information Technology Infrastructure
In fiscal year 2014, HUD is requesting $285 million to support and
modernize its information technology infrastructure. This request
includes $45 million for the development, modernization, and
enhancement of key outdated systems; $116 million for the operations
and maintenance of our current systems; and $124 million to complete
the transition to our new IT Infrastructure system, HUDNET. In fiscal
year 2014, HUD will focus our development efforts on transitioning the
Department's IT infrastructure from the current antiquated environment
to a modern, sustainable infrastructure, continued development of a
modern financial management system that will improve HUD's ability to
measure, track, and report on program costs and efficacy, and
transitioning the current FHA systems to a modern platform. These
changes will allow HUD to deliver services and manage its multi-billion
dollar programs faster, more accurately and using better information
for analysis. These funds are crucial to complement HUD's
transformation efforts, providing resources for maintaining and
improving Department-wide information technology systems.
conclusion
Madam Chairman, this budget reflects the Administration's
recognition of the critical role the housing sector must play to ensure
that America becomes a magnet for jobs that strengthen the Nation's
middle class, including providing ladders of economic opportunity for
all Americans. Equally important, it expresses the confidence of the
President in the capacity of HUD to meet a high standard of
performance.
Given the economic moment we are in, HUD's 2014 budget proposal
isn't about spending more in America's communities--it's about
investing smarter and more effectively.
It's about making hard choices to reduce the deficit--and putting
in place much-needed reforms to hold ourselves to a high standard of
performance. But most of all, it's about the results we deliver for the
vulnerable people and places who depend on us most.
Senator Murray. Thank you very much, Mr. Secretary. And I
will begin the questioning by talking about the status of FHA's
Mutual Mortgage Insurance (MMI) Fund. Your budget states that
$943 million may be needed to cover expected FHA losses in the
single-family insurance fund in the fiscal year 2013. That
follows on the most recent actuarial report showing that the
capital reserve account would go negative. Can you talk about
how the condition of the fund has changed in the past year, and
how HUD arrived at its 2013 shortfall estimate?
Secretary Donovan. Absolutely.
MUTUAL MORTGAGE INSURANCE FUND
I am glad you raised the actuarial report and where we are.
Before that report and since, we have taken aggressive actions
to protect the fund--five different premium increases,
including most recently at the beginning of this month, that
will help protect the funds. That leads to, obviously, the
significant receipts we expect in the budget this year, the
$14.5 billion that I referred to.
What that shows you is that the new loans that we are
making in the fund are the best quality that we have ever seen
in FHA. And I do not believe, at this point, that we should be
taking further steps to increase premiums. What we really
should be focusing on are the loans that are causing the
damage.
And those steps that we have already taken, as you can see,
move us from a negative $16 billion number that was in
actuarial report to the under negative $1 billion that we have
in the President's budget.
The further steps that we need to be taking focus on the
loans that are causing the deficit. If you just took out the
reverse mortgage loans from the FHA fund, we would be in a
positive $4 billion----
Senator Murray. Why are these such a problem?
Secretary Donovan. Frankly, the program needs reforms. And
unfortunately, we do not have the authority to implement those
reforms without full notice-and-comment rulemaking. That is a
process that could take 18 months. And one of the things that
we are asking Congress to do as quickly as possible is give us
the ability to make these changes to the program through a
mortgage letter much more quickly rather than having to go
through this full notice-and-comment rulemaking.
REVERSE MORTGAGE LOANS
The other thing I would say in particular is that, because
of the nature of the reverse mortgage loans, they are more
highly sensitive to changes in house prices. So the recent
economic crisis and housing crisis has had a more severe
impact.
So we need to change the Home Equity Conversion Mortgage
(HECM) program. We are asking for the authority to do that as
quickly as possible, in addition to the changes we have already
made.
The second thing I would say is we need to continue to
increase the collections that we can make on older loans
outside of the HECM program. We made a number of changes this
year. We are going to continue to do that, streamlining short
sales, improving loan sales. All of those can bring billions of
dollars to the fund. But we also need help from Congress in
increasing our enforcement authorities; for example, allowing
us to remove servicing from lenders that are not doing a good
enough job helping homeowners and helping protect the taxpayer.
Senator Murray. Okay, I appreciate that.
Let me ask you about sequestration. You testified before
the full Appropriations Committee a few weeks ago about the
impact on HUD's programs and the people who rely on those.
Those cuts have now been implemented with some real
consequences. I am hearing a lot about this at home. I
mentioned that in my statement.
Can you talk about how public housing authorities are
responding to these cuts, and what is their effect, especially
since this has come so late in the fiscal year?
Secretary Donovan. Absolutely.
SEQUESTRATION'S IMPACT ON PUBLIC HOUSING AUTHORITIES
First of all, and you really talked about this in your
statement, Senator, more than 100,000 families that we expect
to lose vouchers, and we have already seen--you talked about
the example of King County, where families who are on the
waiting list who would have gotten a voucher are going to
remain at risk of homelessness in terrible situations by not
getting that voucher.
But there are even more extreme examples around the
country. We have identified over 700 housing authorities where,
even if they fully draw down their reserves, stop leasing new
vouchers, that we do not think will be enough. That means that
they will literally have to start cutting off families from the
program----
Senator Murray. Who are currently in section----
Secretary Donovan. Who are currently served, or other
extreme measures, reducing payment standards and other things
that would have direct impacts on families that are already
severely stressed. And so we are most concerned about those.
In the most extreme example, and I know this is
particularly important to you and the ranking member, we have
seen housing authorities start to turn back their entire
programs. In other words, they say we can't administer vouchers
anymore.
Senator Murray. Because they do not have the personnel to
do it?
Secretary Donovan. Because they do not have the ability to
do it. Thirteen housing authorities in the first 3 months of
this year, that is a more than tripling of the rate that we saw
last year. And last year was already high because of the cuts
that we have seen in prior--we even have housing authorities
turning back VASH vouchers. Can you imagine a housing authority
saying I can't serve a veteran of this country to get them off
the street?
Senator Murray. Not because they don't have a population
that needs it, but because they do not have the personnel?
Secretary Donovan. Absolutely. Only because they do not
have the funding.
Senator Murray. Right.
Secretary Donovan. Now, beyond that, thanks to the work
that you did in the recent continuing resolution, we have gone
from expecting about 100,000 people in our homeless programs to
be back on the streets--that is down to 60,000. So it is better
than the 100,000, but it is still 60,000 people that could be
hurt that way.
I would also just point to one other example. As Senator
Blunt knows, Joplin is still recovering from the devastating
tornado we saw there. You all worked hard to make sure that
funding was available through the Sandy supplemental. We have
allocated over $100 million there to Joplin.
But we are going to see, just in the CDBG program, over
$800 million of cuts. We believe that is 20,000 jobs in
reconstructing, not to mention the more than 10,000 families
and businesses who may never get rebuilt as a result of that.
Overall, what we are talking about, and you pointed to
this, just at a time when we are really seeing the economy with
the ability to take off, just in HUD's budget, we are talking
about 50,000 jobs lost from sequestration, combining both the
supplemental funding and the work that we are doing across our
other programs.
So these are real impacts on the middle class, on our most
vulnerable families, and they are happening today, and they
will continue to grow for the rest of the year if we do not
reverse sequestration.
Senator Murray. Yes, and what I am seeing is the impact on
the broader community, too. As I see that constriction, people
are once again stopping spending. They are stopping expanding.
It has had a real impact, so I appreciate your perspective.
Senator Collins.
Senator Collins. Thank you, Madam Chairman.
Mr. Secretary, I was very interested in the exchange that
you had with Senator Murray about reverse mortgages, because
over the past couple of years, a retired mortgage banker in
Maine has repeatedly contacted me to express her well-informed
view that, in many cases, our seniors are getting into these
reverse mortgages, and they are turning out to be a disaster
for them. And she keeps asking why isn't HUD doing more, why
isn't Congress doing more, to regulate this financial product?
So it is very interesting to learn today, and to learn
based on the Home Equity Conversion Mortgage program, I believe
you called it HECM?
Secretary Donovan. HECM.
Senator Collins. HECM. That HECMs are contributing to the
financial instability of FHA's MMI Fund due to factors that
included longer mortgage terms than were expected, declining
home values, and an increase in the number of homes conveyed to
HUD.
So I was very glad when Senator Murray asked you about the
impact of those reverse mortgages on the MMI Fund, especially
since we are concerned about that fund drawing on the Federal
Treasury.
But I am also concerned about the impact on seniors of the
wider spread use of reverse mortgages.
For example, the surviving spouse of a borrower with a HECM
insured loan, if not a party to the mortgage him or herself,
must pay off the loan upon the mortgager's spouse's death. And
I am wondering if the spouse even realizes that when the
reverse mortgage is granted.
So what is HUD doing to ensure that borrowers and their
spouses understand that consequence and other potential
problems with getting a reverse mortgage? We see these ads on
television. It sounds like it is the best thing since sliced
bread, and yet, I am hearing that there are a lot of problems.
And the fact that you are seeing such a negative impact on the
MMI Fund suggests this is an area that we really need to look
at.
HOME EQUITY CONVERSION MORTGAGE REFORM
Secretary Donovan. Absolutely. And just to take this
specific point, Senator, about the spouse, this is an issue
that does need work and clarification. We are asking for
legislative language that would clarify this in our budget. But
we have also made sure that, in the counseling that we require,
that this is a much more clear focus when seniors are making a
decision about whether to take a reverse mortgage or not.
I agree with you that we need to do more outreach and make
it more clear. We do believe that it is important that a spouse
should be on the mortgage, be not just a part homeowner but
actually signed on the mortgage for the financial integrity of
the program. But we also have taken a number of steps to create
more options; for example, to create more flexibility to allow
a sale through the estate to ensure that there are ways to
recover short of foreclosure in those situations.
So both the counseling and the flexibility on sale are
things that we have done. But we need the clarification legally
to make sure we all understand, because there is pending
litigation on this, and that has created a lack of clarity as
well.
More broadly, I would just say, quickly, for the reverse
mortgage program, we have taken a number of steps to create
safer products. We introduced a safer version a few years ago.
We have enhanced the financial tools in addition to counseling
that we provide. And we are seeing significant improvement in
loans that were originated after these changes were put in
place in 2011. Using an apples-to-apples comparison, default
rates have come down in half. So we are seeing improvements in
the safety of the loans.
MORATORIUM ON FULL DRAW PROGRAM
But we are very concerned about what we call the full draw
program. We have put a moratorium on that program to stop it.
And we will only reinstitute it if we can get the legislative
authority we need to make the changes quickly. Otherwise, it
will take us, as I said, through full notice-and-comment
rulemaking, probably 18 months or so to be able to institute
those changes.
And unfortunately, if we do not have them sooner, we are
going to have to take more drastic measures that would really
harm the seniors that should have a reverse mortgage, where it
can be a productive tool, because by the end of the fiscal
year, we have to have the program back to making money. We have
to have it with what we call negative credit subsidy, so have
it be a profitable program for the Federal Government.
And the only way that we can do that without this
legislative change is to impose significant changes on
principal limit factors and other things that we think do more
harm than good in some ways.
Senator Collins. Thank you for that response. That is
something I am very interested in working with you and the
chairman on.
I do recognize that a reverse mortgage can be very helpful
to some of our seniors, but it seems to me it is fraught with
risks for others. And the fact that your fund is being hit hard
suggests that it is also fraught with risk for the Federal
Government. And of course, those two facts are connected.
So I do think that we need to take a look at that.
Let me just touch on one other issue. The budget proposes
to increase the loan guarantee commitment authority for FHA's
General and Special Risk Insurance programs from $25 billion to
$30 billion. And as you are well aware, Chairman Murray and I
tried very hard to get this anomaly included in the continuing
resolution. Unfortunately, we were unable to include provisions
that could prove problematic to final passage, and this was one
of them, although it should not have been, in my view.
This important program provides mortgage insurance for the
construction of multifamily housing, hospitals, and healthcare
facilities. Based on commitments recorded through January of
this year, the total demand for mortgage insurance during this
fiscal year is expected to exceed the commitment limitation
available.
If funding is depleted, delays in the approvals of mortgage
insurance could jeopardize construction projects that add jobs
to our economy.
So my question for you, Mr. Secretary, is when do you
anticipate that the program will reach its current limitation
of commitment authority during this fiscal year, since we were
unable to get it increased through the continuing resolution?
GENERAL AND SPECIAL RISK INSURANCE COMMITMENT AUTHORITY
Secretary Donovan. Based on our latest projections, we
expect to run out of commitment authority and have to shut down
the program in mid-August. So that would be 6 weeks before the
end of the fiscal year.
Let me just be clear. There are three reasons why we should
do this, and we want to push hard to get this. We have done
this in past years. We want to get this done during the rest of
the year.
First, and you made this point, that $5 billion in
commitment authority is 22,000 jobs. Second, we are also using
that commitment authority to refinance existing loans that are
already in the program to record low interest rates. That
actually saves taxpayers money by making those loans safer
going forward. Third, the new loans, that $5 billion, will
actually make the taxpayers about $200 million, because those
new loans we are making at the higher premiums that are
charging today make money. And so, in lots of different ways,
not doing this would be a real mistake.
Senator Collins. I completely agree with you, and it should
have been done as part of the continuing resolution. We tried
mightily to get it in there as an anomaly.
Secretary Donovan. I know you did, and I appreciate it. I
think we know where the resistance has been. And I think if we
work together--I certainly have had conversations already on
the House side about this. I hope we can get there. We have
been able to in the past, and really, for the private sector,
in terms of these jobs and being able to move forward, it would
be a shame at the time our housing market is recovering to
reverse that progress.
Senator Collins. Absolutely. Those three arguments are very
solid. Thank you.
Senator Murray. Senator Blunt.
Senator Blunt. I thank the chairman.
Secretary Donovan, on the last page of the booklet I have
here on fiscal year 2014, if I am looking at these figures
right, it looks like to me that, in the billions, the number
you had available in fiscal year 2012, was $44.341 billion. The
number you asked for 2014 is 10 percent higher than that.
What number did you actually wind up with available to you
in 2013?
Is that $44.615 billion what you had available or is that
pre-sequestration?
Secretary Donovan. You are looking at 2013?
Senator Blunt. I am.
Secretary Donovan. That is pre-sequestration.
Senator Blunt. So how much did you----
SEQUESTRATION BUDGET NUMBERS
Secretary Donovan. So post-sequestration would be $42.4
billion. And again, that is on a gross basis. Our receipts from
FHA and Ginnie Mae total $11.2 billion in 2013. So, on a net
basis, it would be $31.2 billion.
And I do not believe the table you have includes those
receipts, if I am correct.
Senator Blunt. I think it has $11.204----
Secretary Donovan. Yes, I am sorry.
Senator Blunt. A lot higher than 2012 and 2011, more than
twice as high as 2012 and 2011.
Secretary Donovan. That is correct. And that is both due to
the better quality of the loans that we are making, as well as
the increase in premiums.
Senator Blunt. And does that affect overall programs, or
just the programs where those receipts come in?
Do you actually get to spend that money like it was other
money available to you?
Secretary Donovan. Ultimately, that is up to the Congress
to determine in the allocations for the budget, how much of
those receipts would stay----
Senator Blunt. What happened here? What happened here? Did
you have $11 billion more to spend on other things as supposed
to the year before, where you had $5.8 billion?
Secretary Donovan. Again, I do not have the discretion to
spend that money. But it is a net benefit to the taxpayer. It
does offset the cost of our programs. So Congress determines
how to use those receipts.
Senator Blunt. Okay, back to my earlier point then. Your
total spending in fiscal year 2013 was higher even with
sequestration than fiscal year 2012, because of those receipts?
Secretary Donovan. So with sequestration, it is about a
$1.9 billion reduction.
Senator Blunt. Reduction.
Secretary Donovan. In gross spending. So that is the $44.3
billion going down to the $42.4 billion.
Senator Blunt. Why did you decide to submit the numbers as
if sequestration or the budget caps would not be utilized again
this year? Was that the direction you got from the Office of
Management and Budget (OMB)? Or did you decide that on your
own?
Secretary Donovan. We wanted to provide both pieces of
information.
Here is the reason, fundamentally. The President believes,
I believe, that, as I said very clearly, that sequestration is
damaging; it is not the right way to manage these programs; and
that we should, before the fiscal year is out, we hope to reach
a comprehensive agreement with Congress that would reverse
sequestration and put in place a balanced deficit reduction
plan. And, therefore, we think it is critical to look at not
just where we are today with sequestration, but also to provide
the information that shows where we would be without that
sequestration, as well.
Senator Blunt. But do you have a list of proposals to show
where you would be with sequestration? I noticed the President
yesterday, according to Reuters, had to submit a document that
reduced his own budget he submitted the day before by $91
billion, but with no particular prioritization, just taking it,
I guess, out of the budget like sequestration.
You do know that is the law, of course?
Secretary Donovan. Obviously, it is the law, and we are
living with the consequences.
In fact, if the----
Senator Blunt. We also live with the consequences of not
acting like it is the law. September 28, OMB sent out a
document to you and everybody else that I put in the
Congressional Record a couple months ago that said, spend your
money beginning October 1 as if the law will not be followed. I
think it actually said, ``as if Congress will change the law,''
which is, of course, a nicer way to say that.
But it would seem to me that we would want to set the
priorities you want with the money you are likely to get, as
opposed to the priorities you want with lines that will, in all
likelihood, I believe, now will be cut. But that is just my
view as opposed to yours.
Answer a question for me about veterans' housing, homeless
veterans. You said you had 60,000 people unserved instead of
100,000? Was that the comment you made?
Secretary Donovan. That is in our homeless programs more
broadly, not just----
Senator Blunt. Not veterans. Homeless programs more
broadly.
What did we do in the continuing resolution that allowed
you to at least close 40,000 of that anticipated gap from
100,000 to 60,000?
SHORTFALLS UNDER SEQUESTRATION
Secretary Donovan. There was funding added to our homeless
assistance grants that allowed us to renew more of the existing
units that are there. We still are going to have to, if
sequestration continues, and the continuing resolution, we are
going to have to eliminate existing programs that house the
homeless if sequestration is not reversed. And that would be
about the 60,000 number that I cited.
Senator Blunt. So the continuing resolution update was
better for this program than if we had just continue to go with
past priority-setting efforts.
Secretary Donovan. Senator, I would just add, to go to your
question earlier, to be clear, we do believe sequestration
should be reversed. We believe that is the right course. And
the President is not going to give up on that.
But I would also say that if sequestration continues, it
will make the budget picture worse next year and increase needs
in many of our programs. Just to give you one example, if
sequestration continues, we will go into next year with a $1.2
billion shortfall in our project-based section 8 program. Those
are contracts that we signed with private owners who manage
housing that says here is the rent that they are entitled to.
And so, for us to live up to those contracts, we are in a
position, if sequestration is not reversed, where, in addition
to the funding that we have here, is an additional $1.2 billion
that would be needed to live up to those contracts.
Senator Blunt. And would those contracts be a priority?
Secretary Donovan. Absolutely. And as I said in my
testimony----
Senator Blunt. Absolutely. So why wouldn't you want to be
dealing with this subcommittee to try to be sure we were
helping you meet your priorities before you meet anything else?
Secretary Donovan. That is exactly why this was a priority
for us in the budget as I laid it out. Eighty-four percent of
our budget that goes to renewals is the top priority for us,
and we have made sure in the budget for next year that every
single family that is currently served could continue to be
served.
Senator Blunt. Well, I am sure you are not the only agency
that has had to approach this, or decided to approach this,
this way. But my sense would be that, at some point, we are
either going to decide we are going to change the law, or it is
actually the law, and we all need to figure out how to deal
with that as we are helping set priorities as opposed to vote
for an appropriations bill that is going to be cut in areas
that we wouldn't want it cut on a line-by-line basis, and other
things that were new and aspirational might have had a broader
debate if you knew they were truly areas that were going to be
impacted by these funding programs.
Chairman, thank you for the time.
Senator Murray. Thank you. And I would just remind all of
us that we are in a position now where we are trying to work
between the White House, the House, and the Senate on what
those levels are going to be. Meanwhile, we have to move our
appropriations bills forward, and we are all trying to manage
through that.
Mr. Secretary, in recent years, examples of housing
authorities that misused Federal funds or failed to comply with
important safety regulations have really highlighted the
importance of oversight. As you work now to improve HUD's
oversight, it is important to make sure we are not just adding
new requirements or just asking for more information, but we
are instead asking for the right information and using it
effectively.
What steps are you taking to improve oversight and
streamline reporting requirements and update regulations?
OVERSIGHT OF TROUBLED PUBLIC HOUSING AUTHORITIES
Secretary Donovan. Well, first, I would point to the
critical section 8 reform legislation that we have proposed. As
I said, we are looking at $0.5 billion in savings just next
year, $2.7 billion over 5 years. That is enormously important.
This does go to Senator Blunt's point as well.
There are important steps that we can take while serving
the same number of families to lower costs in the programs.
We have also taken substantial steps to make sure that the
minority of public housing authorities, the small number that
are violating program rules, that are in serious difficulties,
and are not living up to the standards that we have set, those
troubled housing authorities, that we are focusing on them and
either enforcing against them or working with them to correct
those problems.
And I do think we are making progress there. If you go back
to the beginning of administration, we had about 175 troubled
housing authorities around the country. We are now down to 52.
And I think that we will continue to make progress. We would be
happy to provide more information on how we are doing that
through our FARs effort.
We have over 100 teams around the country that are working
with these housing authorities, both to enforce and to improve
them.
We made enough progress that we have started working on the
near-troubled agencies. We have seen about a 10-percent
reduction in the number of those, and we are going to take
additional steps. We are looking forward to seeing the results
of those assessments this year to see if we made further
progress. And we are actually going to go further upstream to
those that are, for some reason, in the risk-ranking that we
are doing, appear to be at risk of troubles.
So those are all important.
The other thing I would just make sure we understand here,
HUD needs to live up to its responsibilities to oversee these
housing authorities. But these are local entities created under
State law with boards of directors, executives that have
authorities for oversight themselves. And we are going to be
aggressive, and we have been aggressive, in going after
individuals who are not living up to their standards and also
that may be violating our rules.
We are debarring and taking other steps against individuals
who are not living up to their responsibilities. We need to
make sure that local responsibility is met.
Just the last thing I would say is, even where these folks
are doing a great job--you mentioned Steve Norman in King
County. Senator Collins mentioned the improvements that we have
made in the Maine State Housing Authority. They are also not
magicians. And when you are operating at under 70 percent of
administrative fees, we have to recognize that the risk here,
no matter what we do to make the programs more efficient and
effective, is that oversight will fail, that we will get more
units, because there are not capital funds to fix them up, that
are not in decent condition.
And so while we do everything that we can to create more
flexibility, the fungibility between operating and capital fund
is a good example in our budget, to increase oversight, there
is a limit as to what we can do. And even some of these efforts
we would like to undertake, we will have to put aside or delay,
given the funding levels that we have.
Senator Murray. An excellent point. And on the local
governance issue, that really is important. And I would like to
work with you and the inspector general on ways to improve the
ability of housing authorities and other governing boards to
identify some of these problems.
I want to quickly talk about some of the new initiatives.
As I have traveled around my home State, I have been excited to
see some of the partnerships housing providers have created to
address the housing and service needs of people seeking
assistance.
Tacoma, King County housing authorities are doing really
great and exciting work around education. Longview and Walla
Walla in my State are doing some really great work with our
veterans' groups. Seattle's Yesler Terrace project supported by
Choice Neighborhoods involves partnerships with schools,
community colleges, local employers. And that project is going
to redevelop housing and the whole surrounding neighborhood,
while also increasing opportunities for families living in
them.
Your budget proposes to make a significant investment in
Choice Neighborhoods, and I wanted to ask you, how does Choice
encourage the kind of partnerships and leveraging happening in
Seattle?
CHOICE NEIGHBORHOODS
Secretary Donovan. Yes, I very much appreciate you raising
this because the President strongly believes that we can reach
our balanced deficit reduction while still investing more in
the programs that are going to create jobs and growth, and help
people be ready for those jobs through these Ladders to
Opportunity.
And I would just quibble a little bit with your use of the
term ``new initiatives.'' I do want to be very clear that
everything in this budget, whether it is in Choice
Neighborhoods, the Neighborhood Stabilization Investment, Jobs-
Plus, some of the other things that you mentioned, those are
all things that are tested at this point and that we have done.
We are proposing an effort to coordinate these better
through Promise Zones, but it is not a new program, in the
sense that it is simply scaling up existing initiatives or
things that we have proposed before.
One of the things that I think is so impressive about
Choice Neighborhoods--and you have seen it directly, just about
anybody who goes to see the transformation of these
neighborhoods--is that they have enormous leveraging of what
work is being done, whether it is at the Department of
Education, that is why we want to link up with their Promise
Neighborhoods effort. But it also brings so much private
capital.
So just take the nine grantees that we have done so far in
implementation grants for Choice Neighborhoods. They have
raised over $2 billion in capital for investment and job
creation. That is over eight times a multiple of the money that
we have put in on the Federal side.
So some people might say, well, we ought to put this money
into the regular capital fund account. But I think we can get
more bang for the buck if we put it into Choice Neighborhoods
and leverage all of this other private capital that can go to
work creating jobs.
The other thing that it recognizes is, what is the cost of
the child that grows up in that neighborhood and ends up in a
homeless shelter, that ends up not being able to get a job
because they are not getting a decent education?
Senator Murray. Never finishes, yes.
Secretary Donovan. We estimate that the 20 percent of kids
growing up in poverty in this country costs us $0.5 trillion a
year in lost productivity and wages.
And that is a cost that we have to avoid. And that is why
the President focused on this Promise Zones coordination
effort, to make sure that not only we are giving these kids a
chance, we are living up to the American promise, but that we
are also avoiding those enormous costs of failure.
Where are our future workers going to come from if we are
leaving all these kids behind? And that is a cost we can't
afford to bear.
Senator Murray. Right. Well, I really appreciate that. And
as I have seen in my State, the partnerships that are created
through these initiatives really do make a difference.
Secretary Donovan. Seattle Housing Authority Yesler is a
terrific example.
Senator Murray. Great example, yes.
Senator Collins.
Senator Collins. Thank you, Madam Chairman. Madam Chairman,
I am going to submit the remainder of my questions for the
record, because I think if I get into a long exchange, we will
get into the vote that is coming up very shortly, which
probably makes the Secretary very happy. But I do want to make
one----
Secretary Donovan. This is one of the few hearings I love
spending time in.
Senator Collins. He is tactful as well.
I do want to say that the budget presentation--and this
isn't just HUD's, it is across the board. Because of the way it
was done this year, comparing to fiscal year 2012 rather than
to the enacted sequestered amount, is extremely confusing.
I had to have my staff write out for me, and HUD's is even
more confusing because you have offsetting receipts, which a
lot of agencies and departments don't. So I had to have them
write out for me fiscal 2012 enacted, then what is the amount
with receipts; fiscal 2013, the sequester year, what is the
amount with receipts; fiscal 2014, what is the request and what
is the amount with receipts.
And I think to prevent confusion as we begin marking up and
putting together a bill, we need a clearer chart from you. I
mean, you can glean it from some of this, but it isn't easy.
And I suspect that that is because you were instructed by
OMB to pretend the sequestration is going to go away and do
your comparisons to fiscal year 2012.
Is that an accurate assumption on my part, or can we get a
more straightforward chart?
Secretary Donovan. I will hand you this in about 30 seconds
when we finish. So, yes, we do have that.
And look, obviously, we want to provide whatever
information you need to make decisions.
I do think it is a fundamental point here that the
President believes, we all believe, that sequestration is not
the right policy, and that we ought to reverse it, that we can
reverse it. And particularly building into our budget, for
instance, this $1.2 billion hole for project-based section 8,
if we believe we can get there and not have that was not just a
``we were instructed'' but it was a policy choice that we made
that we fully believe in.
Senator Murray. Can I just say that this is all going to
have to be resolved? The House is looking at a different number
than the Senate, and, at some point, we are going to have to
have an agreement.
But we are moving forward as if we are enacting a budget
that has--well, we will hear from our chairman of the
Appropriations Committee what exactly our subcommittee
allocations are. But they have to move forward now. We can't
wait for several months for the budget to be decided between
the House and the Senate.
So this will all come to a head at some point, but I think
we are trying to manage between the guesses at this point.
Senator Collins. And I agree with that, and I also am no
fan of sequestration. We do need to reduce our spending. But to
do these mindless automatic meat axe cuts does not reflect
priority setting, which is what we are supposed to do.
But that doesn't mean that we shouldn't be looking at
budget constraints and reduce spending.
I am just trying to figure out what the real numbers are
here and you need to make that----
Senator Murray. So is the Appropriations Committee
chairman.
Senator Collins. You need to make that easier for us, not
harder, just by your views on sequestration, which I may well
largely share, and despite the hope that this goes away and
that we come up with a more rational priority-based budget.
But it truly was extremely difficult to follow the figures.
RENTAL ASSISTANCE DEMONSTRATION
Secretary Donovan. I apologize. And I also just would say,
to thank you, Senator and the chairman, for the remarkable way
that we have worked together on some of these.
Let me just give you one example. You talked about, are
there smart things that we can do to save money, consolidate
programs? Last year, you gave us the authority to begin our
RAD, Rental Assistance Demonstration. We have already gotten
either commitments or letters of interest to convert to the
section 8 platform from two-thirds of all the units across the
country in two of the legacy programs--we call them orphan
programs, about 14,000 apartments across the country--that we
should be looking to move to a platform.
We have 13 different rental assistance programs. With what
we are proposing in our budget, I think we could easily
complete that conversion and end up with fewer programs with no
additional appropriations, no other work.
So I do think that there are lots of things that we can
continue to do, as you say, not with the meat axe, not with
these--as Senator Graham said the other day, he asked all of
his witnesses, so you are saying this is stupid, sequestration?
We sort of looked at each other, is this a trick question? But
yes, it is.
There are smart ways we can do this, and we have been able
to do that in the past. We did it last year, and I am sure that
we can continue going forward in making those smart decisions
while not hurting the veterans, the families, the seniors, the
people with disabilities that so often depend on our programs.
Senator Collins. Thank you.
ADDITIONAL COMMITTEE QUESTIONS
Senator Murray. Thank you. And I do have additional
questions I will submit for the record and remind my colleagues
that we will leave the hearing record open for 1 week for
additional questions.
And, Mr. Secretary, thank you so much again for your
incredible work on this. We look forward to working with you as
we work through the numbers.
Secretary Donovan. Thanks for your partnership.
[The following questions were not asked at the hearing, but
were submitted to the Department subsequent to the hearing:]
Questions Submitted by Senator Barbara A. Mikulski
super storm sandy
Question. Super-Storm Sandy's wrath had a measurable impact on
residents of Maryland, and especially on the residents of Garrett
County. Maryland suffered a double whammy. Our coastal areas along the
beloved Chesapeake Bay and the Atlantic Ocean were hit by the
hurricane. In Garrett County, called the Switzerland of Maryland, we
were hit by a blizzard.
Homes were destroyed or damaged, nearly all of the county lost
power for a week. More than 100 people had to stay in shelters during
the storm. Fallen trees, debris, and power lines blocked almost all of
the county roadways.
Fire companies were not able to respond to several structure fires
because of the blocked roadways. The county lost their primary and
backup 911 call center for 5 days. And the local hospital operated on
Code Yellow Divert (critical patient intake only) for 4 days during the
storm.
30,000 people live in Garrett County, almost 10 percent below the
poverty line, and almost 15 percent are seniors. Residents have
experienced significant costs after electrical masts were ripped from
homes during the storm. Electrical companies repairing the lines will
not hook up homes to power until residents repair electrical masts at
their own expense.
My first legislation as Chairman of the Appropriations Committee
was taking over the disaster spending bill to get it passed into law.
And the Sandy Task Force has been hard at work. The TV cameras have
left, but the compelling human need has not.
Secretary Donovan, I'm grateful for the work that you and the Task
Force have been doing, and I appreciated it when you assured me at the
last hearing on Super-Storm Sandy that Community Development Block
Grant Program Disaster Recovery (CDBG-DR) funds could help ``fill
gaps'' for areas that didn't get Individual Assistance (IA) from the
Federal Emergency Management Agency (FEMA).
I'm concerned that IA qualification may act as a barrier to Garrett
County getting the help it needs for its poor and elderly residents.
Will you work with me and my staff to ensure that the county gets
the help that it needs in the coming rounds of CDBG-DR funding
releases?
Answer. Madam Chairwoman, please be assured that the Department is
evaluating the full range of recovery needs associated with Hurricane
Sandy and will be making additional allocations of CDBG-DR funding in
response to these needs. I would appreciate the opportunity to better
understand the needs in Garrett County as a result of Hurricane Sandy
and would be happy to have our CDBG disaster recovery staff meet with
Garrett County officials and work with you and your staff to ensure
that we fully understand the scope of the county's unaddressed recovery
needs.
______
Questions Submitted by Senator Frank R. Lautenberg
community development block grant disaster recovery action plan
Question. On March 28, I signed a letter urging the Department of
Housing and Urban Development (HUD) to quickly review New Jersey's
proposed Community Development Block Grant (CDBG) Disaster Recovery
Action Plan. As you know, the $1.8 billion in Federal disaster recovery
aid that is the subject of the plan cannot be distributed until HUD
approves the plan. When will HUD complete its review?
Answer. The Department completed its review of the State of New
Jersey CDBG disaster recovery action plan in late April and approval of
the plan was announced on April 29, 2013. Both State officials and HUD
have signed the initial grant agreement and funds are currently
available to the State.
cdbg disaster recovery funding
Question. On March 5, HUD issued a notice regarding the criteria
for the initial allocation of $5.4 billion in Community Development
Block Grant (CDBG) disaster recovery funding. This notice prohibited
the use of these funds to cover costs incurred by privately-owned, but
publicly-regulated electric utilities in response to Superstorm Sandy.
In previous disasters, these entities did qualify. This change in
precedent will likely result in increased electricity bills for New
Jersey residents and could hurt the ability to strengthen critical
power infrastructure. Will HUD include privately-owned, but publicly-
regulated electric utilities as qualified CDBG recipients in the next
allocation to protect New Jersey ratepayers from rate increases?
Answer. In its December 7, 2012, request to Congress for assistance
in response to Hurricane Sandy, the administration indicated its
intention to limit Community Development Block Grant disaster recovery
(CDBG-DR) assistance to for-profit entities solely to small businesses.
This position is reflected in the Federal Register Notice that HUD
issued on March 5, 2013, governing the use of CDBG-DR funds. The
Federal Register Notice defines ``small business'' by applying Small
Business Administration definitions as found in 13 CFR 121. The Notice
also specifically prohibits the provision of CDBG-DR assistance to
privately owned utilities for any purpose. The Department will consider
the full range of recovery needs when establishing requirements
applicable to future CDBG-DR allocations in response to Hurricane Sandy
but will remain consistent with overall administration policy in the
use of these funds.
cdbg disaster recovery action plan
Question. New Jersey's proposed Community Development Block Grant
Disaster Recovery Action Plan provides $825 million to assist
homeowners, while providing only $254 million to rebuild rental
housing. This allocation has raised concerns because 43 percent of New
Jersey households registering for Federal Emergency Management Agency
(FEMA) assistance as a result of Sandy are renters, and many are low-
income families. Will you commit to carefully reviewing New Jersey's
plan to make sure that all families in New Jersey--both renters and
homeowners--get the help they need?
Answer. The New Jersey CDBG-DR action plan approved by HUD on April
29, 2013, directs approximately 33 percent of housing program funds to
multifamily/rental properties uses. This represented an increase of 5
percent from the State's initial proposed allocation to multifamily/
rental purposes. The Department has conducted its own analysis of the
owner/renter split in the FEMA data and believes the State's allocation
of 33 percent for multifamily/rental purposes is consistent with the
data.
Question. Superstorm Sandy damaged more than 800 public housing
units in my State, displacing 100 families. New Jersey's proposed
Community Development Block Grant Disaster Recovery Action Plan sets
aside only $5 million to support public housing unit repairs. I am
concerned that--because of the pre-existing backlog of public housing
capital repair needs--this amount may be inadequate. What share of the
Sandy-damaged public housing units in New Jersey will it be possible to
restore to a state of good repair with this and other anticipated
Federal funding?
Answer. As part of the Department`s review of New Jersey's CDBG-DR
action plan, HUD discussed with State officials the proposed public
housing allocation of $5 million. The Department is pleased to report
that as part of the HUD-approved action plan, the State increased the
public housing allocation from $5 million to $20 million. Further, the
State is committed to reassessing public housing recovery needs as
additional information becomes available and additional allocations are
made by HUD.
public housing drug elimination program
Question. Prior to 2002, public housing authorities were able to
fund safety, security, and drug- and gang-prevention activities through
the Public Housing Drug Elimination Program, which I created. That
program was eliminated by the Bush administration. In the absence of
dedicated funding, how is your agency working with public housing to
make their facilities safe and drug-free?
Answer. Annually a portion of the Emergency/Disaster set aside
within the Capital Fund is made available for funding safety and
security grants. This funding provides assistance to public housing
agencies for emergency capital needs including safety and security
measures necessary to address crime and drug-related activity.
Emergency safety and security grant funds may be used to install,
repair, or replace capital needs items including, but not limited to
the following:
--security systems/cameras;
--fencing;
--lighting systems;
--emergency alarm systems;
--window bars;
--deadbolt locks; and
--doors.
Outside of the Safety and Security set-aside competition, physical
improvements to the property, such as fencing, security cameras, or
additional lighting, are eligible Capital Fund modernization activities
under current laws and regulations. Public housing agencies (PHAs) can
also use their Operating Fund subsidy for ``anticrime and anti-drug
activities, including the costs of providing adequate security for
public housing residents, including above-baseline police service
agreements.'' (U.S. Housing Act.)
public housing authorities--emergency capital needs
Question. In fiscal year 2013, Congress allocated up to $20 million
for grants to public housing authorities to address emergency capital
needs, including ``safety and security measures necessary to address
crime and drug-related activity.'' Of the $20 million emergency capital
needs allocation, what share has HUD set aside for safety and security
measures?
Answer. The Department plans to set aside $3 million initially for
safety and security measures. At the end of the fiscal year, if funds
remain that were not awarded for emergencies/disasters, the Department
will make additional safety and security awards for applications that
were received and determined to be eligible, which could not be funded
due to the limited funds.
______
Questions Submitted by Senator Daniel Coats
better stewards of taxpayer dollars
Question. We are operating during a time where the game has
changed. Instead of coming here every year in the Appropriations
Committee and asking ``how much more are we going to spend this year?''
we are faced with a fiscal crisis which requires us to ask ``how can we
take better care of the taxpayer dollars that are being sent here?'' We
must all ask how we can better manage and oversee Federal departments.
How we can separate the essential projects from the projects we'd like
to do but can't afford it right now from the projects where we ask
``why are we doing this in the first place?'' Please describe how you
are working to save money in the Department of Housing and Urban
Development (HUD). Furthermore, please explain how you are working to
prioritize funding requests for essential programs instead of programs
that don't seem to work very well.
Answer. The Department strongly shares your belief of the
importance of credible stewardship of taxpayer funds, particularly in
the difficult fiscal environment for discretionary programs. The
Department is proposing several significant cost savings proposals
identified below as well as policy changes that will further strengthen
our successful program efforts.
As you would agree, HUD's mission--to create strong, sustainable,
inclusive communities and quality, affordable homes for all--is crucial
to our Nation's well-being, particularly at a time when nearly 8.5
million households were found to have worst case housing needs in 2011,
an increase of about 1.4 million in only 2 years, largely reflecting
the lack of affordable housing. These very low-income renters do not
receive government housing assistance and either paid more than half
their monthly incomes in rent, lived in substandard housing, or both.
Housing needs cut across all regions of the country and included all
racial and ethnic groups, regardless of whether they lived in cities,
suburbs, or rural areas, and were found across various household types,
including families with children, senior citizens, and persons with
disabilities. Without HUD assistance, a fiscal year 2011 HUD study
projected that 68 percent of the tenants we assist would be added to
the worst case housing needs rolls.
To help address the affordable housing need, HUD dedicated a
majority of its fiscal year 2014 funding request to serve families with
the greatest financial needs and support those most vulnerable. More
than three-quarters of HUD's fiscal year 2014 budget request will
provide rental assistance to almost 5.4 million residents of HUD-
subsidized housing, including public housing and HUD grants to homeless
assistance programs. Also, more than three-quarters of HUD-assistance
households are extremely low-income--i.e., below 30 percent of area
median income, and over 65 percent of HUD-assisted households are
elderly and disabled.
Key contributing programs that support affordable housing
development, preservation of existing units and past investments, or
rental assistance to low-income families and associated cost savings
efforts:
--Tenant-Based Rental Assistance (Fiscal Year 2014 Request--$19.9
Billion).--The section 8 Housing Choice Voucher program is the
Federal Government's major program for assisting very low-
income families, the elderly, and persons with disabilities to
afford decent, safe, and sanitary housing in the private
market. The program currently serves almost 2.2 million
families. At the same time, the fiscal year 2014 request
supports approximately 700,000 landlords and property owners
who participate in the program by providing a fair market rent
so that they can meet mortgage payments, local tax obligations,
utility expenses, and maintain properties in good physical
condition.
The overall requested amount reflects $235 million in anticipated
savings in 2014 from proposed changes to income targeting that
will increase the eligibility of more working poor families,
particularly in rural areas ($155 million), the increase in
tenant income contribution from raising the medical expense
exclusion threshold from 3 to 10 percent ($30 million), and a
change in how utility allowances are determined in the cases of
families who rent units that are larger than the bedroom size
of the voucher for which they qualify under the public housing
agency (PHA) subsidy standards ($50 million).
--Project-Based Rental Assistance (Fiscal Year 2014 Request--$10.3
Billion)--The Project-Based Rental Assistance program provides
rental assistance for eligible tenants residing in specific
multifamily rental developments. This program serves
approximately 1.2 million low-income and very low-income
households that are primarily seniors, families with children,
and persons with disabilities.
The overall request reflects $240 million in anticipated savings
from policy changes that apply residual receipts accounts to
offset assistance payments for new and old regulation contracts
($105 million); require the appraiser for certain owner-
commissioned rent comparability studies to provide additional
support to justify the conclusions of the study ($35 million);
limit rent levels for certain contracts renewed for projects
with current rents that exceed market rents ($8 million);
reduce the time period over which an owner may claim vacancy
payments from 60 days to 30 days ($7 million); and increase
tenant income contribution from raising the medical expense
exclusion threshold from 3 to 10 percent ($85 million).
--Public Housing (Fiscal Year 2014 Request--$6.6 Billion).--The
Public Housing program provides affordable, publicly owned
housing units to approximately 1.1 million families who cannot
afford or will not be served by housing in the private market,
60 percent of whom are fixed-income seniors or families in
which the head-of-household is a disabled person. The Public
Housing Capital Fund serves as the primary source of funding
for public housing rehabilitation and development, and the
Public Housing Operating Fund provides the operating subsidy
payments to public housing authorities for the operation,
management, and maintenance of the rental housing.
--Moving To Work--The fiscal year 2014 budget proposes to scale up
the Moving To Work demonstration in which high-performing
State and local public housing agencies are given various
flexibilities in operating their public housing programs.
In exchange for this flexibility, public housing agencies
help design and test innovative policies that use Federal
dollars more efficiently, help residents become self-
sufficient, streamline and consolidate program delivery,
and reduce long-term costs.
--Rental Assistance Demonstration.--The Rental Assistance
Demonstration, enacted in 2012, targets HUD-assisted
properties that are at risk of being lost from the Nation's
affordable housing stock inventory. It allows the
conversion of public housing and other HUD-assisted
properties to long-term, project-based section 8 rental
assistance as a tool for public housing agencies to
leverage private debt and equity to address their
properties' immediate and long-term capital needs,
estimated at approximately $26 billion (2010). The fiscal
year 2014 budget requests $10 million for targeted
expansion of the demonstration to public housing properties
in high-poverty neighborhoods, including designated Promise
Zones where the administration is also supporting
comprehensive revitalization efforts.
--Homeless Assistance Grants (Fiscal Year 2014 Request--$2.4
Billion).--The administration is committed--through Opening
Doors: Federal Strategic Plan To Prevent and End Homelessness--
to ending chronic homelessness by 2015; homelessness among
veterans by 2015; and homelessness for families, youth, and
children by 2020, and setting a path to ending all types of
homelessness. This commitment has already resulted in a
decrease in the number of chronically homeless persons by 19.3
percent since 2007. Chronic homeless are the most expensive
portion of the homeless population. Homelessness among veterans
has declined by 7.2 percent between January 2011 and January
2012. In addition, as of April 2012, almost 40,000 veterans
have been housed with a HUD-Veterans Affairs Supportive Housing
(VASH) voucher, funded through the Tenant-Based Rental
Assistance program. The fiscal year 2014 budget request
maintains the approximately 325,000 HUD-funded beds that assist
the homeless nationwide, expands rapid re-housing and permanent
supportive housing, and targets--through HUD-VASH vouchers--
chronic homeless veterans.
--Housing Opportunities for Persons With AIDS (Fiscal Year 2014
Request--$332 Million).--This program provides housing
assistance and supportive services for very low-income persons
living with Human Immunodeficiency Virus (HIV) infection who
are at risk of homelessness. The budget--through a forthcoming
legislative proposal--modernizes the program to improve
targeting of resources by basing the funding formula on Centers
for Disease Control and Prevention (CDC) data on persons living
with HIV/AIDS rather than cumulative AIDS cases, and by
incorporating local housing costs and poverty rates into the
formula.
The remainder of HUD's fiscal year 2014 budget is dedicated to
capital grants, which are used by communities to develop and repair
affordable housing or support economic development activities and
infrastructure, and other diverse initiatives, including service
coordination, Fair Housing and Equal Opportunity, Healthy Homes and
Lead Hazard Reduction, to name a few. In fact, the budget reflects some
of the tough choices that needed to be made in the capital grant
programs, for example. The budget provides $950 million for the HOME
Investment Partnerships Program (HOME), 5 percent below the 2012
enacted level, in addition to proposed amendments that would improve
the targeting focus and effectiveness of the overall program at the
constrained resource level. The budget provides $2.798 billion for the
Community Development Block Grant formula allocation, which is a $150
million reduction for formula allocation purposes in comparison to
fiscal year 2012. Doing more with less, however, the budget proposes
several reforms to improve targeting and the effectiveness of this
program, including changes to the allocation process.
Also, HUD's Transformation Initiative (TI) Fund remains the primary
source of funding for HUD's multi-year effort to fundamentally
transform the agency through the use of evidence and improved
partnership with the Department's grantees and other partners. The TI
Fund enables HUD to initiate projects that re-engineer fundamental
business processes, streamline programs and operations, enhance
accountability and respond to cross-cutting and urgent challenges more
nimbly and effectively. Transformation Initiative priorities are: (1)
research and evaluations to build a foundation of current data on
program effectiveness and emerging policy issues; (2) program
demonstrations to test new program approaches in a carefully structured
and rigorously evaluated manner; and (3) technical assistance to
diffuse evidence-based innovation and support State and local partners
to improve their capacity to use public resources effectively. In
addition, HUD will focus its information technology development efforts
on modernizing the Department infrastructure, including the continual
development of a modern financial management system that will improve
HUD's ability to measure, track, and report on program costs and
efficacy. These information technology investments will allow the
Department to deliver services and manage its multi-billion dollar
programs faster, more accurately, and using better information for
analysis.
Finally, the Department is taking steps to protect the Federal
Housing Administration (FHA) fund, reduce risk, and modernize the FHA.
The Administration projects that the FHA will insure $199.3 billion in
mortgage loans in 2014, supporting new home purchases and refinanced
mortgages that significantly reduce borrower payments. FHA's loss
mitigation program minimizes the risk of financially struggling
homeowners going into foreclosure. Recent increases in FHA premium
levels will boast FHA's capital reserves and increase Federal revenues.
In addition, legislative proposals would provide additional authority
to ensure that FHA borrowers are receiving the level of delinquency
assistance needed from servicers, and stronger and more flexible
enforcement authorities so that FHA can better identify non-compliance
and poor performance and take action to avoid losses.
housing assistance programs
Question. In 2012, the Government Accountability Office (GAO) found
the Federal Government is operating 160 housing assistance programs and
tax expenditures within 20 Departments and agencies costing about $170
billion.\1\ Despite these programs, homeownership rates fell to a 17-
year low in the third quarter of 2012. The effectiveness of the
programs is also often inconclusive. What is HUD doing to address this
puzzle of 160 overlapping and duplicative programs?
---------------------------------------------------------------------------
\1\ http://www.gao.gov/assets/590/588818.pdf.
---------------------------------------------------------------------------
Answer. The Department has numerous examples of the effectiveness
of its housing assistance programs. In the absence of these programs,
for example, many of the Nation's most vulnerable families would be at
imminent risk of homelessness, there would be far fewer affordable
housing units, and many of the current first-time and minority
homeowners might not own homes with affordable, sustainable, fair, and
transparent mortgages. Below are key examples of the broad reach and
success of HUD's major housing programs. In an accompanying question,
we have also provided reforms and savings proposals included in the
President's budget for various HUD programs. The Department recognizes
that each spending and tax expenditure program is enacted into law by
Congress and reflects commitments to broader housing by goals and
involves specific mission and individual program designs. Finally, the
Department does not target a specific individual homeownership rate but
is committed to providing a strengthened mortgage and housing
environment that supports and expands appropriate homeownership
including targeting to low-income and other populations who with proper
assistance can responsibly participate in the opportunities afforded
through homeownership.
HUD Programs Support and Sustain Homeownership.--Federal Housing
Administration (FHA) financing was used for 27 percent of home purchase
loans in 2011, including an estimated 41 percent of first-time
homeowners. Fully 60 percent of all African American and Hispanic
homebuyers using mortgages rely upon FHA financing and over 30 percent
of all FHA-insured homebuyers are minorities. According to the latest
Home Mortgage Disclosure Act data, half of all African Americans who
purchased a home in 2011, and 49 percent of Hispanics, did so with FHA
financing.
Between April 2009 and February 2013, more than 6.4 million
foreclosure prevention actions were taken--including nearly 1.7 million
FHA loss mitigation and early delinquency interventions and 1.5 million
homeowner assistance actions through the Making Home Affordable
program, including more than 1.1 million permanent modifications
through the Home Affordable Modification Program (HAMP)--saving these
households an estimated $18.5 billion in monthly mortgage payments.
HUD Programs Produce Desperately Needed Affordable Housing Units.--
HUD's HOME Investment Partnership Program completed 1,095,946
affordable units in the past 20 years, of which 460,692 were for new
homebuyers, 212,100 were for owner-occupied rehabilitation and 423,154
were new and rehabilitated rental units. Thirty-seven percent of those
assisted by HOME with affordable rental housing between 2008 and 2012
were extremely low-income families (families with incomes below 30
percent of area median income).
HUD Programs House Vulnerable Families.--The Housing Choice Voucher
(HCV) program helps 2.2 million low-income families afford decent
housing in neighborhoods of their choice. This program serves the most
economically vulnerable families in the country, including families
with disabilities, elderly families, formerly homeless veterans, and
families with children. Of the families currently receiving HCV
assistance, 78 percent are extremely low-income, with incomes at or
below 30 percent of the area median income, 40 percent have a disabled
head of household, and 18 percent are elderly families.
Many families assisted by the program formerly experienced worst-
case housing needs and without the benefit of this program would be at
immediate risk of homelessness. The most recent Office of Policy
Development and Research (PD&R) report estimated there were nearly 8.5
million families with worst case housing needs in 2011--an increase of
about 1.4 million in only 2 years. A family is defined as having a
``worst-case'' housing need if it pays more than half of its income
toward rent or lives in severely inadequate physical conditions, or
both (Worst Case Housing Needs 2011: A Report to Congress--Summary
(2013). Department of Housing and Urban Development, Office of Policy
Development and Research).
hud grant criteria
Question. HUD provided a Community Block Development Grant (CDBG)
in the amount of $505,000 to Sergeant's Pet Care Products, Inc. which
specializes in pet shampoo and toothpaste.\2\ This company was expected
to bring in $140 million in revenue in 2012.\3\
---------------------------------------------------------------------------
\2\ http://www.governor.nebraska.gov/news/2012/03/19_sarpy_co.html.
\3\ http://www.morganlewis.com/pubs/Law360_PerrigoWin_13sept12.pdf.
---------------------------------------------------------------------------
Secretary Donovan, how is HUD working to ensure that its grant
awards are focused on worthwhile projects? Do you believe that we
should provide awards of over half a million dollars to private
companies with revenue over $100 million?
Answer. Loans to for-profit entities are statutorily eligible
activities under the Community Development Block Grant (CDBG) program.
The State of Nebraska uses a portion of its annual State CDBG funding
and CDBG program income to support its Economic Development Revolving
Loan Fund to provide assistance to businesses and to create jobs. In
this particular instance, Nebraska awarded funds to Sarpy County which,
in turn, provided a loan to Sergeant's Pet Care Products to purchase
machinery and equipment as part of a $7.5 million project. The project
will help create 58 new full-time jobs, 40 of which will be targeted to
low- and moderate-income persons, and will help retain 72 existing
positions. According to State officials, the project is on track with
all funds anticipated to be drawn and expended by the end of June 2013
and projected jobs to be created by the end of January 2014. The
project meets all CDBG eligible requirements, national objective
requirements and public benefit requirements.
overall use of hud funds
Question. According to HUD's Office of the Inspector General (OIG),
in fiscal year 2012, HUD could have put over $3.2 billion to better use
and paid over $1.3 billion in questionable costs.\4\ This represents
over $4.5 billion in public funds that could have been better spent
providing housing aid to people in need or not spent at all. Secretary
Donovan, how do you explain this egregious use of funds that your own
Inspector General identified?
---------------------------------------------------------------------------
\4\ http://www.hudoig.gov/pdf/sar/sar-68.pdf (page II).
---------------------------------------------------------------------------
Answer. The majority of funds that you are highlighting as funds
that could be put to better use are constituted by four major items
described below. The Department does not believe that the
classification of funds that can be ``better used'' is useful or
transparent in informing the public regarding the details of these
significant financing issues. The Department would like to stress the
many areas of agreement with the Office of the Inspector General (OIG)
and the positive actions taken to meet specific circumstances including
enactment of statutory authority by Congress for large portions of the
total amounts--proposals that the Department actually initiated. In
like manner, the Department emphasizes the need to examine the
specifics of each case of financial action classified under the
heading, ``questionable costs.'' For instance, the fact that a
guaranteed loan program that was enacted by Congress for 1 year only
did not have full subscription to the program does not seem to be well
defined as funds that could be put to better use.
Four Items That Constitute the Vast Majority of Funds OIG Labeled as
Having Potential ``Better Use''
Item 1 involves the FHA Preforeclosure Sale Program, which
accounted for approximately $800 million of the $3.2 billion identified
by the OIG. The OIG conclusions derive from an examination of 61 claims
involved in the $25 billion national foreclosure settlement that was a
great accomplishment involving the Department, the OIG and 49 State
Attorneys General. This landmark settlement is resulting in recovery of
funds for thousands of families impacted by improper foreclosure
proceedings as well as having provided additional resources for the
Federal Housing Administration (FHA) Single Family Mortgage Insurance
program. In addition, in a larger context the Department is working
diligently on both an operational, regulatory and statutory basis to
further reduce risks involved in the FHA mortgage programs and thereby
further strengthen the financial position of the FHA funds. While the
FHA has agreed to implement the OIG's recommendations, we do not agree
with the characterization that the funds in question could have been
put to better use.
Items 2 and 3 reflect an OIG review done covering fiscal year 2012
that recommended that $1 billion in Public Housing Operating Subsidy be
offset by limiting reserves held by public housing authorities to 6
months. The audit also recommended an additional $890 million could be
used as an offset from PHAs' Housing Choice Voucher (HCV) program net
restricted assets (NRA), `` . . . if it is determined these funds are
in excess.'' The Department worked closely with the Congress on this
issue and the enacted fiscal year 2012 Appropriations bill did provide
for a $750 million Operating Subsidy offset (initiated by the
Department) and an additional $650 million reduction in HCV NRA as
proposed in the audit, but at levels that were considered by Congress
and the Department to be more appropriate.
Item 4 reflects a recommendation by the OIG to return funds in the
amount of $471.8 million to the U.S. Treasury from the Emergency
Homeowners' Loan Program since all of the funds were not obligated.
This loan program was authorized at $1 billion for 1 year only and the
Department did follow the direction discussed by the OIG to return
several hundred million dollars to the U.S. Treasury recognizing that
the subscription to the program was less than originally projected by
the Congress when they enacted the legislation.
Two Items That Constitute the Vast Majority of OIG Identified
``Questionable Costs''
Under the category of questionable costs the OIG report includes
$322.2 million under the FHA Preforeclosure Sale Program discussed
above and an additional $807.3 million, of which the majority share is
associated with FHA-insured loans made by Countrywide Home Loans,
Incorporated (later sold to Bank of America). As described on page 27
of the OIG semiannual report covering through September 30, 2012, Bank
of America has paid FHA nearly $471 million to settle the Countrywide
portion of the consent judgment and has also agreed to a deferred
settlement payment to FHA of $850 million.
fha's preforeclosure sales program
Question. HUD's OIG also reviewed the Federal Housing
Administration's (FHA's) Preforeclosure Sales Program in fiscal year
2012. Of 80 claims statistically sampled, 61 did not meet the criteria
for participation in the program. As a result, it is estimated that HUD
paid $1.6 billion in claims.\5\ How do you intend to strengthen program
controls and obtain reimbursement from those lenders that were not
previously pardoned from repayment in the national mortgage settlement?
---------------------------------------------------------------------------
\5\ http://www.hudoig.gov/pdf/sar/sar-68.pdf (page III).
---------------------------------------------------------------------------
Answer. The Department provided an auditee response to the Office
of Inspector General (OIG) audit of the Federal Housing
Administration's (FHA's) Preforeclosure Sale Program (PFS); Audit
Report No. 2012-KC-0004. The auditee response dated September 17, 2012,
stipulated that the Office of Single Family Housing agrees that its PFS
policies should align with market execution. To achieve this objective,
FHA agreed: (1) to introduce a streamline PFS approval based on loan
characteristics and borrower credit profile; and (2) specify income
documentation requirements for the deficit income test that must be met
for borrowers that do not meet the streamline requirements. OIG
reviewed the corrective action stipulated above and a mortgagee letter
that will achieve the two objectives referenced is scheduled to be
issued in the 4th quarter of fiscal year 2013, pending OMB approval.
[A copy of HUD's complete auditee response follows:]
HUD Memorandum--Auditee Response to OIG's Audit of FHA's Preforeclosure
Sale Program
September 17, 2012.
For: Ronald J. Hosking,
Regional Inspector General for Audit, 7AGA
From: Charles S. Coulter,
Deputy Assistant Secretary, Single Family Housing, HUD
Subject: Auditee Response, FHA Preforeclosure Sale Program, Audit No.:
2012-KC-000X
The Office of Inspector General (OIG) reviewed the Federal Housing
Administration's (FHA) Preforeclosure Sale Program. OIG performed this
nationwide audit because of noted significant deficiencies in borrower
qualifications during their audit of CitiMortgage's compliance with
FHA's Preforeclosure Sale (PFS) claims (2011-KC-1005, September 30,
2011). OIG's audit objective was to determine whether the U.S.
Department of Housing and Urban Development (HUD) paid claims for only
those preforeclosure transactions that met the criteria for
participation in the program.
The Office of Single Family Housing acknowledges that existing PFS
policy and lender execution against that policy is inconsistent. To
improve alignment and ensure that the long-term interest of the FHA
Insurance Fund are met, FHA is working toward: (1) introducing a
streamline PFS approval policy based on loan characteristics and
borrower credit profile; and (2) specifying income documentation
requirements for the deficit income test that must be met for borrowers
that do not meet the streamline requirements.
The Office of Single Family Housing would also note that the 80
loans sampled by the OIG had an average credit score of 596 and an
average delinquency of 8.7 months. Given this profile, it is likely
that most of the 80 loans would have been conveyed to FHA as real
estate owned (REO) if the PFS transactions had not been approved. Since
the recovery rate of all PFS transactions is 53 percent and the
recovery rate for single family REO sales in 36 percent, the claims
paid by FHA on the PFS transactions were lower than they otherwise
would have been and may have resulted in a net benefit to the FHA
Insurance Fund of as much as $170 million.
Regardless of the economic impact to the FHA Insurance Fund, the
Office of Single Family Housing recognizes the need for strong, clear
PFS policies and lender oversight. The Office of Single Family Housing
will work closely with the OIG to ensure that these objectives are met
and that the issues identified in the report are rectified.
SUBCOMMITTEE RECESS
Senator Murray. This hearing is recessed until next
Thursday, April 18 at 10 a.m., at which time we will hold a
hearing on the Federal Aviation Administration's budget
request.
[Whereupon, at 11:06 a.m., Thursday, April 11, the
subcommittee was recessed, to reconvene at 10 a.m., Thursday,
April 18.]
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
APPROPRIATIONS FOR FISCAL YEAR 2014
----------
THURSDAY, APRIL 18, 2013
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 10:07 a.m., in room SD-138, Dirksen
Senate Office Building, Hon. Patty Murray (chairman) presiding.
Present: Senators Murray, Feinstein, Collins, and Moran.
DEPARTMENT OF TRANSPORTATION
STATEMENTS OF:
HON. MICHAEL P. HUERTA, ADMINISTRATOR, FEDERAL AVIATION ADMINISTRATION
HON. CALVIN L. SCOVEL III, INSPECTOR GENERAL, OFFICE OF INSPECTOR
GENERAL
OPENING STATEMENT OF SENATOR PATTY MURRAY
Senator Murray. Good morning. The subcommittee will come to
order.
Today, we are going to hear testimony from the Federal
Aviation Administration (FAA) Administrator Huerta and the
Department of Transportation (DOT) Inspector General Scovel on
the President's fiscal year 2014 budget request for the Federal
Aviation Administration. I want to welcome both of our
witnesses. Thank you both for being here this morning.
This hearing marks the beginning of our process to build a
budget for the FAA for fiscal year 2014. But as we take a close
look at the agency's budget request for the coming year, we
have to acknowledge where we stand today. For far too long,
some Members of Congress have been unwilling to reach a fair
and balanced compromise on deficit reduction, and as a result
we are now facing drastic and arbitrary cuts to Federal
spending that is required under sequestration.
The process of sequestration has slashed the FAA's budget
by more than $630 million, and it has hit just about every part
of the agency, its operations and management of air traffic;
its capital investments, including the Next Generation Air
Transportation System (NextGen), the modernization of its air
traffic control system; and its research activities. Some here
in Washington, DC, claim the effect of such cuts will be
minimal.
But Secretary LaHood has spoken out about the real impact
these cuts will have on the FAA and our aviation system. He
talked about how sequestration means the FAA will furlough its
air traffic controllers, close down contract towers, and delay
NextGen.
Secretary LaHood made it clear the FAA will not sacrifice
the safety of our aviation system. Instead, the agency will
reduce its services while ensuring air travel remains safe.
However, reductions in air traffic control services will
translate directly into an increase in travel delays.
We still need to see the details on how FAA plans to
implement the cuts required by sequestration. This is important
information for the subcommittee to consider as it develops a
funding bill for next year.
Sequestration and a year-long continuing resolution enacted
well into the fiscal year have made 2013 a challenging year for
our agencies. But the fact remains that we have implemented
large cuts to the funding for the Federal Government, and we
still don't know exactly what Government services will look
like after these cuts are implemented.
For fiscal year 2014, we must take seriously our
responsibility to pass a budget that not only determines the
total level of Government spending, but that reflects our
priorities and puts into place the services we want to see
fulfilled next year. We also need to make sure any potential
cuts to the air traffic control system are fair and that FAA's
process is transparent with adequate consideration given to the
benefits and costs of specific tower closures.
Putting together this budget means we must take a hard look
at the work the FAA has been doing. The FAA manages the most
complex airspace in the world, and it is a world leader in
protecting aviation safety.
Mr. Huerta, I look forward to hearing about your budget
request and what you want to accomplish in the coming year. But
we also have to recognize some problems at the FAA. The
agency's history is filled with capital programs that run over
budget, pass deadlines, and do not deliver on all of the
promised capabilities. These problems continue to burden the
FAA.
The agency recently awarded its System Engineering 2020
contract, which has a maximum value of $7.3 billion. For a
contract of this size, it is disturbing that a recent report
issued from the Office of Inspector General (OIG) found that
the FAA cannot track costs accurately.
NextGen requires the FAA to coordinate the development of
several complex capital programs. However, another recent
report from the OIG points out that problems with the En Route
Automation Modernization (ERAM) program have directly
contributed to 2 years of delay in the FAA's effort to
transition from voice to data communication, which is an
essential part of NextGen.
Problems continue to plague the FAA's operations as well.
Just this past February, the OIG issued a report on the
increase in operational errors by air traffic controllers. The
FAA is unable to determine whether the increase in errors
reflects better data collection or an increase in actual errors
committed by controllers. In addition, the FAA does not have a
base line that can be used to measure any improvement in
operational errors.
The OIG has also reported recently on the FAA's inability
to develop an effective model for its aviation inspector
staffing. After spending 7 years developing it, the FAA still
does not have a model it can use to justify its budget request
or to place its aviation inspectors efficiently across our
globe.
Mr. Scovel, your office has done excellent work on all
these topics. I look forward to hearing your perspective on
these issues as we discuss them this morning.
We do need to hold the FAA accountable for how it spends
taxpayer dollars. As we move forward in this tight budget
environment, the FAA cannot afford to continue any kind of
mismanagement.
PREPARED STATEMENT
At the same time, we need to do our job here in Congress.
We need the FAA doing its job on aviation, not trying to figure
out how to move forward without a real budget in place. And
that's why it's so important for this subcommittee and this
Congress to return to regular order to pass a full
appropriations act that reflects the priority of Congress and
to pass it on time and through the regular process.
With that, I will turn it over to my ranking member,
Senator Collins.
[The statement follows:]
Prepared Statement of Senator Patty Murray
The subcommittee will come to order.
Today we will hear testimony from Federal Aviation Administration
(FAA) Administrator Huerta and Department of Transportation (DOT)
Inspector General Scovel on the President's fiscal year 2014 budget
request for the Federal Aviation Administration. I want to welcome both
of our witnesses, and thank you for being here this morning.
This hearing marks the beginning of our process to build a budget
for the FAA for fiscal year 2014, but as we take a close look at the
agency's budget request for the coming year, we must acknowledge where
we stand today.
For too long, some members of Congress have been unwilling to reach
a fair and balanced compromise on deficit reduction. And as a result,
we are now the facing drastic and arbitrary cuts to Federal spending
that is required under sequestration.
The process of sequestration has slashed the FAA's budget by more
than $630 million, and it has hit just about every part of the agency:
--its operations and management of air traffic;
--its capital investments, including the Next Generation Air
Transportation System (NextGen), the modernization of its air
traffic control system; and
--its research activities.
Some here in Washington, DC, claim that the effect of such cuts
will be minimal, but Secretary LaHood has spoken out about the real
impact these cuts will have on the FAA and our aviation system. He
talked about how sequestration means that the FAA will furlough its air
traffic controllers, close down contract towers, and delay NextGen.
Secretary LaHood made it clear that the FAA will not sacrifice the
safety of our aviation system. Instead, the agency will reduce its
services while ensuring air travel remains safe. However, reductions in
air traffic control services will translate directly into an increase
in travel delays.
We still need to see the details on how the FAA plans to implement
the cuts required by sequestration. We need to know:
--How the FAA will invest its funding for facilities and equipment;
--How many furlough days will be imposed on FAA employees; and
--After delays in the FAA's schedule for closing down contract
towers, the status of each and every tower in the coming
months.
This is important information for the subcommittee to consider as
it develops a funding bill for next year.
Sequestration and a year-long continuing resolution enacted well
into the fiscal year have made 2013 a challenging year for agencies.
But the fact remains that we have implemented large cuts to the funding
for the Federal Government, and we still don't know exactly what
Government services will look like after those cuts are implemented.
For fiscal year 2014, we must take seriously our responsibility to
pass a budget that not only determines the total level of Government
spending, but that reflects our priorities, and puts into place the
services that we want to see fulfilled next year.
We also need to make sure that any potential cuts to the air
traffic control system are fair and that FAA's process is transparent,
with adequate consideration given to the benefits and costs of specific
tower closures.
Putting together this budget means that we must take a hard look
the work that the FAA has been doing.
The FAA manages the most complex airspace in the world, and it is a
world leader in protecting aviation safety. Mr. Huerta, I look forward
to hearing about your budget request and what you want to accomplish in
the coming year.
But we must also recognize problems at the FAA. The agency's
history is filled with capital programs that run over budget, past
deadlines, and do not deliver on all of the promised capabilities.
These problems continue to burden the FAA.
The agency recently awarded its Systems Engineering 2020 contract,
which has a maximum value of $7.3 billion. For a contract of this size,
it is disturbing that a recent report issued from the Office of the
Inspector General (OIG) found that the FAA cannot track costs
accurately.
NextGen requires the FAA to coordinate the development of several
complex capital programs. However, another recent report from the OIG
points out that problems with the En Route Automation Modernization
(ERAM) program have directly contributed to 2 years of delay in the
FAA's effort to transition from voice to data communication, an
essential part of NextGen.
Problems continue to plague the FAA's operations as well. Just this
past February, the OIG issued a report on the increase in operational
errors by air traffic controllers. The FAA is unable to determine
whether the increase in errors reflects better data collection, or an
increase in actual errors committed by controllers. In addition, the
FAA does not have a baseline that can be used to measure any
improvement in operational errors.
The OIG has also reported recently on the FAA's inability to
develop an effective model for its aviation inspector staffing. After
spending 7 years developing it, the FAA still does not have a model
that it can use to justify its budget request or to place its aviation
inspectors efficiently across the globe.
Mr. Scovel, your office has done excellent work on all of these
topics, and I look forward to hearing your perspective on the issues we
discuss this morning.
We need to hold the FAA accountable for how it spends taxpayer
dollars. As we move forward in this tight budget environment, the FAA
cannot afford to continue this kind of mismanagement.
At the same time, we need to do our job here in Congress. We need
the FAA doing its job on aviation, not trying to figure out how to move
forward without a real budget in place.
And that is why it is so important for this committee and this
Congress to return to regular order: To pass a full appropriations act
that reflects the priorities of the Congress, and to pass it on time
and through the regular process.
STATEMENT OF SENATOR SUSAN M. COLLINS
Senator Collins. Thank you very much, Madam Chairman.
Welcome, Administrator and also Inspector General Scovel.
Mr. Huerta, I understand that this is your first time
testifying before our subcommittee, so I want to particularly
welcome you.
There is another group here today that I would like to
welcome. You may have noticed, Madam Chairman, as our
subcommittee convened that there was a group of students in
bright green tee shirts----
Senator Murray. Hard to miss.
Senator Collins [continuing]. Who came into the room. They
are from the Presque Isle, Maine, Middle School, and they have
just arrived on a school visit. We were going to meet up
earlier, but getting into the building is slow, as you know. So
I invited them to observe a bit of the hearing, and I will
sneak out into the hall to take a quick picture with them. But
I am delighted to welcome the Presque Isle Middle School
students and teachers and chaperones here today to Washington,
DC.
It's not the entire school, but I believe we have 58
students coming. So I knew that that would help increase the
attendance for our hearing today.
Senator Murray. Welcome to all of you.
Senator Collins. Just over 1 year ago, we passed the FAA
reauthorization bill. I look forward to hearing the testimony
regarding the status of ongoing initiatives within the agency.
The challenges that the FAA faces throughout the remainder of
this fiscal year and into the next fiscal year are truly
daunting, not only because we are operating under a continuing
resolution, which was certainly not the choice of the chairman
or myself, but also coping with the impact of sequestration.
It's important to remember that the $637 million reduction
from sequestration must be implemented in a way that ensures
safety while minimizing the impact to the traveling public. Not
only do I travel home to Maine every weekend--so this affects
all Members of Congress personally--but I represent a State
where tourism is very important, and being able to have an
efficient air traffic control system is very important to the
success of the tourism industry, which is a pillar of the
economy of the State of Maine.
FAA recently announced its plans to achieve these savings,
and I very much appreciated the call from the Administrator.
But I am concerned that the result will be furloughs, the
closure of contract towers, and the elimination of midnight
services, among other controversial cuts.
In my home State of Maine, Bangor International Airport is
one of the airports that is affected by the elimination of
midnight tower closures. If the FAA moves forward with this
plan, it will be very detrimental to airport operations. And
let me explain why.
The Bangor Airport is a major port of entry and a diversion
point for a wide mix of air traffic, including the return of
our Nation's troops from overseas. Indeed, in the last decade,
more than 1 million troops have landed at Bangor, Maine, and
they've been met every single time by local troop greeters,
even if they arrive in the middle of the night or the middle of
a snow storm.
In addition, Bangor is a diversion point for planes with
troubled passengers. Whenever there is an issue, whether it's a
medical issue or an unruly passenger, or it is determined that
an individual is on the no-fly list and should not be admitted
into the country, the plane inevitably is diverted to Bangor.
The curtailment of air traffic control services will
increase operational risk. Presence of a 24/7 FAA tower with
full terminal radar services was a key determining factor in
choosing Bangor as a Noble Eagle alert site post 9/11. The
missions flown in and out of Bangor during these hours by the
military are not always scheduled to air traffic, and the
Bangor Air National Guard base, which shares the commercial
airport space, has the infrastructure and maintenance support
to handle these short notice transients.
These diversions, as well as the civil diversions for
homeland defense, are often circumstances where a pilot needs
the support of a tower or radar control to help ensure safety.
So I very much hope that these military and homeland defense
factors are taken into consideration when the FAA finalizes its
plans.
As the chairman mentioned, I know that the FAA is
undertaking a long-term effort to improve the efficiency,
safety, and capacity of the aviation system through NextGen.
This is a critical system, but it has been plagued with some
delays and cost overruns. It's a multibillion dollar effort
that is absolutely essential to modernizing our airspace, and
it will have the benefits of reducing delays and fuel
consumptions to the nearly 2 million passengers traveling on
over 50,000 flights controlled each day here in the United
States alone.
This obviously has been a complex procurement, and we need
to ensure that NextGen delivers the promised benefits while
representing a sound investment of taxpayer dollars. I
recognize that over the past several years, the aviation
industry has faced some tough economic decisions. Aviation
plays a critical role in economic growth, jobs, and investment,
and the chairman and I share the goals of keeping our national
aviation system the largest, safest, and most efficient in the
world.
There are several other issues that I am going to discuss
when we get to the questions. For example, I'm concerned about
the number of runway incursions that have dramatically
increased in recent years. And that has happened at a time when
air traffic operations have been declining.
I am also concerned about the cutbacks in the Airports
Improvement Program (AIP). I know the airports in my State rely
heavily upon this program and are concerned with any reduction
in AIP whether the reductions are made to small, medium, or
large airports.
I'll also be asking about the latest developments with
Boeing's 787 aircraft. I have a feeling that may be of interest
to the chairman as well.
It is critical that we work together, and I look forward to
doing just that. If the chairman will excuse me for just a few
moments, I am going to go take a quick picture, and I will be
right back.
Senator Murray. I noticed your class went out in the hall,
so they're waiting for you.
PREPARED STATEMENT
Senator Collins. Thank you.
[The statement follows:]
Prepared Statement of Senator Susan M. Collins
Thank you Chairman Murray. Welcome Administrator Huerta and
Inspector General Scovel. Mr. Huerta, I understand this is your first
time appearing before this subcommittee.
Just over 1 year since the final passage of the Federal Aviation
Administration (FAA) authorization bill, I look forward to hearing the
testimony regarding the status of the ongoing initiatives within the
agency.
The challenges the FAA faces the remainder of this fiscal year and
into fiscal year 2014 are daunting not only because of operating under
a continuing resolution but compounded with sequestration. It is
important that the $637 million reduction from the sequester be
implemented in a way that ensures safety while minimizing the impacts
to the traveling public. FAA recently announced its plans to achieve
this savings, which resulted in furloughs, the closure of contract
towers, the elimination of midnight services, among other controversial
cuts.
In my home State, Bangor International Airport is one of the
airports affected by the elimination of midnight tower closures. If the
FAA moves forward with this plan, it will be detrimental to airport
operations. Bangor Airport is a major port-of-entry and diversion point
for a wide mix of air traffic, including the return of our Nation's
troops from overseas and the diversion point for planes with troubled
passengers.
The curtailment of air traffic control services will increase
operational risk. Presence of a 24/7 FAA tower with full terminal radar
services was a key determining factor in choosing Bangor as a Noble
Eagle alert site post 9/11. The missions flown in and out of Bangor
during these hours by the military are not always scheduled air
traffic, and Bangor Air National Guard Base has the infrastructure and
maintenance support to handle these short notice transients. These
diversions, as well as civil diversions for homeland defense, are often
circumstances where a pilot needs the support of tower/radar control to
help ensure safety. These military factors must be taken into
consideration when the FAA finalizes its plans.
The FAA is undertaking a long-term effort to improve the
efficiency, safety, and capacity of the aviation system through the
Next Generation Air Transportation System (NextGen). FAA's recent
estimate for NextGen's total cost through 2025 is expected to be
between $15-22 billion, with the private sector contributing an
additional $5-7 billion. This multi-billion dollar effort to modernize
the national air space will provide many benefits, such as reducing
delays and fuel consumption to the nearly 2 million passengers
traveling on over 50,000 flights controlled each day here in the United
States alone.
FAA has been working hard to address the many challenges identified
with these highly complex initiatives, but much work remains to ensure
programs are implemented on time and within budget. With this
undertaking, processes must be improved and updated while eliminating
duplication and waste in order to make the agency more efficient and
effective. It is our obligation to ensure NextGen delivers the promised
benefits and represents the sound investments of taxpayer dollars.
Over the past several years, the aviation industry, as with many
other industries, has faced tough economic hardships. Aviation plays a
critical role in driving economic growth, jobs, and investment across
the country. Chairman Murray and I share the goals of keeping our
national aviation system the largest, safest, and most efficient in the
world.
While the FAA is continuing efforts to improve safety on the
Nation's airport runways, the number of runway incursions has
dramatically increased in recent years. This is particularly alarming
given that air traffic operations have declined at the same time.
The fiscal year 2014 budget proposes $15.5 billion for the FAA,
which is a $312 million increase over the current sequestered levels.
This provides $9.7 billion for the Operations account, $2.8 billion for
Facilities and Equipment, $166 million for Research, Engineering and
Development, and $2.9 billion for the Airports Improvement Program
(AIP). It is worth noting that the reduction to AIP is coupled with
removing large airports from the program which will be offset with an
increase to passenger facility charge fees. I am concerned with this
proposal as this funding is essential to airports throughout the
Nation. The airports in Maine rely heavily upon this program and are
concerned with any reduction to AIP, whether the reductions are made to
small, medium, or large airports.
I am also interested in the latest developments with Boeing's 787
aircraft. FAA has now approved Boeing's proposed certification plan
that will, I hope, address factors that likely contributed to the
battery incidents. I understand testing and design modifications have
been completed and FAA is analyzing the results. I am eager to know
when FAA anticipates its final approval allowing the 787s to continue
its operations.
The future of aviation is in our hands. It is critical that FAA
remain vigilant in its oversight responsibilities, and I look forward
to working with you both on these efforts.
Senator Murray. Thank you very much. And I will turn to Mr.
Huerta to begin his testimony.
Again, welcome to our subcommittee.
SUMMARY STATEMENT OF HON. MICHAEL P. HUERTA
Mr. Huerta. Thank you very much, Chairman Murray, Ranking
Member Collins, and members of the subcommittee. Thank you for
the opportunity to be here today to discuss the FAA's 2014
budget request. As you are aware, this is my first appearance
before you as Administrator of the FAA.
I appreciate the support of the Senate in moving my
confirmation forward. We have a great number of challenges and
a great number of opportunities ahead, and I sincerely hope to
enjoy a long and effective relationship with this subcommittee.
The FAA's fiscal year 2014 budget request is $15.6 billion.
The 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 below fiscal year 2012.
This is a 2.2-percent decrease, which is part of the
President's overall effort to reduce our Nation's 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 for 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, in order to continue to
support near-term progress. 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 0.6 percent above
the fiscal year 2012 enacted level. This request will enable us
to run the agency on a day-to-day basis and maintain and
support our air traffic control and air navigation systems.
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
System, or ERAM, that became operational in the last 2 years.
ERAM is at the heart of NextGen. It helps us to advance our
transition from a ground-based system of air traffic control to
a satellite-based system of air traffic management.
The 2014 budget allows the FAA to meet the challenge of
both maintaining the capacity and the safety of the current
system, while keeping our comprehensive modernization and
transformation efforts moving forward. 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 (RE&D) is $166 million, a decrease of 7 percent
from 2012. Nonetheless, we intend to continue critical research
in NextGen and 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're proposing to modify the mix of
funding available for airport development projects.
The budget would allow commercial service airports to
increase the passenger facility charge from the current maximum
of $4.50 to $8.00. This gives airports greater flexibility to
generate more of their own revenue, and it allows us to reduce
our request for the ongoing Airport Grants Program by $450
million. This change focuses Federal resources on smaller
airports that don't 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. And this is critical when we consider the
impact of the sequester on our aviation system in the current
fiscal year.
As you noted, the cuts required by the sequester have
forced us to slash contract expenses and furlough 47,000 of our
employees. With employees working fewer hours, we will have a
less efficient air traffic system and less time for safety
inspectors to certify new aircraft for the market. It's 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 national economy.
PREPARED STATEMENT
Madam Chairman, this concludes my prepared remarks, and I
would be pleased to answer any questions you might have.
Senator Murray. Thank you very much.
[The statement follows:]
Prepared Statement of Hon. Michael P. Huerta
Chairman Murray, Ranking Member Collins, members of the
subcommittee: Thank you for the opportunity to speak to you today. This
is the first time I am testifying before you as the confirmed
Administrator of the Federal Aviation Administration (FAA). I sincerely
hope to enjoy a long and effective relationship with you and this
subcommittee.
The FAA's fiscal year 2014 budget request of $15.6 billion strikes
a balance between maintaining current infrastructure while deploying
key Next Generation Air Transportation System (NextGen) benefits to our
stakeholders, upholding our critical safety programs, and modernizing
our aviation infrastructure at funding levels that are $351 million
lower than fiscal year 2012. This is a 2.2-percent decrease, which is
part of the President's effort to reduce the deficit.
The FAA's Operations request of $9.7 billion represents an increase
of just 0.6 percent above the fiscal year 2012 enacted budget. This
funding level includes $30 million to provide maintenance for newly
transitioned En Route Automation Modernization (ERAM) systems, as well
as modest inflationary adjustments for FAA's workforce, rent and lease
increases, and costs for a Service Center building project.
This budget includes program adjustments of $62 million from the
fiscal year 2012 level in the Air Traffic Organization (ATO). To
achieve these savings, ATO will be evaluating cost-savings and
efficiency gains in the following areas: Contract Weather Observations,
Facility Realignments and Consolidations, and Very High Frequency
Omnidirectional Range (VOR) Minimum Operational Network (MON).
The budget allows FAA to meet the challenge of both maintaining the
capacity and safety of the current National Airspace System (NAS) while
keeping our comprehensive modernization and transformation efforts
moving forward. The Facilities and Equipment (F&E) request of $2.8
billion represents a 1.7-percent increase from the fiscal year 2012
enacted level.
The F&E NextGen portfolio is $928 million in fiscal year 2014, a
7.5-percent increase above the fiscal year 2012 enacted level. This
funding provides FAA with the resources needed to continue our ongoing
NextGen modernization activities, including nationwide Automatic
Dependent Surveillance-Broadcast (ADS-B) deployment. It also provides
for follow-on ERAM development for future NextGen capabilities and
publication and accelerated development of Precision Based Navigation
(PBN) procedures that will provide greater flexibility in the NAS and
to facilitate more dynamic management of air traffic. The remainder of
our investment--representing over $1.8 billion--will be in legacy
areas, including aging infrastructure, power systems, information
technology, navigational aids, and weather systems.
The fiscal year 2014 Research, Engineering, and Development (RE&D)
request of $166 million is a $1.5 million (1 percent) decrease from the
fiscal year 2012 enacted level. This supports FAA's continued work in
both NextGen and other research areas such as fire safety, propulsion
systems, advanced materials, aircraft icing, and continued
airworthiness. The RE&D NextGen portfolio is $61.4 million, an increase
of $1.6 million above the fiscal year 2012 enacted level, and supports
NextGen-specific research into wake turbulence, human factors, and
clean aircraft technologies. This includes $12 million for the Joint
Planning and Development Office (JPDO) to continue their leadership in
coordinating interagency initiatives.
The FAA must meet our Nation's growing need for UAS. Our RE&D
request provides $7.5 million to support this critical area through
research on UAS technologies which directly impact the safety of the
NAS. The program is focused on sense and avoid and command and control
requirements that will support the safe integration of UAS in the NAS
within the 14 Code of Federal Regulations regulatory framework.
The NextGen Alternative Fuels for General Aviation program is
requested at $5.6 million in order to support the recommendations of
the Unleaded Avgas Transition Aviation Rulemaking Committee. Funding
for the Environment and Energy program is requested at $33.5 million.
This program supports a range of activities, including research to
mature certifiable clean and quiet aircraft technologies, and develop
sustainable fuels. The program also supports enhanced NextGen
environmental research via the Continuous Low Energy, Emission and
Noise (CLEEN) program and other vehicles.
Airports remain a critical part of the aviation system
infrastructure. Our fiscal year 2014 request provides the funding
needed to ensure safety, capacity, and efficiency at our Nation's
airports through a combination of grant funding and an increase in
Passenger Facility Charges (PFCs). Our $2.9 billion request supports
our continued focus on safety-related development projects, including
runway safety area improvements, runway incursion reduction, aviation
safety management, and improving infrastructure conditions.
The fiscal year 2014 budget proposes to lower funding for Airport
Grants to $2.9 billion by eliminating entitlement funding for large hub
airports while maintaining discretionary eligibility. To assist the
airports that need the most help, the budget focuses traditional
Federal grants to support smaller commercial and general aviation
airports that do not have access to additional revenue or other sources
of capital. At the same time, our proposal allows airports to increase
non-Federal Passenger Facility Charges (PFC) from the current maximum
of $4.50 to $8 which provides them with greater flexibility to generate
their own revenue. If all commercial service airports increase the PFC
collection to $8 they could generate $2.39 billion in additional
funding for airport projects.
The fiscal year 2014 budget proposes that we work with the
insurance companies and air carriers to build private capacity to
insure against war risk occurrences. Our co-insurance proposal would
build this private capacity through a transition period where risk is
shared between the FAA and private insurers. In the first year of
transition, the FAA would bear the majority of the risk, easing private
insurers back into the market.
Private parties would play a large role in setting terms,
conditions, and pricing of coverage under the proposed arrangement. Air
carriers and insurers would have flexibility to develop terms and
conditions that meet the carriers' needs while enabling the insurers to
offer coverage at affordable prices. The FAA is ready to work with
insurers and carriers to find parameters that make for viable coverage
under this proposal.
Under the co-insurance proposal, FAA and commercial insurance
providers would jointly underwrite a common policy. In the case of a
claim, FAA would pay an established fraction of the losses (for example
80 percent), and a commercial insurance company would pay the
remainder. Air carriers would be free to negotiate the charge for the
commercial fraction of the coverage with the insurance company. For
FAA's share of the risk, FAA would charge the lesser of the current cap
and a rate proportional to what the commercial insurance company is
charging under the same policy.
This budget supports continued progress on our NextGen efforts. The
entire fiscal year 2014 NextGen portfolio totals $1.002 billion
distributed among F&E programs ($928.1 million), Research, Engineering
and Development programs ($61.4 million) and Operations activities
($12.6 million). This investment portfolio reflects an increase of
$67.2 million, or approximately 7 percent, above the fiscal year 2012
enacted level. This level of program funding enables the FAA to
continue to support near-term NextGen commitments in a budget-
constrained environment.
While the thrust of our work focuses on U.S. airports, airspace and
aircraft, the FAA actively engages with global aviation partners to
ensure operators receive benefits anywhere in the world.
One immediate benefit to the public is the NextGen Metroplex
initiative. The FAA is working to improve the efficiency of airspace
above congested metropolitan areas by designing precise GPS routes that
will accelerate benefits while reducing bottlenecks and congestion.
These routes will enhance safety and efficiency, and foster the flow of
commerce. Satellite-based navigation is expected to cut a total of 7
million nautical miles from flight plans around these cities each year.
These routes, together with gradual descents that cut back on engine
power, are projected to save at least 22 million gallons of fuel. For
these cities, this represents total reduction in carbon emissions of
220,000 metric tons. That is the equivalent of removing more than
43,000 cars from the streets.
Fiscal year 2014 will see the continuation of NAS-Wide deployment
of the Automatic Dependent Surveillance-Broadcast (ADS-B), the
cornerstone of our transformation to satellite enabled, GPS-based
navigation. We expect the total complement of about 700 radio stations
to be in place and operating by early 2014. Fiscal year 2014 funding is
also included for the development of ADS-B software requirements for
the Advanced Technologies and Oceanic Procedures (ATOP) automation
platform.
In December 2011, the FAA announced contract awards to analyze fuel
quality control procedures, conduct jet engine durability tests with
alternative fuels and perform key testing to support qualification and
certification of jet biofuels from alcohols, organic matter, and other
renewable materials. We expect these activities to support the next
round of jet fuel approvals, scheduled to begin in 2014.
NextGen's contribution to our Nation's economic recovery and future
leadership is critical. We recognize the fiscal challenges our Nation
faces. America's future demands that we continue to invest in modern
technologies that pave the way for tomorrow's capabilities. We continue
to work in full partnership with industry, other agencies and
departments, and with our labor groups to achieve a shared vision,
leveraging powerful technologies and setting new standards for the
future of global aviation.
Safety has always been FAA's number one mission, and our National
Airspace System (NAS) has never been safer. There has not been a fatal
commercial passenger accident in the United States since 2009. That
represents approximately 39.7 million flights that were operated
safely. I am proud of the hard work that has gone into providing a
basis for achieving this level of safety. As we move forward into 2013
and beyond, U.S. aviation is experiencing its safest period ever, and
the dedicated men and women of the FAA will continue working diligently
to maintain safe operations within the NAS.
We are achieving this next level of safety by making our programs
smarter and more data-driven. Our Nation's safety record is a direct
result of an unwavering commitment by Government and industry to work
together to monitor data and identify trends to prevent accidents.
Instead of a reactive, forensic approach to safety management, we are
identifying and mitigating conditions or trends that have potential to
give rise to safety problems. The only way to prevent accidents before
they happen is to accurately identify risk areas and work to mitigate
them. This is possible due, in part, to voluntary reporting for both
FAA and industry employees, safety management systems (for both FAA and
industry) and the creation of the Aviation Safety Whistleblower
Investigation Office. All of these efforts have been providing the
agency with data and information to which we have never before had
access. More information results in FAA being able to see trends that
could lead to accidents, and mitigate the associated risks to prevent
accidents from happening. Adjusting the safety culture to ensure
employees that they can provide information without fear of reprisal is
a cornerstone of our approach to safety.
In 2012 we continued to expand the Aviation Safety Information
Analysis and Sharing (ASIAS) system, which now covers 95 percent of all
commercial flights in the United States. This system allows airlines to
share operational data and voluntary safety reports with each other and
the FAA. ASIAS and other data analysis tools are constantly making our
aviation system even smarter. With these tools, we are able to conduct
more comprehensive safety and performance analysis, and share this
information with industry stakeholders.
With regard to the Boeing 787, last month Boeing redesigned the
battery system and the FAA approved the company's plan for showing that
the redesign will work. Approving the certification plan was the first
step in the process to evaluate the 787's return to flight. Boeing has
redesigned the internal battery components and added better insulation
for the battery cells. They have also added a robust battery
containment and venting system. The company has done extensive testing,
including limited test flights, without passengers, using the
redesigned battery prototype. The FAA is reviewing these test reports
and analysis to make sure that the new battery system ensures the
safety of the aircraft and its passengers.
We all know the importance of aviation to America and the global
economy. Aviation creates jobs and trade, and it connects us to
destinations near and far. The forecast we released March 6 shows that
aviation will continue to expand both domestically and internationally
over the coming decades. And traffic volume for U.S. carriers is
expected to rise by more than 75 percent in the next two decades.
Last year, 737 million people flew on U.S. carriers, and we
anticipate that number to hold steady this year. Our future outlook
shows continued positive growth. In fact, we can expect roughly 400
million more people flying 20 years from now, an increase equal to more
than today's U.S. population.
It is essential to the effective management of FAA's programs to
have stability and predictability that can be relied upon. The many
authorization extensions over the last few years took a toll on FAA's
work in certain areas until the Federal Aviation Reauthorization
Modernization and Reform Act of 2012 offered the stability essential to
our agency's ability to meet the current demands of both air traffic
and aviation safety. For many years, FAA labored under the uncertainty
of temporary reauthorizations. Now sequestration places us in an even
more extreme uncertainty. FAA has worked hard to plan for sequestration
cuts. Seventy percent of FAA's Operations budget is dedicated to
employee salaries and benefits, so they must bear a significant portion
of the cuts. I can assure you that safety is the FAA's top priority. If
sequestration means fewer flights can be safely accommodated in the
NAS, then there will be fewer flights.
On March 5, FAA began issuing furlough notices to over 47,000
employees. There will be 1 furlough day per biweekly pay period, for a
maximum of 11 days through September 30. We issued final furlough
determination notices to employees in early April. We are also planning
to eliminate midnight shifts in over 70 towers across the country,
close over 149 air traffic control towers at airports with fewer than
150,000 flight operations or 10,000 commercial operations per year, and
reduce preventative maintenance and equipment provisioning and support
for all NAS equipment. All of these changes are being made in
collaboration with our stakeholders and our unions.
As a result of employee furloughs and prolonged equipment outages
resulting from lower parts inventories and fewer technicians, travelers
should expect delays. Flights to major cities like New York, Chicago,
and San Francisco could experience delays of up to 90 minutes during
peak hours because we will have fewer controllers on staff. We are
aware that these service reductions will adversely affect commercial,
corporate, and general aviation operators. We also expect that, as
airlines estimate the potential impacts of these furloughs, they will
change their schedules and cancel flights.
Beyond the impacts to air traffic, aviation safety employees will
also experience furloughs. This will impact airlines, aviation
manufacturers, and individual pilots who need FAA safety approvals and
certifications. While the agency will continue to address identified
safety risks, a slowed certification and approval process due to
furloughs could negatively affect passengers and all segments of the
aviation industry.
We all want the same things. We want to get better at what we do,
think smarter, improve safety, streamline certification, and remain the
agency that can work collaboratively with the world to develop safer
and more efficient practices. Sequestration will not stop us from
trying to attain these goals, but it will make it much, much harder.
Despite these uncertain times, the demand for aviation and its
services will continue to grow, and that is why it is critical that we
invest smartly. Our world will continue to be even more interconnected,
and aviation will continue to be a pillar of the global economy.
NextGen will help us meet the challenges that lie ahead, as we
transform from ground-based radar to satellite-based navigation, a work
we are performing in collaboration with our industry partners. We are
seeing its benefits already, and will continue to do so in the coming
years as it becomes an even more integral component of our aviation
system.
In 2012 we made several noteworthy strides delivering NextGen
benefits to operators and the traveling public. Laying the groundwork
is our En Route Automation Modernization (ERAM) program, the platform
upon which NextGen capabilities will be realized. This enabler of
NextGen has been deployed at over half of our facilities controlling
high-altitude air traffic, and eight En Route centers are now using
ERAM as their primary means of controlling aircraft. Five NextGen
transformational programs are now under contract, most recently Data
Communications and NAS Voice System. We also deployed the Automatic
Terminal Proximity Alert tool in several locations, which has helped
air traffic controllers better manage aircraft spacing to safely
achieve optimal efficiency on final approach. And our System Wide
Information Management tools are providing National Airspace System
users with more precise weather information and airport surface data.
This past year, our deployment of satellite-based Performance Based
Navigation (PBN) procedures increased both safety and capacity across
the country as part of our Metroplex initiative. From northern
California to southern Florida, we are implementing PBN to more
efficiently use our Nation's airspace for direct routing. In addition,
through data analysis, procedure improvements, and effective training
for controllers as well as pilots, we safely modified the separation
standards for approaches to parallel runways at a number of busy
airports. Taken together, these initiatives are helping airlines
improve on-time performance, reduce fuel consumption, and deliver
travelers to their destinations more efficiently.
We continue to engage through our work with Optimization of
Airspace and Procedures (OAPM) initiatives, which are being done in
close collaboration with industry and stakeholders. OAPM is actively
working in 9 of the 13 metroplexes identified in Phase 1 of the
program. Of these, one (Houston) is currently in the implementation
phase with two additional sites planned to start implementation of the
new procedures later this summer (DC and North Texas). The metroplex
initiative optimizes procedures in a geographic area where there are a
number of airports, rather than focusing on each airport separately.
Through this initiative, we are untangling our busiest airspace and
creating more direct routes, cutting fuel usage, and becoming more
environmentally friendly. In the congested airspace in the skies above
our busiest metropolitan areas, these new modifications are being put
in place in 3 years, much more quickly than the 5 to 10 years it had
taken previously. We are also actively engaged with our industry and
Government partners in the development of NextGen through, for example,
the NextGen Advisory Committee (NAC). This group is helping to guide
many aspects of our air traffic modernization work. The NAC also works
on developing and recommending NextGen performance metrics.
Another key component of NextGen is reducing aviation's impact on
the environment. Last year we advanced a number of critical initiatives
toward this goal. We made great headway in developing a replacement for
leaded aviation gasoline through our collaboration with industry and
technical research. We partnered with industry through our Continuous
Lower Energy, Emissions, and Noise (CLEEN) program to test aircraft
with new wing and engine designs, as well as a blended sustainable
biofuel. And we are collaborating with our Nation's airports to develop
renewable energy sources and sustainability to reduce emissions. For
example, this year we provided Airport Improvement Program (AIP) grants
to Chattanooga Metropolitan Airport for construction of a 4,000 panel
solar farm, and to Chicago O'Hare International Airport for low-
emission electrical power units used by aircraft parked at the gate.
While NextGen is delivering benefits now, it also builds for the
future. Similarly, the past year we made progress toward ensuring
safety in industry segments where we anticipate significant growth in
the coming years: Unmanned Aircraft Systems (UAS) and Commercial Space
Transportation. FAA employees are working creatively with our industry
partners to meet the challenges of these dynamic sectors.
We are working to safely integrate Unmanned Aircraft Systems into
our national airspace. In March 2012, the agency created a new UAS
integration office. The office serves as the FAA's one-stop portal for
all matters related to civil and public use of UAS in the NAS. The FAA
is in the process of drafting the initial Notice of Proposed Rulemaking
for small UAS. In addition, on February 14, 2013, the FAA released the
Screening Information Request (SIR) to outline the process in which the
FAA would collect, evaluate and select six test sites across the
country to test Unmanned Aircraft Systems. We plan to select those UAS
test sites by the end of this calendar year.
Just as with unmanned aircraft, the FAA is working to safely
integrate commercial space operations into the national airspace system
as well. To date, the FAA has licensed 215 commercial space launches
and reentries. They have gone off without a fatality, a serious injury,
or significant property damage. Last year, we licensed the historic
launches of the SpaceX Falcon 9 rocket--marking the first time a
commercial company delivered cargo to the International Space Station.
Missions like these continue to demonstrate the viability of the
commercial space industry. The FAA has also licensed a total of eight
commercial spaceports. In fiscal year 2014, our commercial space
division is requesting to convert four contract resources to Federal
employees so they can expand their workload to include responsibilities
that are inherently governmental. These additional duties would include
safety inspections, compliance assessments, regulatory activity
support, and inter-agency coordination efforts to create common safety
standards.
Efficiencies are not just for the future. Given the economic
challenges we are facing, FAA has worked very hard to find cost-savings
and we have been quite successful. Even before sequestration, we have
set a target of $91 million in cost-savings for fiscal year 2013. We
recognize that the status quo is not an option and we will continue to
strive to achieve additional efficiencies moving forward.
Last year we made great strides in finding efficiencies, leveraging
our resources, empowering our employees, and making greater use of
technology to perform our core mission. Through a congressional
reprogramming request under our Foundation for Success initiative, we
streamlined finance, information technology, acquisition, and other
essential functions within a shared services organization. The results
included enhancing delivery of information technology services at a
lower unit cost. Additionally, the FAA's Aeronautical Center, which
supports the NAS as well as international partners, generated nearly
$16 million in cost-savings or avoidance last year through streamlining
processes and continuous improvement initiatives. Overall in 2012, we
generated nearly $94 million in cost-savings or avoidance through
control measures and innovative business solutions.
One of our most significant accomplishments of the year came in the
wake of one of the Nation's biggest challenges. Hurricane Sandy
devastated homes and infrastructure throughout the Northeast. Though
the region's airports experienced flooding and other significant
damage, our technical staff worked around the clock to restore airfield
and air navigation systems to operational status. Their hard work and
dedication to the FAA's mission resulted in the restoration of normal
air traffic operations just days after the storm. Seeing our
workforce's efforts to prepare for and rebuild after this unprecedented
storm is one of my proudest moments as head of the FAA. The agency is
grateful for the $30 million in emergency relief funding entrusted to
us by this committee. We are already putting these funds to good use to
repair roofs and walls at FAA facilities, navigation and landing
systems, power systems, and other structures and equipment. In total,
the funds will support 59 repair projects at 21 different locations.
In the current fiscal climate, we must find ways for FAA's
employees to work smarter and enhance our productivity. FAA must not
only meet our day to day responsibilities, we must also look to the
future and figure out how to shape the agency to meet the demands and
opportunities of the future. We are actively engaging our employees in
the development of recommendations for facilities consolidation and
realignment. As noted earlier, the U.S. aviation system is going
through significant, even revolutionary changes. NextGen is a major
transformation which will increase our efficiency and safety, reduce
delays and reduce fuel consumption. UAS have the potential to change
the face of aviation. In the midst of these changes, budget pressures
are making us ask hard questions about what the FAA needs to deliver in
the coming years to ensure the safety and efficiency of the NAS and how
to do it most cost-effectively.
Finally, it is essential that we chart innovative and collaborative
ways to engage with all segments of the aviation sector, from airlines
to association groups, to general aviation, to unions. We must embrace
the opportunity to make long-lasting changes together that ensure a
vital and vibrant aviation industry that serves the needs of this
Nation.
I am extremely proud of our achievements. While I recognize there
is still much work to be done, I know we are up to the task. In the
years ahead we will strive to build on these achievements. We will work
toward making the safest aviation system even safer and smarter;
accelerate the benefits of new technology; and empower employees to
increase efficiencies and spur greater innovations. The decisions we
make over the next few years are going to affect the air transportation
system in the United States for decades to come, and I am eager to work
with you and your colleagues to reach the next level of aviation safety
and efficiency.
Senator Murray. Mr. Scovel.
SUMMARY STATEMENT OF HON. CALVIN L. SCOVEL III
Mr. Scovel. Madam Chairman, Ranking Member Collins, members
of the subcommittee, thank you for inviting me to testify on
FAA's fiscal year 2014 budget. Like other agencies across the
Government, FAA is having to rethink its funding priorities and
make difficult tradeoffs in a most trying fiscal environment.
My testimony today will focus on how FAA can achieve
efficiencies through more effective management of its
workforce, the agency's largest cost driver, and its
modernization efforts while not losing sight of its safety
mission. My office has identified multiple opportunities for
FAA to reduce costs in managing its controller and inspector
workforce.
The agency has been challenged to ensure thousands of newly
hired controllers have the skills needed to carry out their
critical role. Cost overruns on FAA's controller training
contract have reached almost $89 million. And training times
for newly hired controllers have increased by 41 percent since
2009. To meet its goals of reducing training costs and times,
FAA needs to provide stronger contract controls, including how
it awards incentive fees.
FAA also needs to rethink its processes for scheduling
controllers. While air traffic operations have declined by 23
percent since 2000, FAA today employs slightly more controllers
than it did then. Improved scheduling, particularly on
overnight shifts at low activity towers, could enhance
productivity as well as yield additional cost-savings.
The agency similarly needs to improve how it allocates its
4,000 flight standards safety inspectors. FAA has yet to find a
reliable model for determining how many inspectors it needs and
where they are needed most to address the greatest safety risks
and get the best return on investment.
FAA's second major challenge is effectively managing its
implementation of modernization projects and protecting its
airport investments. For example, FAA continues efforts to
fully implement the En Route Automation Modernization program,
a system for processing flight data initially priced at $2.1
billion. While FAA has overcome some technical problems and
fielded ERAM at 16 facilities, ERAM remains at risk of cost and
schedule increases as FAA implements the system at the last
four facilities, including some of the most complex in the
National Airspace System.
To set realistic budgets and expectations for its
modernization and infrastructure efforts, FAA needs to take
several actions. First, FAA needs to complete an integrated
master schedule for NextGen's many interdependent programs to
address operational and technical risks and make informed cost
and schedule tradeoffs.
Second, FAA must rein in excessive costs on major
acquisition contracts. FAA awarded multibillion dollar
contracts without resolving differences between the agency's
cost estimates and those provided in contractor proposals. This
lack of control creates unreal, unreliable budget estimates and
unnecessary cost increases.
Third, FAA needs to ensure airport revenues are
appropriately spent. Over the past 10 years, we have identified
millions of dollars in airport revenue that, contrary to
Federal law, were diverted, used for non-airport purposes or
simply lost. Had these revenues been used for airport
operations, the airports could have relied less on Federal
funding.
As FAA works to control costs, it must not lose sight of
its number one priority, ensuring the continued safety of the
National Airspace System. One of FAA's key safety issues
remains reducing controller errors. FAA statistics show that
serious operational errors by controllers are on the rise,
including those associated with runway incursions. Improved
data collection and analysis would enable FAA to better
identify the root causes of these safety risks and mitigate
them.
Another important safety issue relates to FAA's
implementation of new pilot qualification requirements, a key
provision of the Airline Safety Act. FAA is behind schedule in
finalizing the highly contested rule for pilots, but still
states it will make the final due date of this coming August.
Ongoing aviation advancements such as unmanned aircraft
systems have created new safety challenges for FAA. Safely
integrating these new systems, which FAA predicts may number
roughly 10,000 within the next 5 years, will require new
approaches to managing the Nation's airspace.
PREPARED STATEMENT
Madam Chairman, this concludes my prepared statement. I'd
be happy to answer any questions you or other members of the
subcommittee may have.
Senator Murray. Thank you very much.
[The statement follows:]
Prepared Statement of Hon. Calvin L. Scovel III
Madam Chairman and members of the subcommittee: Thank you for
inviting me to testify on the Federal Aviation Administration's (FAA)
fiscal year 2014 budget. As you know, FAA strives to maintain safe
operation of the National Airspace System (NAS) while ensuring
efficiency through modernization efforts such as the Next Generation
Air Transportation System (NextGen). The sequestration's mandated
budget cuts require agencies across the Federal Government to rethink
their priorities and make difficult tradeoffs. FAA is no exception. The
audits conducted by my office aim to improve safety--FAA's number one
priority--and to control costs, create efficiencies, and assist in
establishing priorities.
My testimony today focuses on three significant challenges for FAA:
(1) more effectively managing its workforce; (2) managing strategies
for NextGen and modernization; and (3) continuing efforts to ensure the
safety of the NAS.
in summary
Our recent and ongoing work has identified opportunities for FAA to
improve the management of its workforce, the agency's largest cost
driver. Specifically, FAA can increase the efficiency of its air
traffic controller and safety workforce by strengthening its controller
training program, revising its controller staffing and scheduling
practices, and developing an effective method for determining how many
safety inspectors it needs and where they are most needed. At the same
time, FAA must protect its investment in its multibillion dollar
NextGen efforts and infrastructure improvements that are critical to
ensuring the future viability of the NAS. This will require FAA to set
priorities and establish sound management strategies to achieve near-
and long-term benefits, enhance its contract oversight, and prevent
misuse of airport revenue and Federal grant funds. Finally, FAA must
not lose sight of its number one priority: ensuring the continued
safety of the NAS. One of FAA's key safety issues remains effectively
collecting and analyzing data on air traffic controller errors that
create air and ground collision risks. FAA also faces new challenges
with safely integrating unmanned aircraft systems into the NAS,
implementing a safety data sharing system to proactively assess risks,
and ensuring effective oversight of its voluntary safety disclosure
program for air carriers.
background
FAA's budget funds four accounts: Operations; Facilities and
Equipment (F&E); the Airport Improvement Program (AIP); and Research,
Engineering, and Development (RE&D).
--Operations is FAA's largest cost driver and funds most of the
agency's day-to-day activities, including safety oversight and
air traffic control functions. Salaries and benefits for
controllers, safety inspectors, and other FAA personnel make up
71 percent of FAA's operations costs.
--F&E funds the agency's NextGen initiatives and other modernization
activities such as improving aging infrastructure, power
systems, navigational aids, and weather systems.
--AIP funds grants to airports to pay for runway construction and
other related projects.
--RE&D provides funds for NextGen and other research areas such as
fire research and safety, and aging aircraft.
FAA's total fiscal year 2014 budget request of $15.6 billion
represents about a 2-percent decrease from the agency's 2012 budget.
However, the 2014 request includes $3 billion in Immediate
Transportation Investments spending for AIP and NextGen programs (see
table 1). FAA proposes to shift the focus of its AIP account to smaller
commercial and general aviation airports and eliminate guaranteed AIP
funding for large hub airports. The proposal would also increase the
passenger facility charge limit from $4.50 to $8 per enplanement for
all eligible airports, giving large hub airports greater flexibility to
generate their own revenue.
TABLE 1.--FAA BUDGET, FISCAL YEAR 2012 THROUGH FISCAL YEAR 2014
[Dollars in millions]
----------------------------------------------------------------------------------------------------------------
2013 Increase/
continuing decrease from
Account 2012 actual resolution 2014 request 2012 to 2014
annualized \1\ (Percent)
----------------------------------------------------------------------------------------------------------------
Operations...................................... $9,653 $9,712 $9,707 0.6
F&E............................................. 2,731 2,777 2,778 1.7
AIP............................................. 3,350 3,350 2,900 -13.4
RE&D............................................ 168 169 166 -1.2
---------------------------------------------------------------
Subtotal.................................. 15,902 16,008 15,551 -2.2
===============================================================
Immediate Transportation Investments............ .............. .............. 3,000 ..............
===============================================================
Total..................................... 15,902 16,008 18,551 16.7
----------------------------------------------------------------------------------------------------------------
\1\ This amount excludes the $637 million reduction in funding due to the sequestration.
Source: FAA.
Due to sequestration, FAA must reduce its remaining fiscal year
2013 budget by $637 million. The majority of this reduction will be
absorbed by the Operations account. FAA expects that cuts to the
Operations account will result in the closure of 149 contract towers,
and FAA plans to require controllers, technicians, and other employees
to take up to 11 unpaid furlough days through the end of September.
Most of the remaining reduction will be absorbed by the F&E account.
This reduction will require FAA to adjust its cost and schedule
baselines for individual NextGen and other modernization programs,
which could delay completion of these projects.
faa has opportunities to more effectively manage its controller and
inspector workforce
FAA plans to place thousands of new air traffic controllers at its
more than 300 air traffic facilities nationwide--a significant
challenge, as new controllers can require several years of training to
become certified at their assigned locations,\1\ and each facility has
unique operations and air traffic volume. Although the agency has had a
major controller training support contract in place since 2008, the
contract has experienced cost overruns and has not met its goal to
reduce total training times. FAA must also continue in its efforts to
address controller workload issues, particularly in terms of improving
productivity, which could create cost-savings. Finally, to effectively
oversee a dynamic aviation industry, it is critical that FAA place its
approximately 4,000 flight standards safety inspectors where they are
most needed.
---------------------------------------------------------------------------
\1\ New controllers achieve certification on each position as they
move through facility training. After they have certified on all
positions within their assigned area, they are commissioned as a
certified professional controller at that facility.
---------------------------------------------------------------------------
Challenges in FAA's Training Programs and Contract Oversight Jeopardize
FAA's Efforts To Ensure a Proficient Controller Workforce
To replace retiring controllers who were hired immediately after
the 1981 strike,\2\ FAA plans to hire and train more than 11,700 new
controllers over the next 10 years.\3\ In 2004, we reported that FAA's
controller training program was extremely decentralized for such a
large national undertaking and that the efficiency and quality of
training varied extensively by location. With the large numbers of new
controllers entering the workforce and veteran controllers retiring or
eligible to retire, FAA must have reliable information on how many
certified controllers it needs to effectively manage the NAS. FAA
executed a contract to train its new controllers; however, it has not
been effectively managed.
---------------------------------------------------------------------------
\2\ In 1981, following a period of labor unrest, an overwhelming
majority of the air traffic control workforce went on strike on August
3. President Reagan ordered those controllers to return to duty within
48 hours. When those 10,438 striking controllers did not return to
work, President Reagan fired them on August 5.
\3\ Over the past 5 years, FAA has hired more than 6,600 new
controllers.
---------------------------------------------------------------------------
FAA's $859 million Air Traffic Controller Optimum Training
Solutions (ATCOTS) contract continues to be a significant issue for the
agency. FAA awarded the contract in 2008 to provide up to 10 years of
controller training support and to assist in modernizing the agency's
training program.\4\ Key ATCOTS goals include reducing total training
costs, reducing training time, and developing training innovations that
can be adapted to new technologies--particularly those related to
NextGen. However, 4 years into the contract, the goals have not been
achieved. For example, between 2009 and 2012, the average training time
for newly hired controllers increased 41 percent from 1.9 years to 2.7
years.
---------------------------------------------------------------------------
\4\ The ATCOTS contract consists of a 5-year base period, worth
$437 million, and two option periods (a 3-year period and a 2-year
period) worth $422 million.
---------------------------------------------------------------------------
In 2010, we reported that the ATCOTS contract faced significant
cost overruns, poor procurement practices, and a lack of effective
contract oversight.\5\ For example, in its first 2 years, the ATCOTS
contract exceeded negotiated contract values by $46 million. Our
current review continues to show that FAA has not implemented
sufficient changes to improve its program and contract oversight. For
example, in 2012, after 4 consecutive years of cost overruns (totaling
approximately $89 million), FAA chose to extend the ATCOTS contract by
3 years without clearly defining the contract's training requirements
or ensuring that it can produce sufficient training innovations to meet
its training goals.
---------------------------------------------------------------------------
\5\ FAA's Air Traffic Controller Optimum Training Solution Program:
Sound Contract Management Practices Are Needed To Achieve Program
Outcomes (OIG Report No. AV-2010-126), September 30, 2010. OIG reports
are available on our Web site at http://www.oig.dot.gov/.
---------------------------------------------------------------------------
Additionally, since awarding the 10 year contract in September
2008, FAA paid the contractor over $31 million in cost incentive fees
and award fees that were ineffective at motivating contractor
performance. For example, to reduce contract costs, FAA paid the
contractor $19 million in cost incentive fees and award fees related to
cost containment despite the $89 million in cost overruns. FAA also
awarded the contractor over $12 million for meeting performance
measures that do not link to important training goals, such as training
innovations.
In May 2011, FAA created an Independent Review Panel of industry
and academic professionals to evaluate all aspects of how the agency
hires, assigns, and trains new controllers. To date, the panel has
identified 49 recommendations, many incorporating actions we previously
recommended, that could significantly improve FAA's controller hiring
and training processes. However, most are in the early stages of
development, and timeframes for actual implementation are not yet
known.
We plan to issue reports on FAA's ATCOTS contract and air traffic
controller facility training later this year and will continue to
monitor the agency's cost-saving efforts in these areas.
FAA Could Realize Cost-Savings Through Improved Controller Productivity
and Scheduling
Since 1998, FAA has introduced a series of initiatives intended to
increase controller productivity and reduce operating costs. These
initiatives include eliminating alternate work schedules, matching
controller staffing to facility workload, reducing operational overtime
costs, and developing an automated official time reporting system.
However, it is unclear whether these initiatives are achieving the
anticipated productivity gains and cost-savings. FAA data suggest that
its overall staffing may not be optimal. Since 2000, total air traffic
operations have declined by 23 percent, while the total number of
controllers slightly increased. We are currently conducting a review of
FAA's controller productivity initiatives.
As directed by the FAA Modernization and Reform Act of 2012,\6\ we
are also conducting a review of the cost impacts of new FAA controller
schedules--developed in response to concerns about the impact of FAA
scheduling practices, particularly during overnight shifts, on
controller performance and air traffic safety. While most of FAA's new
controller scheduling policies have not significantly affected costs,
our ongoing work indicates the agency could realize some cost-savings
through better scheduling. For example, 72 facilities that do not meet
the agency's minimum traffic guidelines for continuous overnight
operations continue to have a minimum of two controllers during the
midnight shift. Reducing air traffic control services at these
facilities during a portion of or the entire midnight shift could
reduce operating costs. However, FAA has not yet calculated the
potential savings. We expect to report on our reviews of FAA's
controller productivity and scheduling later this year.
---------------------------------------------------------------------------
\6\ Public Law 112-95.
---------------------------------------------------------------------------
FAA Has Not Developed a Reliable Method for Determining Its Safety
Inspector Workforce Needs
FAA currently employs approximately 4,000 flight standards safety
inspectors who oversee all facets of aviation safety, from general
aviation to air carrier operations. However, the agency has not
determined where these resources are most needed or the extent to which
there may be a shortfall in its inspector workforce. A 2006 National
Research Council (NRC) study,\7\ conducted at the direction of
Congress, found that FAA's methodology for allocating aviation safety
inspector resources was ineffective. NRC recommended that FAA develop a
new approach, and, in response, FAA introduced a new staffing model in
October 2009.
---------------------------------------------------------------------------
\7\ ``Staffing Standards for Aviation Safety Inspectors,''
September 20, 2006.
---------------------------------------------------------------------------
We have evaluated the model as part of an ongoing audit of
inspector staffing, as requested by Congress.\8\ Thus far, FAA
officials are not confident in the accuracy of the model's staffing
projections and therefore have not fully relied on the number projected
by the model when developing plans and annual budget requests. As of
January 2013, FAA had reported the results of its staffing model six
times, with each iteration showing very different nationwide employee
shortages (see figure 1).\9\
---------------------------------------------------------------------------
\8\ Congress directed our office to review inspector and analyst
staffing issues in section 205 of the Airline Safety and FAA Extension
Act of 2010, Public Law 111-216, enacted August 1, 2010.
\9\ Based on our analysis of FAA data, these fluctuations appear to
be caused by a number of underlying issues such as inaccurate and
outdated data.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
FAA is working to further refine the model so that it more
effectively identifies the number of inspectors needed and where they
should be placed to address the greatest safety risks and get the best
return on investment. We expect to issue our report on inspector
staffing later this year.
sound management strategies are key to the cost-effective
implementation of faa's modernization and infrastructure efforts
FAA has numerous efforts underway to modernize the air
transportation system and upgrade infrastructure--most notably its
multibillion dollar NextGen transformational programs.\10\ The success
of these efforts depends on the agency's ability to set priorities,
control costs, deliver benefits, and maintain stakeholder support.
However, FAA has been challenged to maximize near-term benefits through
its metroplex initiative, while addressing cost and schedule risks
related to implementing critical automation systems such as the En
Route Automation Modernization (ERAM) program. In addition, FAA has not
yet developed an integrated master schedule to help advance and
prioritize key transformational programs. Other challenges include
improving contract oversight and management, upgrading aging air
traffic control facilities, and protecting airport investments.
---------------------------------------------------------------------------
\10\ FAA's transformational programs, defined as programs directly
related to the delivery of NextGen capabilities, will fundamentally
change the NAS by enhancing communications, improving the tracking of
aircraft, and revamping overall air traffic management.
---------------------------------------------------------------------------
Integrating New Performance-Based Navigation Routes Is Critical To
Maximizing Near-Term Benefits and Ensuring User Support
In 2010, FAA launched its metroplex initiative--a 7-year effort to
improve the flow of traffic and efficiency at congested airports in 13
major metropolitan areas. A key part of this effort and a stepping
stone for NextGen is the introduction of new performance-based
navigation (PBN) procedures, such as Area Navigation (RNAV) and
Required Navigation Performance (RNP),\11\ which can provide
significant near-term benefits such as more direct flight paths,
improved on-time aircraft arrival rates, greater fuel savings, and
reduced aircraft noise. FAA has completed initial studies or begun
design work at 8 of the 13 metroplex locations but continues to face
challenges with shifting from planning to implementation. FAA has
extended the expected completion date for all metroplex sites by 15
months to September 2017 after determining that its initial schedule
was too aggressive.
---------------------------------------------------------------------------
\11\ RNAV is a method of navigation in which aircraft use avionics,
such as Global Positioning Systems, to fly any desired flight path
without the limitations imposed by ground-based navigation systems. RNP
is a form of RNAV that adds on-board monitoring and alerting
capabilities for pilots, thereby allowing aircraft to fly more precise
flight paths.
---------------------------------------------------------------------------
While the metroplex approach is a step in the right direction to
achieving the near-term benefits of reduced congestion, we reported in
August 2012 that industry representatives were concerned that FAA had
not yet integrated efforts from other related initiatives, such as
better managing surface operations.\12\ In addition, many airspace
users that are equipped with advanced avionics would like more advanced
PBN procedures than FAA's current efforts provide--specifically, those
that regularly allow for more precise and curved approaches. We also
identified a number of barriers to FAA's metroplex effort, including
the need to work across diverse agency lines of business, update
policies, streamline the process for implementing new flight
procedures, apply environmental regulations, upgrade controller
automation tools, and train controllers on new advanced procedures. FAA
is currently working to address our recommendations, including
developing milestones for a more integrated metroplex approach and
addressing barriers in a timely manner.
---------------------------------------------------------------------------
\12\ Challenges With Implementing Near-Term NextGen Capabilities at
Congested Airports Could Delay Benefits (OIG Report No. AV-2012-167),
August 1, 2012.
---------------------------------------------------------------------------
FAA has several efforts underway to identify and resolve obstacles
to PBN use. For example, FAA has tasked MITRE to obtain and analyze
data to measure the use of PBN procedures and quantify their benefits.
While our analysis of MITRE's preliminary data shows high RNP use at
some small- to medium-sized airports, such as Oakland, overall RNP
usage is low, particularly at busy metroplex airports, such as New
York.\13\ According to MITRE, one of the obstacles to using the
procedures in busy metroplex locations is the lack of controller tools
to manage mixed operations--that is merging aircraft using straight-in
approaches with those on curved paths.\14\ It is important for FAA to
use MITRE's data to determine why procedures are not being used and
what it will take to obtain benefits. FAA currently has a team
developing an action plan to address obstacles, such as the need to
update policies and procedures to allow PBN use, and expects to issue a
report later this year. FAA is also working to streamline its process
for implementing new procedures in response to recommendations from an
internal FAA review--the NAV Lean project. However, FAA has only
implemented 3 of the 21 recommendations thus far and does not expect to
complete all recommendations until September 2015.
---------------------------------------------------------------------------
\13\ PBN usage data is as of January 2013. MITRE has ongoing
efforts to update the data and improve the formulas. MITRE is only
capturing data for RNP procedures with curved approaches because it
cannot distinguish RNP procedures with straight-in approaches from
conventional procedures.
\14\ According to MITRE, other causal factors, such as weather or
operational conditions that do not necessitate the use of PBN
instrument approaches, can also affect RNP use.
---------------------------------------------------------------------------
Despite Progress, FAA Faces Programmatic and Cost Risks With Automation
Systems in the Critical Path of NextGen
FAA's goals for NextGen ultimately depend on the success of its
ongoing efforts to deploy ERAM--a $2.1 billion system for processing
flight data. Without ERAM, the key benefits of FAA's transformational
programs, such as new satellite-based surveillance systems and data
communications for controllers and pilots, will not be possible. FAA
originally planned to complete ERAM by the end of 2010, but significant
software problems impacted the system's ability to safely manage and
separate aircraft and raised questions as to what capabilities ERAM
will ultimately deliver. As a result, FAA rebaselined the program in
June 2011, pushing its expected completion to 2014 and increasing cost
estimates by $330 million.
FAA is making considerable progress toward getting ERAM on track.
The agency is now using ERAM at 16 of 20 sites either on a full- or
part-time basis--a significant step forward given the extensive
problems at the two initial sites. FAA plans for all 20 sites to
achieve full operational capability and to decommission \15\ the legacy
system by August 2014. However, as FAA deploys ERAM to the Nation's
busiest facilities, such as New York and Washington, DC, it expects to
identify new problems that could impact cost and schedule. FAA is
currently spending about $12 million a month on the ERAM F&E portion of
the contract, excluding NextGen efforts funded through the ERAM
contract. If the current contract burn rate does not decline
significantly, the agency will need additional funds to complete this
stage of the program.\16\
---------------------------------------------------------------------------
\15\ Decommissioning involves the disconnection, removal, and
disposal of the HOST computer system once ERAM has been declared
operationally ready at a site.
\16\ The Office of Management and Budget (OMB) approved shifting
$44 million of ERAM O&M funding to F&E funding, increasing total ERAM
F&E funding to $374 million. As of February 2013, FAA had spent a total
of $241.86 million (F&E)--about 64.7 percent of the $374 million in F&E
funding allocated since the June 2011 rebaseline.
---------------------------------------------------------------------------
Moreover, controllers and experts continue to raise concerns about
ERAM's capabilities. While these issues are not expected to delay
ERAM's 2014 implementation, they will need to be addressed for the
system to support NextGen initiatives.
--Flight Plan Trajectory Modeler.--This is an ERAM capability that
models aircraft flight paths and is used to predict conflicts
and ensure accurate handoffs between controllers and other
facilities. However, the modeler software has often required
adjustments to change the flight plan trajectory to ensure
accurate handoffs. According to controllers, improvements are
needed in order to support current operations and NextGen
capabilities that use trajectory-based operations.\17\
---------------------------------------------------------------------------
\17\ Trajectory-based operations focus on more precisely managing
aircraft from departure to arrival with the benefits of reduced fuel
consumption, lower operating costs, and reduced emissions.
---------------------------------------------------------------------------
--Aircraft Tracking and Sensor Fusion.--This capability allows ERAM
to integrate--or ``fuse''--multiple radars and satellite-based
information for controllers. However, thus far, controllers
have not been able to take advantage of this improved
capability because of tracking issues. A MITRE analysis found
that the ERAM tracker will require adjustments to use the
Automatic Dependent Surveillance-Broadcast system (ADS-B) \18\
and radar together to manage air traffic. Until these issues
are addressed, it is unlikely FAA will be able to reduce
separation between aircraft at high altitudes.
---------------------------------------------------------------------------
\18\ ADS-B, one of NextGen's transformation programs, is a
satellite-based surveillance technology that combines the use of
aircraft avionics and ground-based systems.
---------------------------------------------------------------------------
Similar to ERAM, FAA's Terminal Automation Modernization/
Replacement (TAMR) effort is on the critical path to NextGen. FAA's
TAMR program aims to modernize or replace all of the automation systems
that controllers rely on to manage traffic at terminal facilities with
a single automation platform--the Standard Terminal Automation
Replacement System (STARS) system. If effectively implemented, TAMR is
expected to reduce agency costs and facilitate the implementation of
NextGen capabilities.
TAMR currently involves modernizing automation systems at 11
terminal facilities, 7 of which are the largest and busiest in the
Nation. FAA estimates this effort will cost $438 million and be
completed between 2015 and 2017. However, the agency faces significant
cost, schedule, and technical risks in this effort. Specifically, FAA
has yet to identify and finalize all ``gaps''--that is, the software
and hardware requirements that are needed to successfully replace the
existing automation system \19\ with STARS. Finalizing these gaps
requires extensive software development and testing--a lengthy and
potentially costly process should issues arise in testing. FAA is
currently developing software to address 94 gaps but anticipates
identifying more gaps once it begins transitioning to STARS at the
busiest facilities. Moreover, because full STARS capability at the 11
sites is still years away, FAA continues to add new capabilities to
existing systems at select facilities to support air traffic
operations. The longer FAA must maintain and update existing systems at
these sites, the greater the implementation and cost risk because FAA
will have to add the same new capabilities to STARS to maintain
operations at the sites. To improve FAA's effectiveness in achieving
terminal modernization, we made a number of recommendations to better
and more cost efficiently manage this effort. We anticipate receiving
FAA's response and issuing our final report soon.
---------------------------------------------------------------------------
\19\ Common Automated Radar Terminal System (CARTS-IIIE) automation
systems currently exist at the 11 large terminal facilities.
---------------------------------------------------------------------------
FAA Lacks an Integrated Master Schedule To Manage and Prioritize Key
NextGen Programs
Setting realistic plans, budgets, and expectations for key NextGen
programs is critical to controlling NextGen costs. FAA now spends
almost $1 billion annually on NextGen efforts and plans to spend $2.4
billion between 2013 and 2017 on the six transformational programs that
will provide NextGen's foundational technologies and
infrastructure.\20\ These include ADS-B, with a current approved cost
of $2.7 billion, and Data Communications, with a current approved cost
of $741.5 million.
---------------------------------------------------------------------------
\20\ These six programs are ADS-B, System Wide Information
Management, Data Communications, NextGen Network Enabled Weather, NAS
Voice System, and Collaborative Air Traffic Management Technologies.
---------------------------------------------------------------------------
However, FAA has yet to complete an integrated master schedule to
manage implementation of these six programs--many of which are
interdependent. Without a master schedule, FAA will be challenged to:
(1) fully address operational, technical, and programmatic risks; (2)
prioritize and make informed tradeoffs for programs' costs and
schedules; and (3) determine what capabilities should be delivered
first. In response to a recommendation we made in April 2012,\21\ FAA
is working on the integrated master schedule and expects to have it
completed by December 2013.
---------------------------------------------------------------------------
\21\ Status of Transformational Programs and Risks to Achieving
NextGen Goals (OIG Report No. AV-2012-094), April 23, 2012.
---------------------------------------------------------------------------
Ineffective Planning and Oversight Have Contributed to Cost Overruns
and Delays for Efforts Needed To Support NextGen
Since 2005, FAA has experienced cost overruns, schedule delays, or
both on half of its major air traffic control programs, including ERAM.
Weaknesses in FAA's contract planning have hindered the agency's
ability to efficiently and effectively advance programs and protect its
investments. For example, when designing ERAM's contract structure, FAA
did not fully adopt best practices for information technology (IT)
acquisitions--such as modular contracting, which calls for dividing a
large contract into manageable contract segments delivered in shorter
increments. In addition, ERAM's cost incentive fee did not motivate the
contractor to stay below cost targets because FAA simply increased the
target costs as requirements grew. At the time of our review, FAA paid
the contractor over $150 million in cost incentives fees even though
ERAM costs exceeded the budget by at least $330 million. Further, FAA
did not detect or mitigate significant risks until almost 2 years after
software problems surfaced at a key test site. In response to our
recommendations, FAA has modified the ERAM contract to implement a more
modular structure, revised incentives for new software releases, and
improved ERAM's risk management process.\22\
---------------------------------------------------------------------------
\22\ Weaknesses in Program and Contract Management Contribute to
ERAM Delays and Put Other NextGen Initiatives at Risk (OIG Report No.
AV-2012-179), September 13, 2012.
---------------------------------------------------------------------------
FAA has also awarded contracts without resolving differences
between the agency's cost estimates and those provided in contractor
proposals, resulting in unreliable budget estimates. For example, to
accomplish NextGen and efforts related to maintaining the NAS, FAA
awarded seven Systems Engineering 2020 (SE-2020) contracts for
technical and professional support services, which have a cumulative
maximum value of $7.3 billion--the largest award in FAA history.
However, when FAA awarded these SE-2020 contracts in 2010, it included
18 million more labor hours than needed, overstating potential contract
costs by $2 billion. As a result, FAA cannot be sure that the
contract's cost baseline is an accurate benchmark for monitoring costs.
For FAA's ATCOTS contract, FAA did not resolve the 29 percent
difference between the contractor's proposed costs and FAA's
independent Government cost estimate. In addition, the contract
experienced a 35-percent cost increase during the first contract year
due to underestimating controller training requirements.
FAA's problems in these areas are further exacerbated by weaknesses
in its review and approval process for major acquisitions. OMB requires
Federal agencies to monitor and evaluate performance of IT investments
through a capital planning and investment control process. In response,
FAA's Joint Resources Council (JRC) was established to ensure capital
investments fulfill mission priorities and maximize resources. However,
JRC sometimes lacks complete information when making investment
decisions. Further, FAA does not consistently follow the JRC approval
and oversight process. As a result, FAA risks making investment
decisions with incomplete information, which could jeopardize the
success of critical FAA programs. For example, since 2005, FAA has
experienced cost overruns, schedule delays, or both on 7 of its 14
major air traffic control IT programs, including the Wide Area
Augmentation System program, which exceeded original cost estimates by
$2 billion. FAA has established a new control group within its Program
Management Office that, once appropriately staffed, will begin to
assess program planning documentation.
FAA Must Address Key Issues To Achieve Potential Cost Savings Through
Facility Realignments and Consolidations
A critical--and costly--step in FAA's NextGen effort is the extent
to which it realigns and consolidates its aging infrastructure. To
sustain its current facility infrastructure, in fiscal year 2014, FAA
plans to spend $125 million to replace or improve its terminal radar
approach control (TRACON) facilities and air traffic control towers,
$53 million to maintain en route centers, and $85 million to sustain
electrical power systems. The average age of an en route center is 51
years, while the average age of a TRACON is 29 years. Moreover, many of
these facilities are in poor or fair condition, and the infrastructure
at some facilities cannot support NextGen and other modernization
initiatives.
FAA's current plans call for an integrated control facility in the
New York metropolitan area--a significant step in achieving operational
efficiencies. However, to successfully realign and consolidate
facilities, FAA needs to make informed decisions regarding cost,
schedule, technical capabilities, and the impact on the aviation
workforce. In July 2012, we recommended that FAA develop and regularly
update comprehensive cost estimates for construction, equipment,
increased salaries, relocation expenses, and training for its
consolidation effort.\23\ As FAA's plans evolve, addressing these
issues early will better position the agency to achieve potential cost
savings and NextGen benefits. FAA expects to provide a detailed cost
estimate for the integrated New York facility by the end of 2014. To
completely implement our recommendation, FAA will need to produce
detailed financial information for consolidating facilities in other
locations.
---------------------------------------------------------------------------
\23\ The Success of FAA's Long-Term Plan for Air Traffic Facility
Realignments and Consolidations Depends on Addressing Key Technical,
Financial, and Workforce Challenges (OIG Report No. AV-2012-151), July
17, 2012.
---------------------------------------------------------------------------
Further Actions Are Needed To Protect Federal Investment in Airport
Infrastructure
FAA projects that U.S. passenger traffic will grow by 2.6 percent
annually in the next 5 years, and that by 2033 there will be 1.15
billion passengers. Ensuring enough capacity at the Nation's airports
is essential to meeting this demand, reducing delays, and realizing the
full benefits of NextGen. However, NextGen alone will not address
capacity constraints at some airports. While FAA has made progress in
overseeing airport infrastructure improvements at our Nation's
airports,\24\ including new runways, the agency must ensure that
current and planned runway projects and their corresponding capacity-
enhancing airspace changes remain on schedule. Moreover, FAA needs to
improve its grant oversight to protect its significant investments in
these projects.
---------------------------------------------------------------------------
\24\ According to FAA, since the start of fiscal year 2000, 24
airfield projects have opened at 20 major airports. These include 16
new runways, 3 taxiways, 3 runway extensions, 1 airfield
reconfiguration completed (included relocating a runway and
constructing a new center taxiway), and 1 airfield reconfiguration to
be completed this year (includes a runway extension and a new runway
that have been completed, and another runway due to open in October
2013).
---------------------------------------------------------------------------
FAA is pursuing several airspace redesign projects nationwide--
including major efforts to revamp airspace in the Atlanta, Chicago, and
New York-New Jersey-Philadelphia areas. To ensure runways at these
sites have sufficient capacity to accommodate the additional air
traffic, FAA must synchronize its airspace redesign and runway efforts,
as it did at the Chicago O'Hare International Airport. Completing a new
runway and extending an existing runway in 2008 \25\ allowed FAA's
airspace redesign efforts in that area to move forward.
---------------------------------------------------------------------------
\25\ Infrastructure projects as part of Phase 1 of the O'Hare
Modernization Program.
---------------------------------------------------------------------------
However, the remaining infrastructure and related airspace projects
for O'Hare, as well as the planned infrastructure and related airspace
projects for the Philadelphia International Airport, are at risk due to
the uncertain future of these capacity enhancement programs (see table
2). Although FAA has committed nearly $1.4 billion in AIP funds for the
next 20 years--with annual outlays of more than $60 million--the agency
faces multiple implementation challenges. To protect these investments
and ensure sufficient capacity, FAA needs to work closely with
airports, airlines, and other stakeholders to resolve differences and
make decisions about these projects so they can move forward.
TABLE 2.--STATUS OF MAJOR NEW RUNWAY PROJECTS
[Dollars in millions]
----------------------------------------------------------------------------------------------------------------
Total
Airport Phase Estimated completion date cost
estimate
----------------------------------------------------------------------------------------------------------------
Chicago O'Hare:
Runway 10C/28C....................... Construction................. September 2013............. $1,290
Runway 9R/27L \1\.................... Design \2\................... 2020....................... 520
Runway 9C/27C........................ Design \2\................... 2020....................... 1,130
Runway 10R/28L....................... Construction................. December 2015.............. 516
Philadelphia: Runway 9R/27L, Runway 8/26 Some Site Prep \2\ \3\....... TBD........................ 5,200
\1\, Runway 9R/27L \1\.
----------------------------------------------------------------------------------------------------------------
\1\ Extension of existing runway.
\2\ Funding for construction has not been secured and is subject to ongoing negotiations with the airlines.
\3\ Extension of runway 9R/27L (which will be renamed 9C/27C when the new runway is built) is in the design
phase with a 2015 estimated completion date. Due to lack of funding, completion dates for the remaining
projects have yet to be determined.
Insufficient oversight of airport revenue and AIP grants further
jeopardizes FAA's investments. Over the past 10 years, we have
identified nearly $376 million in airport revenue that was illegally
diverted, used for non-airport purposes, or was simply lost. Had these
revenues been used for airport operations, the airports would have been
more self-sufficient and less reliant on Federal funding. While FAA
conducts airport revenue reviews, the reviews have been limited to a
few airports a year. In general, FAA relies primarily on three
oversight methods that have proven inadequate to prevent the diversion
and loss of valuable airport revenue: (1) review of airport sponsors'
annual revenue use reports; (2) single audit reports; and (3) third-
party complaints. At the request of several House members from
California, we are currently conducting an audit on FAA's oversight of
Los Angeles International Airport revenue use.
Finally, reducing and recovering improper AIP grant payments has
been a longstanding challenge for FAA. In 2010, we reported that FAA
had made an estimated $31 million in recoverable improper payments \26\
during fiscal year 2008 and had not detected them. More recently, we
reported that FAA's oversight was insufficient to prevent or detect
more than $1.4 million in recoverable improper American Recovery and
Reinvestment Act of 2009 (ARRA) grant payments. In particular, we found
that San Francisco International Airport officials improperly billed
ARRA for over $832,000 for unapproved taxiway and drainage work, as
well as ineligible survey equipment. To address this challenge, FAA
began implementing a new risk-based grant oversight process and an
electronic grant payment system in 2012. However, it is too soon to
know whether this additional step will significantly improve FAA's
ability to prevent or detect future improper payments.
---------------------------------------------------------------------------
\26\ In 2002, Congress passed the Improper Payments Information Act
(IPIA), providing a framework for agencies to use in testing for
improper payments, identifying their causes, and implementing solutions
to reduce them. In August 2006, OMB established detailed requirements
for complying with IPIA. OMB further clarified that improper payments
include the following payments to ineligible recipients: duplicate
payments, payments in incorrect amounts, payments for ineligible
services or services not received, or payments having insufficient
documentation.
---------------------------------------------------------------------------
opportunities remain to better ensure the safety of the national
airspace system
While FAA works to achieve efficiencies in its operations,
programs, and overall costs, it must continue to address ongoing safety
concerns. FAA has several opportunities to enhance safety by improving
its collection and analyses of safety data, including data on air
traffic controller errors that create air and ground collision risks.
FAA will need to enhance its oversight of aircraft repair stations and
implement key provisions of the Airline Safety Act related to pilot
safety. FAA also faces challenges with safely integrating unmanned
aircraft into the NAS, developing a safety information sharing system
to proactively assess risk, and improving its voluntary safety
disclosure program for air carriers.
Data Collection and Analysis Enhancements Are Needed To Identify and
Mitigate the Root Causes of Separation Losses
A top priority for FAA is to accurately count operational errors--
events where controllers do not maintain safe separation between
aircraft--and identify trends that contribute to them. FAA statistics
indicate that reported operational errors rose by 53 percent between
fiscal years 2009 and 2010. While operational errors remained at these
levels during fiscal years 2010 and 2011, FAA reports that the most
serious reported errors continued to rise by 49 percent from fiscal
year 2009 to fiscal year 2011 (from 37 to 55, respectively).
In January 2012, FAA issued new policies and procedures for
collecting, investigating, and reporting separation losses.\27\
However, their effectiveness is limited by incomplete data and
implementation challenges. FAA lacks an accurate baseline on the number
of separation losses due in part to its limited review of Traffic
Analysis and Review Program (TARP) data \28\ and exclusion of some
potential operational errors reported under the Air Traffic Safety
Action Program (ATSAP) \29\ from its official count. At the time of our
ATSAP review last year, approximately 50 percent of all ATSAP event
reports \30\ were classified as ``unknown,'' and therefore some errors
may have been excluded.\31\ Further, as we reported last month, FAA
does not analyze and report all separation losses automatically flagged
by TARP. Instead, FAA investigates losses of separation identified by
TARP when aircraft come within less than 70 percent of the required
separation distance.
---------------------------------------------------------------------------
\27\ Losses of separation occur when aircraft do not maintain the
minimum required distance apart. Most losses of separation are
classified as either an operational error (if the controller's actions
caused the loss) or a pilot deviation (if the pilot's actions caused
the loss).
\28\ TARP is an automated system that detects losses of separation
at air traffic terminal facilities.
\29\ ATSAP is a voluntary, non-punitive program in which
controllers can self-report safety incidents and concerns.
\30\ Event reports identify actual or potential losses of
separation, including operational errors, or other situations that may
degrade air traffic safety.
\31\ FAA changed how it categorizes event reports in January 2012.
However, the committees that review ATSAP reports still do not contact
facilities if they believe an event is unknown to management.
---------------------------------------------------------------------------
In July 2012, we reported a number of management issues with ATSAP
that the agency must address to correct known deficiencies and realize
the program's full potential. These include a lack of formal processes
to review ATSAP committee decisions on errors and enforce key program
guidelines and requirements. Failure to address these issues not only
undermines efforts to improve NAS safety but also may lead to the
perception that ATSAP is an amnesty program that automatically accepts
reports of serious incidents, regardless of whether they properly
qualify under the FAA directive establishing the program.
Runway Incursions Continue To Increase
Runway incursions--potential ground collisions--are a key safety
concern for FAA that requires heightened attention at all levels of the
agency. As we noted in July 2010,\32\ the number of the most serious
runway incursions--incidents in which a collision was barely avoided--
decreased after runway safety initiatives detailed in FAA's August 2007
Call to Action plan were implemented.\33\ However, shortly after our
2010 report, the trend reversed dramatically. Between fiscal years 2010
and 2012, reported runway incursions increased about 19 percent, and
serious runway incursions tripled (see figure 2)--despite the fact that
total air traffic operations declined by 1 percent between fiscal years
2011 and 2012. In addition, for the period of October through December
2012, total incursions increased by approximately 20 percent compared
to the same period in 2011. As a result of these concerns, we plan to
initiate another review of FAA's Runway Safety Program later this year.
---------------------------------------------------------------------------
\32\ Review of FAA's Call to Action Plan for Runway Safety (OIG
Report No. AV-2010-071), July 21, 2010.
\33\ Specifically, these incidents declined from 25 reported in
fiscal year 2008 to 6 reported in fiscal year 2010.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
To help reverse these trends, FAA deployed the Airport Surface
Detection Equipment-Model X (ASDE-X) system at 35 major airports in
fiscal year 2011, at a cost of approximately $550 million. ASDE-X
enhances runway safety by providing detailed information to air traffic
controllers regarding aircraft operations on runways and taxiways.
However, ASDE-X does not directly alert pilots, as recommended by the
National Transportation Safety Board (NTSB) in 2000. To address this
shortcoming, FAA plans to integrate the use of ASDE-X with three other
systems--Runway Status Lights (RWSL), ADS-B, and In-Cockpit Moving Map
Displays. Integrating various systems to improve surface safety
requires establishing requirements for technical upgrades, validating
system performance and integrity, and determining whether ASDE-X
capabilities can meet FAA's goals for increasing safety and capacity.
We are currently assessing FAA's progress in integrating ASDE-X with
other technologies such as RWSL and ADS-B to improve runway safety.
Oversight of Repair Stations Remains a Concern
According to FAA, there are nearly 4,800 FAA-certificated repair
stations worldwide that perform maintenance for U.S.-registered
aircraft. Forecasts show that the maintenance, repair, and overhaul
industry will grow annually by 4.4 percent over the next 10 years,
yielding a market value of between $50 billion to $65 billion for this
segment of the aviation industry. These upward trends are expected to
continue as airlines look to cut maintenance costs and increase
profitability. However, since 2003, we have recommended that FAA
strengthen its oversight of air carriers' contracted maintenance
providers by developing a comprehensive, standardized approach to
repair station oversight and targeting inspector resources based on
risk.
In 2007, FAA implemented a new risk-based system to target its
surveillance of repair stations. However, our ongoing review indicates
that inspectors continue to complete mandatory inspections instead of
targeting resources to where they are needed based on risk.
Additionally, some inspectors do not use the risk assessment process at
all; those that do are hindered in their ability to assess risk, due in
part to limitations in data availability and quality. As a result, FAA
has been ineffective at conducting risk-based oversight.
FAA's surveillance at foreign and domestic repair stations also
lacks the rigor needed to identify deficiencies and verify they have
been addressed. Systemic problems we identified during our 2003
review--such as inadequate mechanic training, outdated tool calibration
checks, and inaccurate work order documentation--persist at the repair
stations we recently visited. FAA guidance requires inspectors to
review these specific areas during repair station inspections, but
inspectors overlooked these types of deficiencies.
Given U.S. air carriers' continued reliance on repair stations to
perform their aircraft maintenance domestically and abroad, it is
imperative that FAA improve its risk-based system to provide more
rigorous oversight of this industry. We plan to issue our report on
FAA's oversight of repair stations this month.
FAA Faces Challenges in Implementing Key Pilot-Related Provisions of
the Airline Safety Act
The fatal Colgan Air crash in 2009 raised concerns about a number
of pilot performance issues, which culminated in the Airline Safety and
FAA Extension Act of 2010.\34\ Since the act's passage, FAA has made
important progress in implementing many of the act's requirements, such
as advancing voluntary safety programs and improving pilot rest
requirements. However, FAA has not met the act's timelines for updating
pilot training standards, implementing pilot mentoring and leadership
programs, or establishing safety management systems.
---------------------------------------------------------------------------
\34\ Airline Safety and Federal Aviation Administration Extension
Act of 2010, Public Law 111-216, (2010).
---------------------------------------------------------------------------
In addition, FAA missed the act's deadline to substantially raise
airline pilot qualifications by August 2012. The act mandates that all
part 121 pilots obtain an Airline Transport Pilot certificate,\35\
which requires 1,500 flight hours--six times the current minimum of 250
hours needed for a commercial pilot's certificate. Although FAA's
proposed rule would provide some flexibility in meeting these
requirements for pilots with relevant degrees or military flight
experience, air carrier representatives remain opposed to the new
requirement, contending that the quality and type of flying experience
should be weighted more heavily than the number of flight hours.
However, if FAA does not issue its final rule, the act's requirements
will automatically go into effect for air carriers in August 2013, and
FAA must ensure that carriers make the necessary adjustments to their
pilot training and qualification programs.
---------------------------------------------------------------------------
\35\ An Airline Transport Pilot (ATP) Certificate is the highest
level of pilot certification. Pilots certified as ATP are authorized to
act as pilot-in-command of an aircraft in commercial airline service.
Additional eligibility requirements are contained in 14 CFR 61.153.
---------------------------------------------------------------------------
FAA has also been challenged to develop an act-required pilot
records database to enhance the screening process for newly hired
pilots. For example, FAA needs to determine how to incorporate data
from FAA, air carriers, and the National Driver Registry in a way that
is accessible for air carriers to review during the pilot hiring
process. The act did not establish a milestone for when the database
should be completed, and the agency has yet to make key long-term
implementation decisions.
FAA's Safety Oversight Role Continues To Expand as New Technologies and
Programs Are Introduced Into the NAS
Over the next several years, FAA will be challenged by the
introduction of unmanned aircraft, new integrated data systems for
proactively identifying risk, and further use of voluntary disclosure
programs.
--Unmanned Aircraft Systems (UAS).--FAA predicts there will be
roughly 10,000 active UAS in the United States in 5 years, with
more than $89 billion in worldwide UAS spending over the next
10 years. However, FAA has approved these operations on a
limited, case-by-case basis, due in part to the safety risks
associated with UAS integration into the NAS. While the
capabilities of unmanned aircraft have significantly improved,
they have a limited ability to detect, sense, and avoid other
air traffic. Given the growing interest and potential safety
issues associated with UAS flights, Congress recently directed
the Secretary of Transportation, through the FAA Modernization
and Reform Act of 2012, to develop a comprehensive plan for
integrating UAS into the NAS no later than September 30, 2015.
At the request of the Chairmen and Ranking Members of the
Senate Commerce Committee and the House Committee on
Transportation and Infrastructure, as well as their Aviation
subcommittees, we are currently assessing FAA's progress in
integrating UAS into the NAS. We expect to issue a report later
this year.
--Aviation Safety Information Analysis and Sharing (ASIAS).--In 2007,
FAA implemented ASIAS to collect and analyze data from multiple
databases and proactively identify and address safety risks.
ASIAS enables authorized users to obtain data from confidential
databases--including voluntary safety programs such as the
Flight Operational Quality Assurance program and the Aviation
Safety Action Program--as well as from publicly available data
sources such as NTSB's Accident and Incident Reports database.
However, access to ASIAS data for FAA and industry
representatives has been limited due to airline proprietary
concerns.
In the Airline Safety and FAA Extension Act of 2010, Congress
directed our office to assess FAA's ability to establish a
comprehensive information repository that can accommodate
multiple data sources and be accessible to FAA aviation safety
inspectors and analysts who oversee air carriers. Accordingly,
we are currently assessing FAA's progress in implementing
ASIAS, its process and plan for allowing system access at both
field and headquarters levels, and its use of ASIAS data to
assist in commercial air carrier safety oversight. We expect to
issue our report later this year.
--Voluntary Disclosure Reporting Program (VDRP).--As mandated in the
FAA Modernization and Reform Act of 2012, we are conducting a
review of VDRP, a program that allows air carriers to
voluntarily report adverse safety issues to FAA without fear of
enforcement actions, provided that carriers develop
comprehensive solutions to identified safety issues. As part of
this review, we are examining whether FAA ensures reports meet
VDRP requirements, including the development and implementation
of corrective actions, and whether the agency uses VDRP data to
identify safety risks.
conclusion
FAA faces many difficult decisions in the months ahead. To resolve
the complex issues we identified, the agency must think strategically
to prioritize those programs that can achieve the greatest benefits in
the most cost efficient and effective manner possible. At the same
time, FAA needs to protect its investments and assets that are
vulnerable to misuse and abuse, while remaining focused on safety.
Fully implementing our recommendations would better position FAA to
control costs and create efficiencies as it works to enhance
operations, successfully implement key programs, and address safety
concerns. We will continue to work with FAA to ensure it meets its
mission while protecting taxpayer dollars.
Madam Chairman, this concludes my prepared statement. I would be
happy to address any questions that you or other members of the
subcommittee may have.
BUDGET CONTROL ACT/CONTRACT TOWER PROGRAM/FURLOUGHS
Senator Murray. Let me begin by asking a question about
FAA's contract tower program. Under the FAA's original plan to
comply with sequestration, the FAA said they expected to save
between $40 million and $50 million by shutting down 173
contract towers at soon as the first week in April. But under
the FAA's most recent plans, 149 towers are expected to close,
and my understanding is that that will start June 15.
Can you explain to us, Mr. Huerta, what the latest estimate
is of how much will be saved by closing down those towers, and
whether those savings will significantly reduce the number of
furloughs at the FAA?
Mr. Huerta. Thank you, Madam Chairman. As we look at the
need to achieve the savings of $637 million that you noted in
your opening statement, we have to look both at our contract
expenditures as well as our pay and benefit expenditures. Our
current estimate of savings from contract towers that we're
going to be able to achieve based on the June 15 closure date
is approximately $25 million.
The savings from furlough days--we have notified our
employees that they should expect to be furloughed for up to 11
days.
Senator Murray. Between now and September 30?
Mr. Huerta. Between now and September 30. That represents 1
day per 2-week pay period between now and the end of our fiscal
year. The total savings associated from those furloughs are
slightly in excess of $200 million. We have had an extensive
effort, and it continues, to evaluate and review our ongoing
expenditures, our contract expenditures, and our information
technology (IT) expenditures, to find additional areas of
savings.
We have significantly reduced travel by 30 percent,
limiting it to operational travel, for example, when we have to
send someone to fix a piece of equipment that might have become
inoperative. Likewise, we have projected, and we expect to
achieve, savings in our information technology infrastructure
of approximately $35 million.
We have focused on reducing our costs associated with
training. We have canceled a new training program for new
controllers at the FAA Academy for the summer in order to focus
our resources on critical personnel needed to operate the
National Airspace System.
It's with great regret that we have to look at closing
lower activity facilities while at the same time reducing hours
available for our employees. But as we all know, the sequester
represents a very dramatic and very blunt instrument in terms
of how we find reductions in expenditures. But in order to
achieve them, we have to take the actions that we've talked
about.
CONTRACT TOWERS
Senator Murray. Well, as you know, there's a lot of
interest in protecting the contract towers in 2014. What will
it take to get those contract towers back up and running in
fiscal year 2014?
Mr. Huerta. It depends on the nature of the specific
contract tower. We've heard from approximately 50 of the 149
airport operators that they are exploring opportunities for
local funding of the expense of the contract towers for some
period of time. If that were the case for those facilities, it
would simply be a change in who is paying the cost.
We have been negotiating with them an orderly handoff so
that they can take over the facility and assume its cost when
funding from the FAA would cease on June 15. Should the
financial picture change in 2014, the handoff would simply work
as smoothly going the other direction.
Senator Murray. And what would be the cost of that?
Mr. Huerta. Well, the cost is they will continue to
operate, and so it essentially is just a question of who pays.
As it relates to a facility that may elect to--or for whatever
reason it might be necessary to close, then what we would need
to engage in is a process to hire controllers, recertify
controllers, and get them back up to speed in operating that
airspace. That would represent an expenditure of both time and
money in order to make that happen.
FURLOUGHS
Senator Murray. So do you think it makes sense to close
some down for the summer?
Mr. Huerta. We have very few choices, and as we've talked
about repeatedly, we're looking at a series of bad options to
choose from. The sequester gives us few options but to achieve
the required savings and to achieve them in this year.
Senator Murray. So let's talk about the furloughs, because
we're hearing a lot about that.
Mr. Huerta. Sure.
Senator Murray. You said up to 11 days. How many employees?
Mr. Huerta. It affects 47,000 of our employees, which is
most of them. The only employees that are exempt under the
sequester legislation are those in our Airport Improvement
Program.
Senator Murray. Right. So that includes air traffic
controllers, safety inspectors, and we are hearing it's going
to lead to a lot of delays this summer. What other actions has
the FAA taken to avoid furloughs, and how did you decide who
would get furloughed at the agency?
Mr. Huerta. Let me take first the question, what other
actions did we take. We started first at our contract
expenditures and looked across the board at what we could do to
dramatically reduce contract expenditures. And we focused on
those activities such as the ones I mentioned that represent
out-of-pocket cost, travel, information technology, and so
forth.
We do have limits on our ability to reduce some contracts,
though. For example, our single largest contract is the FAA's
telecommunications infrastructure contract. That is a services
contract with a private company that provides critical
communication services between all air traffic facilities. That
contract is worth about $225 million on an annual basis.
So we had to focus in those areas that would not at the
same time seriously cripple the mission. But our contract
savings alone were not able to get us to our required savings.
By the way, I'd also like to mention that our third largest
contract expenditure is for Federal contract towers. These
facilities are low activity facilities. They have fewer than
150,000 operations on an annual basis and less than 10,000
commercial operations.
I would like to point out that we have thousands of
airports in the United States that operate every single day in
a non-towered capacity and operate safely. All but 1 of the 149
towers that we have slated for closure, in fact, close for a
significant number of hours during the day. So they have a
regular process for operating in a non-towered capacity.
But even looking at all of the contract expenditures, we
were unable to achieve the full $637 million in savings. So
that's what led us to the need to furlough our employees. In
looking across the agency as a whole, we established a
principle that we needed to find the appropriate balance of
getting the cost savings that we needed to get, while at the
same time having the ability to operate the system, maintain
its safety, and recognizing that we were imposing a significant
hardship on our employees.
Eleven furlough days between now and the end of the year
represents one per pay period. That is a reduction of 10
percent of the pay of each employee, the 47,000 that are
affected. From an operational standpoint, it represents a
reduction of 10 percent of the available hours that employee is
able to provide.
Senator Murray. And I'm hearing from some people that some
air traffic control towers will be hit more in terms of
operational ability.
Mr. Huerta. No. We have allocated them equally across the
whole system. But each facility operates differently, and it
may have differing impacts, depending on the specific traffic
conditions at that airport.
Let me give you a couple of examples, if I might. Chicago's
O'Hare Airport is a major hub airport. It operates with two air
traffic control towers, one on the north side of the airport
and a central tower that operates for the entire airport. In
order for us to be able to operate the north tower of the
airport, we have to have a minimum complement of air traffic
controllers available to staff a minimal number of positions.
RUNWAY INCURSIONS
If we can't staff all of that minimal number of positions,
then we must consolidate operations to the central tower. The
airport can continue to operate, but what it means is we lose
the ability to use one runway, because that north tower is
essential to control the northernmost runway of the airport. So
that is an example of how relatively small reductions of hours
can significantly affect the operations of an airport.
Senator Murray. And that's Chicago--does LAX----
Mr. Huerta. The Los Angeles airport is a four-runway
airport, but it is also a major hub airport for quite a number
of operators. In the case of the Los Angeles airport, their
traffic loads are such that they're relatively constant during
the day. Already at Los Angeles, the north airfield operates
under significant operational restrictions because of very
closely spaced parallel runways that exist at that airport. And
the airport does have a long-term plan to improve that.
But, again, if I have fewer controller hours available to
me, then what it affects is the efficiency of the airport. Our
highest priority is to ensure that it operates safely, but
where we take a penalty is inefficiency.
Senator Murray. Okay. And I apologize to the subcommittee
for running way over time, but this is what we're hearing from
a lot of our airlines at this point: Some of our airports are
going to be significantly impacted for reasons they don't
understand, like vacations and those kinds of things. So I
think it's really important that everybody understands how you
got to these decisions and how we're going to move forward on
that.
Senator Collins.
Senator Collins. Thank you, Madam Chairman. As I
highlighted in my opening statement, the total number of runway
incursions increased 21 percent between fiscal year 2011 and
2012 from 954 to an all-time high of 1,150.
Administrator, what is the FAA doing to reduce this
alarming increase and ensure the safety of the traveling public
on our Nation's runways? And to what do you attribute the large
increase?
Mr. Huerta. Thank you, Senator Collins. Let me take the
second part of that first. Reported runway incursions reached
an all-time high of 1,150 in fiscal year 2012. We believe this
number is reflective of changes in our reporting culture
through voluntary safety reporting systems, as well as enhanced
use of electronic detection systems, expansion of reporting
requirements and the deployment of new systems that were
designed to streamline reporting.
Nonetheless, this is something that we take very, very
seriously. The fiscal year 2014 budget request supports our
efforts to reduce runway incursions and to improve airport
surface safety. Some of the initiatives that we're talking
about include airport safety reviews. This involves conducting
airport safety and certification inspections at each of our
certificated airports to ensure that the signs, the markings,
and the lighting all meet national standards.
Also, airport driver training programs and records are
reviewed as a significant part of this, because, as you know,
there are a lot of regular vehicles that operate at the
airport, and they have to understand how to move on the
airfield.
We've been conducting runway safety action team (SAT)
meetings, and our fiscal year 2014 budget request would
continue to support those. Our SAT meetings improve
multidisciplinary teams conducting safety reviews at selected
airports based on analysis of the data.
The team is there to improve runway safety through
coordinated actions with all components of the aviation
community and the FAA lines of business to really understand if
there's a design issue or if there's a training issue that we
need to address at a particular airport, which takes me to
training. There is a significant focus that we've placed on
conducting training seminars to provide knowledge, guidance,
outreach, and awareness at all levels, and really focusing on
if we have the right kind of training in place.
I'd also like to talk about industry involvement. The
Runway Safety Council (RSC) consists of officials not only from
the FAA and other partners in Government, but also industry and
labor. What we want to do is meet regularly to determine root
causes of runway incursions. This is part of a collaborative
decisionmaking process that we're trying to adopt across the
whole FAA to bring everyone together.
Senator Collins. Mr. Scovel, do you agree with the analysis
that the Administrator just gave that this may reflect better
reporting rather than an increase in the problem?
Mr. Scovel. Not entirely, Senator Collins. Here's what our
examination has revealed. There is a better reporting culture
within the FAA among the controllers, and we certainly
acknowledge that. The voluntary reporting programs, such as
ATSAP, the Air Traffic Safety Action Program, has encouraged
controllers to come forward, knowing that there will be non-
punitive results from their self-disclosures, and that has
certainly increased, we trust, the number of operational errors
or reported runway incursions over time.
However, we also note that better reporting tools, such as
TARP and the TRACON environment and a longstanding reporting
tool in the en route environment, have also been capturing more
and more previously unreported operational errors. And that,
too, has been driving the number up.
You asked specifically about runway incursions. Before I
address that, very quickly, let me note also that the data
collection across the board and the analysis of that data--we
have identified areas for improvement for FAA. With regard to
runway incursions, as the subcommittee will well remember, that
is the number one item on the National Transportation Safety
Board (NTSB) most wanted list every single year, and it has
been for more than a decade.
Senator Collins. Which troubles me, because it's going up,
not down.
Mr. Scovel. It is going up. The subcommittee will remember
that in 2007, the FAA issued a call to action for runway safety
in light of a previous rise in runway incursions. And between
2007 and 2009, 2010, that call to action achieved commendable
results largely through the measures that Administrator Huerta
cited just now as those that are returning to emphasis under
his leadership.
We believe that the agency's attention perhaps drifted off
some of those safety measures after the initial successes of
that 2007 call to action. I commend the Administrator for
returning the agency's attention to those, because, certainly,
in our view and the view of the NTSB, those will yield the
greatest success in terms of reducing runway incursions.
There are technological innovations as well, runway status
lights, Automatic Dependent Surveillance-Broadcast (ADS-B),
SDX, surface protection technology, all of which the agency is
working to implement, encountering some difficulties on those.
But we encourage the agency to persist, and we're certain that
those will yield better results as well.
Senator Collins. Thank you. I'm just going to ask one quick
second question. I see we have a lot of members here.
AIRPORT IMPROVEMENT PROGRAM GRANT FUNDING
Administrator, I want to ask you about a part of the budget
that just makes absolutely no sense to me. On the one hand, the
administration is proposing a $450 million reduction in the
Airport Improvement Program, while at the same time the
President's budget proposes what he calls an immediate
Transportation Investment Program that provides an additional
$2 billion.
Could you please explain to us in a brief statement, given
our other members who are here, the rationale behind what
appears to be taking away money from the same program with one
hand and then giving it back with another program? Now, let me
say I fully understand that you're restructuring AIP to drop
the larger airports and allow an increase in the passenger
facility limits. But this still seems to be an odd
juxtaposition of reducing by $450 million on the one hand and
then increasing by $2 billion.
Mr. Huerta. Thank you, Senator Collins. As you point out,
the two pieces that you referenced are designed to do two
different things. The first is a restructuring of the AIP
program. The budget requests a total AIP level of $2.9 billion,
which is $450 million below our fiscal year 2012 enacted level,
and it is paired up with an increase in the passenger facility
charges (PFC).
PASSENGER FACILITY CHARGE
Now, consistent with the recommendations from the
President's Deficit Reduction Commission, all guaranteed
funding for approximately 29 large hub airports would be
eliminated under this proposal, because they would have the
ability to raise significant funding through the passenger
facility charges. Medium, small, and non-hub airport passenger
entitlements as well as non-primary entitlements would then be
calculated at levels that are consistent with the formulas in
effect under current law when the total funding level is below
$3.2 million.
Now, in terms of the $2 billion proposal, what that
reflects is an interest on the President's part to catch up on
the backlog of infrastructure improvements in airports which
are required. It is a one-time program that would enable us to
accelerate the development of a large number of projects that
have been in the pipeline and at the same time create needed
jobs for the economy.
Senator Collins. Well, thank you very much, Madam Chairman.
I would just note that it certainly seems duplicative to me in
terms of the purpose of the AIP program. Thank you.
Senator Murray. Senator Feinstein.
Senator Feinstein. Thank you very much, Madam Chairman.
UNMANNED AIRCRAFT SYSTEMS
Mr. Huerta, I'd like to confine my question time to this
new area of unmanned aerial vehicles known as drones. And as
chairman of the Intelligence Committee, I've had an opportunity
to understand how potentially dangerous these items are and how
they vary in size and scope and ability.
I understand that the 2012 reauthorization act orders you
to develop a comprehensive plan to integrate unmanned aircraft
into the national airspace no later than September 30, 2015.
And it's my understanding that, to date, the FAA has permitted
more than 300 unmanned public aircraft so far. For example, the
Department of Homeland Security is using surveillance drones to
monitor the border. These are not armed, we are told.
Is what I have just said essentially correct?
Mr. Huerta. That is correct, Senator Feinstein.
Senator Feinstein. Well, I am very worried about two
things. One is safety, and the other is privacy. There was a
hearing in the Judiciary Committee not too long ago on drones,
and we had one example of a drone that was very small and used
by a Colorado sheriff's department. I am familiar with drones
that are quite large, that are armed, and are used in various
places in the world for various tasks.
The fact that they're unmanned, the fact that you may
license them for one use, doesn't mean they can't be converted
to another use. Has the FAA looked at that and recognized the
potential danger of the development of drones in commercial
airspace?
Mr. Huerta. Thank you, Senator Feinstein. Unmanned aircraft
is a technological frontier area that we're trying to
accommodate. The direction that we've received from Congress,
as you point out, is how we can safely integrate them into the
National Airspace System by 2015. You're also aware that the
reauthorization act of last year requires us at the same time
to designate six test sites to test and understand how this
technology would be incorporated into the National Airspace
System.
The purpose of the test sites is to enable us to develop
data and information along the lines of what you're talking
about: How these things are used, what can we learn from them,
and questions related to other factors as well. As we were
developing the information request to solicit proposals for the
test sites, we heard what you heard, which was a lot of public
concern about privacy and how these particular vehicles could
be used, and did it raise questions about invasion of privacy.
Now, privacy is not something that Congress asked us to
look at, nor is it something that the FAA has the authority to
regulate. But we did determine that it was important for us to
frame the question as we were looking at the test site request
for proposals.
What we did was at the same time we released the request
for proposals for the test sites, we also published a notice
that we would require whoever is designated as a test site
operator to publish a privacy protection policy and make that
available to the public so it is out there for everyone to see
how the data that would be developed through the use of this
unmanned aircraft would be used, and does it raise any privacy
questions.
I think this is a complicated issue. It's new for us. We
relied on the expertise of people that had regulated this area
in the past. As an evolving technology, it's one that we're
going to have to watch very carefully. There is significant
interest on the part of State and local law enforcement for the
use of unmanned aircraft for the surveillance purposes that you
talked about. There are differing laws at the State level about
how these aircraft might be used.
I think that as we develop the data and as we do additional
testing, it's certainly something that we are going to be
looking at very carefully. But it's not something we have the
authority to regulate.
Senator Feinstein. Here's my concern. I understand that. So
you could have thousands of these things in the air. How do you
control them? How do you keep them from getting into air
traffic? And I understand they might have a height limit of 400
or 500 feet. How do you keep them away from airports? You know,
there's even a report that a pilot saw one. Was that true or
false? I don't know whether it is true or false.
Mr. Huerta. We had the report that a pilot saw what they
determined to be either a model airplane or an unmanned
aircraft, yes.
Senator Feinstein. Is there any more information on that,
or is that pretty much what it is?
Mr. Huerta. That's pretty much what it is. But on your
question of how can we regulate them safely, this is exactly
what we're trying to determine. Through the use of certificates
of authorization as well as the test sites, what we need to
develop a better understanding of is how these aircraft operate
in ways that are both similar and different from manned
aircraft that operate in the system every day.
The direction we've received from Congress is to safely
integrate unmanned aircraft. And so the thing that we care the
most about before we allow widespread use of unmanned aircraft
is to ensure that they can operate safely, both on their own,
but also in conjunction with other aircraft.
Senator Feinstein. I've just learned that there's even an
association promoting drones.
Mr. Huerta. Yes, that's correct.
Senator Feinstein. And there's so much that needs to be
looked at very seriously, I think, before we do this. The
privacy questions are enormous. Now, I understand that's not
really your jurisdiction. But in these test sites, which I
assume are not overpopulated areas, will the people that enter
into the test have specific privacy policies to which they
subscribe the use of their drone to?
Mr. Huerta. The designation of the test sites would need to
be accompanied by a privacy plan. We're not in a position to
make a determination of the content of the plan, but what we
would require is that they develop one, that they make it
available to the public, and it is available for people to read
and understand.
Senator Feinstein. I know they wouldn't legally carry
munitions. But there's nothing to stop someone from arming one
with munitions, and that's my big concern.
Mr. Huerta. Well, to a certain extent, that risk exists
today with manned aircraft through the extensive use of general
aviation that takes place----
Senator Feinstein. Yes, but not in commercial aviation.
Mr. Huerta. Not in commercial aviation. That is correct.
Senator Feinstein. But there will be many more drones than
there are private aircraft, most likely.
Mr. Huerta. Well, this is something that we're going to
have to try to understand. You are correct. There are industry
proponents that really see this as the next frontier of
aviation and are actively promoting the use of these aircraft.
There are a lot of beneficial uses that the industry is
promoting as well, for example, weather surveillance or
environmental initiatives, where they're examining, for
example, loss of ice in the Arctic areas or surveying of coast
lines, mapping activities.
Senator Feinstein. I think we would all agree with that.
It's what's outside of that that's of deep concern.
Mr. Huerta. But this is what we need to focus on, and this
is what we will need to learn as we develop this information.
Senator Feinstein. Good. I'm glad to hear that. My time is
up, and I thank you.
Senator Murray. Thank you very much.
Senator Moran.
Senator Moran. Thank you, Madam Chairman.
CONTRACT CONTROL TOWERS
Administrator Huerta, I want to focus on the control
towers. Has there been a safety analysis completed on each one
of the 149 towers that you propose to close?
Mr. Huerta. Senator Moran, yes. We did conduct an analysis
and determined that it was feasible for each of these towers to
operate safely. That was the first decision. The second
decision----
Senator Moran. It was capable for each of these towers to
operate safely.
Mr. Huerta. Correct.
Senator Moran. The towers are operating safely?
Mr. Huerta. No, for the airport to operate safely----
Senator Moran. In the absence of a tower?
Mr. Huerta [continuing]. In the absence of a tower. The
second part of the question then becomes how we get there. It
was for that reason in working through with our local sponsors
and partners that we decided to introduce the delay to June 15
to ensure that everyone fully understood how that transition
would work.
As I mentioned in my earlier remarks--this was before you
arrived, sir--every one of these towers except one operates in
a non-towered capacity for some portion of the day. So there
are well-established rules of how the airport operates in a
non-towered capacity. The tradeoff is in order to maintain a
safe operation, what you might sacrifice is efficiency. So they
may operate less efficiently in a non-towered capacity, but
they will certainly operate safely.
Senator Moran. So the 149 air traffic control towers that
potentially will be closed were never necessary for safety
reasons?
Mr. Huerta. We have thousands of airports that operate in
the country every day that----
Senator Moran. That's not my question. Are the airports
that we've had towers at--were those towers placed there
because they were important for safety?
Mr. Huerta. The towers were placed there for a variety of
reasons. But my point is that we are not doing anything that is
not safe. The airport can continue to operate in a non-towered
capacity safely, just as they do for many hours of the day.
Senator Moran. Do the airports then operate in a less safe
manner? You're saying they're safe, but how can they be as safe
without a tower as they are with a tower?
Mr. Huerta. What we do is we transfer responsibility to the
pilots, and we limit and separate traffic greater distances to
ensure added margins of safety if there is not a tower right on
the airport.
Senator Moran. Can you provide the subcommittee with the
separate analysis of each airport of the 149?
Mr. Huerta. There is different analysis that we have done,
and we can certainly provide that to the subcommittee.
[The information follows:]
Safety analyses were conducted for each airport subsequent to the
development of a safety case that looked into airport standards,
equipment, procedures, provision of critical information to
stakeholders and pilots, and impact on neighboring facilities. This
process identified 20 mitigations required for the withdrawal of funds.
These requirements were then applied to each facility and a mitigation
implementation plan developed for each airport. We have provided the
subcommittee with the FAA safety risk management document that contains
all of this information.
Senator Moran. When did you do the analysis?
Mr. Huerta. We did the analysis as part of our overall
review where we looked at the activity levels associated with
these towers, we consulted with our partners in the Defense
Department and the Department of Homeland Security, and then
once we made the decision, we've been consulting with local
airports.
Senator Moran. What was the timeframe in which the analysis
was done, and how long did it take?
Mr. Huerta. The analysis was done over the earlier part of
this year. We spent several weeks looking at this question of
how we would close these facilities.
Senator Moran. Were there any airports that you determined
needed a control tower to remain safe within that program?
Mr. Huerta. Yes.
Senator Moran. How many were they?
Mr. Huerta. I will get you an exact number for the record.
[The information follows:]
As a result of the safety analyses we determined that 19 facilities
needed to remain open for an additional period of time in order to
evaluate the impact on neighboring air traffic control facilities in
the event those towers did close and did not continue operating as non-
Federal contract towers.
Mr. Huerta. But in general, if two characteristics were
met, they were located in busy congested airspace adjacent to a
major commercial airport and so the handling of those
activities in conjunction with the major airport was a factor
to consider; or, secondarily, based on discussions with the
Defense Department, where it served a significant national
security purpose.
Senator Moran. Is that the analysis that was done by the
airports that requested they not be closed because of national
interest? Is that the ones that you were then----
Mr. Huerta. That was part of it, yes, sir.
Senator Moran. But there were airports that had air traffic
control towers before the request for demonstrating a national
importance, a national need, that were determined--that a
control tower needed to be there for safety in this instance.
But in other instances, the control tower was not necessary for
safety.
Mr. Huerta. It's a function of configuration and traffic
and efficiency of the airport. We're not doing anything that is
not safe, and each airport operates under different conditions.
Senator Moran. Do you disagree with the testimony of the
NTSB at the Commerce hearing that you were at earlier this week
that talked about the importance of the redundancies that the
air traffic control tower provides and the safety that's
necessary, that follows that redundancy?
Mr. Huerta. I think what the chairman said was that they
had not done a specific analysis of towered versus non-towered
airports. She did note that safety is a function of many layers
of safety. As I've said, we are not doing anything that would
make the airports operate unsafely. In the event there is any
tension between safety and efficiency, what will suffer is
efficiency. But the airports will operate safely.
Senator Moran. I have a series of questions, but my time
has expired on my first question.
Mr. Huerta, let me make sure that I understand what you're
saying is that none of the airports are any less safe when the
tower is closed than they were when the tower was there. You
say they're all operating safely. But my question is has safety
been reduced?
Mr. Huerta. It is not, because the nature of the operation
changes in a non-towered capacity. They operate less
efficiently. We put more separation--pilots are required to
communicate with each other, and that compensates for the lack
of a tower.
Senator Murray. Thank you very much.
FURLOUGH IMPACT ON NEXTGEN
I wanted to ask you about the furlough's effect on the
FAA's ability to move forward on NextGen. Even if a capital
program is fully funded, FAA still needs to have engineers
there and traffic controllers on the job in order to get the
work done.
Mr. Huerta, talk with us about the impact the furloughs are
going to have on NextGen and especially on ERAM, which provides
a foundation for FAA's modernization.
Mr. Huerta. The most significant problem with the furloughs
and how it affects NextGen is how it affects what we call the
collaborative workgroups. These are workgroups that are made up
of stakeholders, controllers, management in facilities, and
these workgroups are essential for us to work through
deployment problems associated with new technologies and
ensuring that we're able to address training and development
issues associated with the deployment of new technologies.
We have a large number of these workgroups. They tend to be
very site specific. For example, as we're deploying ERAM in a
given air traffic center, there will be a collaborative
workgroup that supports that deployment. Likewise, in our
Airspace Modernization Program, such as our Greener Skies Over
Seattle initiative that you're familiar with, we would have a
collaborative workgroup that would work on the design of those
procedures.
As a result of the reduction in controller hours, we have
found it necessary to pull back people that would otherwise be
working on collaborative workgroups to their home facilities so
that they can deal with day-to-day operations to mitigate the
impacts that we would otherwise have on day-to-day operations.
And so that, of necessity, is going to introduce some delay in
the continued rollout.
The deployment of ERAM--I feel we are in a very good place,
where we are right now, as a result of the use of these
collaborative workgroups. But I can envision a situation until
we can restart them that some of the later sites may be delayed
for final deployment.
Senator Murray. Mr. Scovel, you've done a lot of analysis
on the ERAM program and its progress. And your most recent
audit recognizes the FAA has improved its management of ERAM
and turned it around but said there's still some risks. In
particular, you said the program is spending its money quickly
and some of the hardest work is still ahead.
What does the FAA need to do to manage these risks? And, in
particular, do you think sequestration cuts will add to the
FAA's challenges?
Mr. Scovel. To your last point, Madam Chairman,
sequestration will certainly add to FAA's challenges in dealing
effectively with ERAM. What we have learned over the last
several weeks is that FAA will continue to support facilities
that use ERAM on a full-time basis. Those are currently 10:
Salt Lake City, Seattle, Minneapolis, Albuquerque, Denver,
Chicago, Los Angeles, Oakland, Houston, and Kansas City.
But the program will halt activities for five facilities
that were working to transition from part-time use of ERAM to
full time. And those facilities would be Memphis, Cleveland,
Washington, New York, and Boston. In addition, the agency will
stop plans for the last four sites that are currently using
Host, the legacy system, full time to control air traffic, and
they have not yet begun transitioning to ERAM. Those would be
Atlanta, Miami, Jacksonville, and Fort Worth.
The reason for all of this is precisely what Administrator
Huerta outlined. The collaborative workgroups that involve a
significant number of controllers have had to be reduced or, in
some instances, eliminated from the group of four or the group
of five in order to ensure that those controllers are available
for their primary duties.
EN ROUTE AUTOMATION MODERNIZATION
This will have an impact on ERAM, certainly, through the
rest of this fiscal year, the year in which sequestration is
fully upon us. But because of the ripple effect of suspending
transition operations at these other nine centers, we can
expect that into fiscal year 2014, ERAM will similarly be
hobbled--perhaps that is the right word. It would not be,
certainly couldn't be, as far along as it would had
sequestration not impaired the agency's ability to use
controllers in these workgroups.
The agency through dint of main effort has set August 2014
as the firm and fast deadline for implementation of this
initial phase of ERAM. I caution the subcommittee, however--and
the industry is certainly well aware--that whatever state ERAM
is in in August 2014 will not be what was fully envisioned when
ERAM was first contracted some years ago.
It will also necessitate further software releases for
several years thereafter. In fact, one is planned for fiscal
year 2014 and thereafter to the tune of close to $1 billion.
That will, again, position ERAM to most effectively support
NextGen--impact on NextGen most certainly because of the impact
of sequestration on ERAM.
Senator Murray. I've gone over, but I want to ask you one
additional question, Mr. Huerta. I may have to run to another
hearing, and in a truly bipartisan fashion, Senator Collins has
agreed to chair if I have to leave. But I did want to ask you
one additional question.
ALTERNATIVE JET FUELS
I'm really pleased that FAA has been working hard on making
air traffic more sustainable, and there are a lot of ways to
tackle that problem. I am particularly interested in the
potential of alternative jet fuels. My home State of Washington
is making some really great strides in research and development
of some really promising technologies that will help us move
toward some alternative jet fuels.
We've got industry, nongovernmental organizations,
universities. They've all joined together in a consortium--
Sustainable Aviation Fuels Northwest--to evaluate some of these
opportunities and challenges around alternative jet fuels. As
you know, the FAA has created a Center of Excellence on this.
Can you tell us a little bit, real quickly, in a short
amount of time--and maybe answer me offline as well--about your
vision for these centers?
Mr. Huerta. The vision for the new Center of Excellence is
to help us tackle the energy and environmental challenges
facing aviation and to ensure sustained aviation growth but in
a sustainable manner. Aviation has always faced challenges with
energy, noise, air quality, and climate, and what this really
says is you need an integrated approach to look at how all of
these things relate to one another.
The idea is that the center would help us through research
and development activities to develop a much better
comprehensive understanding. The focus of the new center will
help us achieve our aspirational goal of having 1 billion
gallons of alternative jet fuel in use in aviation by 2018 and
ensuring the widespread use of these fuels in the longer term.
Now, we've received proposals and we're reviewing them in
response to the competitive solicitation that we put forward,
and this should be completed in the next few months, at which
time we will provide a formal notification.
Senator Murray. I very much appreciate that.
I'm going to turn to Senator Collins, and, again, I may
just leave in just a short minute. But, again, thank you,
Senator Collins for taking over for me on the subcommittee and
to our subcommittee members.
Senator Collins [presiding]. I'm honored to do so and
pleased that you trust me to do so, Madam Chairman.
First, let me associate myself with Senator Murray's
comments about alternative jet fuels. We have some really
interesting research going on at the University of Maine in
this area. And I, too, think that it holds great potential, and
I hope this is something that we will see the administration
continue to encourage and fund some of the basic R&D that is
necessary.
AIRPORT IMPROVEMENT PROGRAM FUNDING
I want to return to the Airport Improvement Program and ask
some basic questions of you. First of all, what percentage in
dollar amounts of the Airport Improvement Program grants
currently go to small airports? And, second, under the budget
proposal for AIP, will there be an increase or a decrease in
funding to go to small airports? I understand what you're doing
with the big airports, so I don't want you to take the time up
on that.
Mr. Huerta. In fiscal year 2013, we estimate that the small
airports would receive about $2 billion or 63 percent of the
$3.2 billion in total AIP grant funding. This includes
entitlement and discretionary spending, but does not include
entitlements that may have been carried over from previous
years.
Under the fiscal year 2014 budget proposal, small airports
would be expected to receive about $1.9 billion or 69 percent
of the $2.75 billion in total AIP grants. So that's an
estimated decrease of about $121 million.
Now, while small airports would receive less AIP funding
overall, the programmatic changes that accompany this in the
budget would increase the amount of discretionary dollars that
are available to small airports because of the suspension of
the large airports from the AIP program. So, therefore, that
means that the small airports would have more access to the
$801 million in fiscal year 2014 discretionary spending.
Senator Collins. So for the small airports, overall,
there's an estimated decrease of $121 million from fiscal year
2013. You're pointing out that the small airports would have
more access to the $801 million in discretionary funding. But
isn't it accurate to say that they are not guaranteed the same
level of funding that they had received from the entitlement
part of the program, the formula part?
Mr. Huerta. It is true that the formula would be reduced.
But since we are excluding their large competitors for the
discretionary program, I would feel confident that they would
be able to get back to those levels through the discretionary
program.
787 DREAMLINER
Senator Collins. Thank you. I want to talk about the 787
Dreamliner. Some experts have contended that the Dreamliner
incidents have revealed that the FAA lacks the expertise to
effectively test and evaluate new technologies such as the
lithium batteries, and thus is relying too heavily on Boeing to
vouch for the safety of the system. What's your response to
that concern? Do you agree with that?
Mr. Huerta. I don't. For 50 years, the FAA has relied on a
system of shared technical expertise being brought together,
where we assemble the best technical experts both from inside
the Government as well as from industry to make determinations
on how we set the highest levels of safety. But the FAA always
retains the ultimate responsibility to make the call and to
issue the certification.
Aviation by its very nature is about pushing technological
boundaries, and so when a new technology is presented as part
of a new aircraft or a new piece of equipment, we bring
together technical experts that understand that technology and
its interactions in an operating context. Based on that
process, we set certification standards, and that was the case
for the 787. It's a process that has served us very well for 50
years, and it will continue to serve us well in the future.
Senator Collins. Mr. Scovel, do you agree with that? Does
FAA have the expertise in-house that it needs, or is it too
reliant on trusting the contractor? I'm just using Boeing as an
example. There, undoubtedly, are others.
Mr. Scovel. I understand. I need to start by issuing a
caveat, and that is we don't have current work, any work,
specifically, examining the 787 question and supposed over-
reliance by the agency on Boeing's own engineering expertise. I
can say that we have examined certain facets of the FAA's
certification program.
One that we expressed concern about in a report a couple of
years ago was FAA's reliance on organizational designation
representatives. These are company airline manufacturers,
representatives, employees, who are detailed, in effect, to the
agency. They remain on the manufacturer's payroll, but they are
performing the certification responsibilities that
Administrator Huerta outlined.
Over the development of that program in more recent years--
and it's been in effect for a long, long time, so it's not a
new development--but as the program has been refined in more
recent years, the ability of FAA to review the qualifications,
performance, or even the conduct of those company employees who
are performing FAA responsibilities has been diminished by
mutual agreement between the agency and the manufacturers
involved to include Boeing.
We are concerned that that relinquishment of overall
supervisory authority over such designees by the agency may, in
effect, at some point raise the question of whether the agency
is properly exercising its certification responsibilities.
Senator Collins. Thank you.
Senator Feinstein.
Senator Feinstein. Thanks very much, Madam Chairman. I
appreciate it.
HELICOPTER OPERATING PRACTICES
I want to raise an old saw, and it's unregulated use of
helicopters. As you know, this is a source of major concern to
millions of Angelinos, and I understand the same thing is true
in New York City. And these are helicopters flying low and
spying on prominent people, particularly in the Los Angeles
area.
Our fiscal year 2013 bill directed the FAA to complete a
report on the subject. It's my understanding that your regional
administrator, Bill Withycombe, has held public hearings and is
looking at the problem and has committed to releasing a report
in May of this year. That report is meant to evaluate a full
set of voluntary and regulatory options to reduce helicopter
noise and address the safety issues, as well as, candidly,
privacy issues.
Is that report going to be released in May of this year,
Mr. Huerta?
Mr. Huerta. Yes. In response to the congressional request,
we have, indeed, undertaken LA helicopter noise initiative, and
we are intending to release it to Congress in May of this year.
Senator Feinstein. Good. Do you have any indications of
what might be forthcoming?
Mr. Huerta. Well, these are always very complex issues. As
a result of this noise initiative, community interests,
helicopter operators, have been meeting regularly under the
leadership of our regional administrator there in Los Angeles.
The purpose of this is to identify very specific noise
sensitive locations that exist there, helicopter operating
practices, and other things which contribute to the residents'
concern about noise pollution that exists in the neighborhoods.
It's a group that we're finding to be very committed to
finding solutions that provide noise relief while not degrading
or eroding the business operations that exist there. I think
it's fair to say that we would place a greater emphasis on
working this out locally and reaching agreements. The reason
for that is it gets you to solutions more quickly than a
traditional rulemaking might.
If the operators can develop a much better understanding
and through the use of such things as notices to airmen or
NOTAMs and outreach to the helicopter operators, engaging the
local officials--for example, a lot of the concerns might come
through the use of police helicopters or news organizations--
and you bring the parties together and work through how they
actually operate, often that will get us to solutions. But this
is all the stuff that we're looking at there in Los Angeles.
Senator Feinstein. I think if you just kept them out of
residential areas and maybe with a waiver for police, that
might solve the problem. But as you know, Los Angeles has a
large Hollywood community, and these helicopters regularly are
a problem in these residential areas. The question is do they
really belong there to kind of be spying on people, and that's
not a legitimate business interest.
Mr. Huerta. Well, I think that, clearly, there is
significant concern about helicopters that are, in the views of
the residents, just there to make mischief. But I think the
distinction that I was drawing was regulatory versus non-
regulatory approaches. If we can solve the problem through non-
regulatory approaches, it happens much more quickly. If we
still have a problem as a result of those efforts, then it is
something that we have to take another look at.
Senator Feinstein. Well, let me say that I appreciate that,
and I appreciate the action. I know it's controversial, but I
can tell you the complaints are large and the distress is
large. So I'm very grateful for that.
Mr. Huerta. Well, Senator Feinstein, as a Californian, I
hear from your constituents.
Senator Feinstein. Yes. One other thing. Is there any
reason why a drone pilot should not be certified and licensed?
Mr. Huerta. This is actually one of the questions that we
are examining as part of our overall review of how we
incorporate them into the National Airspace System: What should
be the requirements of an operator of an unmanned aircraft?
Senator Feinstein. Because they also ought to be
identifiable. If I understand what's coming down the pipe, it's
hundreds of thousands of these things flying everywhere. And I
think it's a real hazard and that we really need to be able to
identify abhorrent behavior, that the pilots who pilot them,
whether they're crop dusting or doing anything else, should
have a specific legal responsibility.
Mr. Huerta. Well, that is one of the questions that we are
examining as part of safe integration.
Senator Feinstein. Well, I'm going to introduce legislation
to require it. So I don't know where that will go, but I have
real concerns, and I would hope that the FAA could understand
this, because the first big accident we have is going to change
the whole dynamic, and it will happen.
Is there a limit on size that the FAA certifies?
UNMANNED AIRCRAFT SYSTEM
Mr. Huerta. There are different operating characteristics
for very small unmanned aircraft systems (UAS). Essentially,
what we're trying to do is draw a distinction between what is a
modeler, who might be flying a model airplane--as long as
they're flying at very low altitudes and not interfering with
any kind of commercial aircraft--that's a category where we
have much less concern.
But as you pointed out in your previous statements,
unmanned aircraft that operate for a wide variety of purposes
at higher altitudes can be of very different sizes, and our big
concern is how do we safely integrate them with other aircraft.
Senator Feinstein. Well, you know, one of the things I'm
familiar with is the real-time video that can be taken off of
these.
Mr. Huerta. Sure.
Senator Feinstein. Consequently, they are real spy
machines. Now, is that something we want in commercial service
in the United States of America? And I think that's a very real
question with which the industry has to grapple.
Mr. Huerta. That's a fair question, and I think that's one
of the things that we will learn more about as a result of
these test sites and data gathering that we're going to be
doing.
Senator Feinstein. Well, let me ask you this. Can this get
ahead of you?
Mr. Huerta. It's a very rapidly evolving technology.
Senator Feinstein. Yes.
Mr. Huerta. And I think it's fair to say that the public is
only now coming to grips with what the full implications of
that are. I have stressed to the industry associations the
importance of them being very transparent about what the
potential for these activities needs to be. But I think that we
as a country need to look at this technology very carefully,
and while we're very focused on how we safely integrate them,
larger questions are raised that we and our Government partners
will need to consider in the months and years ahead.
Senator Feinstein. And exactly--you know, I can envision
drone fights in the air, drones cracking into each other. So I
think they have to be identifiable. I think the pilots have to
be certified. We have to know who's doing this, because it
doesn't take much to put a munition on it once you've got the
know-how.
So I know the company that makes most of these, I visited
in California, and it's certainly a first-rate company, but
that also troubles me because their ability to innovate is so
great. So I would just like to urge you to give your attention
to this subject, because what we do is going to make a huge
difference down the stream, even before we know the full
implications of this.
Mr. Huerta. That's very good counsel, Senator.
Senator Feinstein. Thank you. Thank you very much.
Senator Collins. Senator Moran.
Senator Moran. Senator Collins, thank you very much.
Administrator, I want to go back to something I raised with
you in my earlier round of questioning, and I want to make sure
we have an understanding of what you're going to do in
providing copies of the analysis. Those words, analysis, study,
exam, review, have different meanings. We use those words many
times, and I'm not sure they always mean the same to each
person using those words.
CONTRACT CONTROL TOWERS
So I'm really interested in seeing what kind of analysis,
study, exam, review that the FAA did to demonstrate the safety
of your decision. And as I understand it, you did an analysis
of each one of the 149 control towers and reached a conclusion
in each instance that it would be safe to eliminate the control
tower. I want to confirm with you that you will provide that
analysis on each one of those towers to the subcommittee and
then ask you what kind of timeframe that will take.
Mr. Huerta. I'll need to provide a response for the record
in terms of what kind of a timeframe that will take.
[The information requested by the subcommittee was
submitted by the Federal Aviation Administration on CD media on
June 10, 2013.]
Mr. Huerta. The analysis that we conducted was a function
of what is the level of activity of these facilities, and then
its relationship to the surrounding environment and other
airports that might exist in those facilities, national
defense, and so forth. I think that it's fair to say that the
analysis did, for example, consider questions. Does the tower
close at night?
Therefore, that tells us there are specific operating
procedures for that airport to operate in a non-towered
capacity. And we can provide you all of that information.
Senator Moran. That's interesting to me, and I hadn't
thought of that point. But it's interesting to me that there
was no analysis that would say that perhaps it's safer if we
had air traffic control towers operating 24 hours a day. You
reached the conclusion that it was safe because they weren't
operating certain hours of the day. But there's also an
analysis that could show that they could be valuable in
improving safety if they were operating more hours.
Mr. Huerta. Senator Moran, as I said in response to your
earlier question, what changes when an airport operates in a
non-towered capacity is how it operates.
Senator Moran. And, again, I don't mean to be redundant,
but you will provide that information to the subcommittee and
you will let us know how much time it takes to get it to us?
Mr. Huerta. Yes, sir.
Senator Moran. Thank you very much. You may be aware of my
effort on the Senate floor with Senator Blumenthal and nearly
30 of my colleagues, Republicans and Democrats, to try to
alleviate this problem by shifting some funding within the
debate of the continuing resolution from unobligated balances
in research and facilities accounts. Did you oppose that effort
to transfer or to change those monies from being spent in the
unobligated accounts and facilities manner to providing money
for control towers?
Mr. Huerta. I think it was quite clear that the
administration's position was that we were looking for a global
resolution to the sequester issue. As it relates to our ability
to deal with the impacts of the sequester, as you know, it's a
blunt instrument, and we are implementing the law as it has
been enacted. Should different laws be enacted, we will
implement them.
Senator Moran. You know, that standard was not applied
uniformly during the continuing resolution debate, and I don't
expect you to have an answer for why that would be the case. I
visited, as you may know, with Secretary LaHood, who told me
that he would like to be helpful in the cause, but indicated
the administration opposed my amendment.
His explanation was that the administration wanted to have
a--different than what you just said, but what he indicated was
the administration does not want to solve this problem on a
short-term basis. I should tell you that I didn't vote for
sequestration. I think across-the-board cuts are irresponsible.
I'm not defending sequestration. I am criticizing the manner in
which you're implementing sequestration, because I don't think
it's required under the circumstances.
SEQUESTRATION
But, again, I share the view, I suppose, of the
administration that sequestration is not a manner by which we
should find savings. Having said that, Secretary LaHood said
the administration opposes my amendment because it is not a
long-term solution to the problem. Everything, Administrator,
within the continuing resolution was a short-term solution.
It's a continuing resolution that gets us through until
September 30.
I couldn't find a single Senator, Republican or Democrat,
who opposed the amendment. All of them spoke to me in favor of
the amendment, could not understand why we couldn't transfer
money that was unobligated and unused to a higher priority. And
so it is still confusing to me, even with your answer.
I can't solve in the continuing resolution the issue of
sequestration. I'm interested in solving the issue of
sequestration, but it looks to me like you would allow us to
help you at the FAA solve a problem in a way that is less
damaging to the traveling public. So I remain confused by the
suggestion that we want to solve a longer-term problem with
sequestration. So do I.
But it does seem odd to me and it seems inappropriate to me
that you're unwilling to solve a problem that you're presented
with, one problem at a time as they come up. Unfortunately,
that's the circumstance in which we find ourselves. You're not
interested in solving this problem until we solve the larger
problem?
Mr. Huerta. Well, Senator Moran, these are all not optimal
decisions. I've said repeatedly that these are all very
difficult choices. Every dollar that I am unable to save
through the Federal contract tower program is a dollar that I
need to find in employee furloughs. And there's a tension and a
tradeoff between lower activity facilities, higher activity
facilities. This is an extremely difficult statute to
implement, but it is the law and we're forced to implement it.
Senator Moran. And let me make sure that I understand that
answer, which is you do have the discretion to decide where the
cuts would occur, because you're choosing to cut the control
tower program and perhaps not furloughing air traffic
controllers at more high volume airports. So the suggestion
that has been made--I don't know if by you or not--that we have
no choice--it is a choice, but it's a choice that you describe
as difficult, but you made a choice. Is that true?
Mr. Huerta. Well, the choice that we made is to minimize
impact on the maximum number of travelers. I'd like to share
with you a specific example. Many of these smaller facilities
have very low activity of all flights. So if I'm looking at the
tradeoff between closing a tower which can operate safely where
the maximum number of commercial activity flights might be,
say, two or three a day versus affecting the arrival rate at a
large facility, I'm going to err on the side of ensuring that I
protect the maximum number of travelers.
Senator Moran. Administrator, that's exactly what I would
want you to do. And what's disturbing to me is the continual
suggestion that we don't have the discretion to do that. What
you're saying to me is exactly what I've been saying on this
issue, which is why can't we prioritize? You prioritized. You
decided that this is more important for safety than this. Why
isn't spending money on control towers more important than
unobligated balances?
Mr. Huerta. Because the unobligated balances are in a
different funding source which I am not permitted to transfer
money from.
Senator Moran. But I was giving you the authority to do
that.
Mr. Huerta. But it's authority that I don't have.
Senator Moran. But you opposed me giving you the authority
to do that. It doesn't make sense to me. I'm still baffled by
this. Mr. Administrator, it does seem to me that you have
indicated there was discretion, or, at least, you have the
opportunity to prioritize. You have the discretion because
you've now decided to keep some towers open or keep towers open
for another couple of months, and you added some towers back to
the list that wouldn't be closed.
So it does seem that there's some opportunity for you to
utilize that discretion, and I wish you would support us giving
you the opportunity to have more discretion. One of the things
that caught my attention, and I assume that you said this. It
comes from a newspaper in Frederick, Maryland. And you were
quoted at the time when the stimulus dollars were made
available, $5.3 million at Frederick, Maryland, for an air
traffic control tower.
This was just a few years ago, and I read the article that
said that by the time the air traffic control tower was open
for business, you made the decision to close the tower. But
back during sequestration, this is what you reported as saying
in the local newspaper.
``More than 300 aircraft are based at the airport. It has
two runways and handles 130,000 aircraft operations annually,
Huerta said. It is estimated that the number will increase to
165,000 by 2025. Huerta had to almost shout above the noise to
say he came to make the case that the airport is so busy that
it needs a tower.'' Quoting you, ``I think the case has been
made, Huerta said. This has become a very busy airport,'' and
yet it's one that is being closed.
Mr. Huerta. And its current rate of activity is less than
150,000 operations. As I've said, these are difficult choices.
Senator Moran. Madam Chairman, I was asked by Senator Blunt
to ask a question in a different vein, although it's along the
same topic. Our colleague, Senator Blunt, has introduced a bill
earlier this week that would ensure that essential employees
upon whom public safety depends can continue to work without
furlough.
During a Senate Commerce Committee hearing earlier this
week, you asked for the opportunity to review the bill. And
Senator Blunt asked me to ask you if you had reviewed the bill
and now had an opinion.
Mr. Huerta. We have reviewed the bill. The administration
has not taken a position on it at this point.
Senator Moran. I think, Madam Chairman, that's all I have.
COST-SAVINGS
Senator Collins. Thank you very much, Senator Moran. I want
to recognize your very strong leadership on the contract tower
issue. This is an issue that is of great concern to many of our
colleagues on both sides of the aisle. And I personally believe
that had you been able to get a vote on the Senate floor that
you would have won overwhelmingly.
Mr. Attorney General--Inspector General--maybe you'd like
to be Attorney General--maybe not.
In your statement, you talked about that the FAA could
realize cost savings through improved controller productivity
and scheduling. And you talk about that since 2000, total air
traffic operations have declined by 23 percent while the number
of air traffic controllers has actually increased. I mention
this because I think the furloughs are a very blunt and harmful
instrument that does not set priorities.
But it seems to me that in your excellent testimony and the
audits and reports that you've done that you've suggested other
ways that savings could be achieved and that the targets under
sequestration could be met. So could you talk to us a little
bit more about your comment that FAA could realize cost savings
with better scheduling and higher productivity?
Mr. Scovel. Yes. Thank you, Senator Collins. It is true
that air traffic operations since 2000 have decreased about 23
percent with slightly more controllers on duty today than there
were then. We've been asked by the House to undertake a review
of air traffic controller productivity, and that review is
underway, and we don't have conclusions yet that I can share
with you.
However, what we have identified through a number of audits
of FAA's air traffic controller scheduling practices as well as
training is that there are a number of towers--and that's been
the subject of discussion off and on between Senator Moran and
the Administrator--but a number of towers that maintain at
least two air traffic controllers on duty through the nighttime
hours when, by virtue of FAA's own threshold requirements in
terms of operations, those towers should be closed.
CONTROLLER TRAINING AND SAFETY
There are opportunities for savings if FAA were to apply
its own thresholds to those particular towers and leave those
towers unmanned during the nighttime hours. We defer to the
agency in terms of the safety question, and we are very
cognizant of Senator Moran's concern with safety as well as the
testimony of the NTSB chairman on Tuesday, in which she offered
the view that redundant safety systems, safety layers, can only
enhance safety rather than decrease it.
Senator Collins. Well, I think part of that also was in
response to the very unfortunate incidents where the air
traffic controller had fallen asleep during the nighttime
shift----
Mr. Scovel. Exactly.
Senator Collins [continuing]. Which is obviously
unacceptable. I'm not sure the answer is to have a second
person there to wake the person up. But I do think that that's
probably why two are on duty.
Mr. Scovel. It is in some instances as a result of the
concern over fatigued controllers from several years ago. A
decision was made by the agency and, in fact, the Department to
put a second controller on duty at those locations,
notwithstanding the fact that nighttime operations were below
the threshold that had been specified by FAA for manning the
tower in the first place.
SEQUESTRATION
Senator Collins. The reason I mention this issue,
Administrator, is that I would encourage you to go back and
really scrutinize your budget--I'm not saying that you
haven't--but to look at the contract towers issue, the post
midnight issue, particularly when you're dealing, as we are in
Bangor, with a dual use airport that has military operations as
well as civilian, and to also take a look at the furlough
issue. I'm worried about the impact on morale. I'm worried
about the impact on operations.
I've met just in the last couple of weeks with high-level
Navy officials and National Guard officials, and they have both
been able to work through this in a way that has either greatly
lessened the number of furlough days that will be required by
DOD's civilian employees within their departments or eliminated
altogether. And the disturbing thing is I'm also hearing that
the White House is putting pressure on the Navy, the Coast
Guard, and the National Guard to do furloughs anyway. I don't
think we ought to be trying to enhance the pain of
sequestration.
I agree that sequestration was a terrible policy. It
doesn't set priorities. It treats programs as if they're of
equal worth, and it is a very poor way to legislate. But here
we are, and it seems to me that we've got to work together to
try to figure out ways to minimize the impact on operations and
on the workforce.
I personally believe we're going to end up paying more
later in a lot of these cases as we delay contracts and cause
problems in the supply chain and take other actions as a result
of sequestration. So I would encourage you to go back and take
another really close look at your budget.
FURLOUGHS
Mr. Huerta. Senator Collins, I can't speak to what's going
on in other agencies, but I will give you my assurance that we
are in a continuous evaluation of where we can achieve cost
savings. I will say that when we first began our initial
planning, we actually thought that we were going to have a much
larger number of furlough days. And through our very aggressive
efforts to reduce spending in other areas, we're able to get
that down to the 11 that we're currently working with, and we
will continue to work on that.
I have with my staff weekly reports on how we're doing with
contract expenditures, what we're seeing with respect to our
actual performance. This is something that we will continue to
manage throughout the fiscal year as long as the sequester is
in place.
As you know, and as I've said repeatedly, these are
difficult choices, and we're forced to choose between very
unattractive options. But nothing would be better news for me
than a situation where we would be able to relax these
draconian measures. But it all depends on how the financial
performance plays out in the weeks ahead.
ELECTRONIC DEVICES ON PLANES
Senator Collins. Let me just ask two final questions. One,
Administrator, what progress has the FAA made in reviewing
airline procedures governing the use of portable electronic
devices such as smart phones and tablet computers in flight?
It's not that I'm seeking being on a flight where everybody's
on a phone having a conversation. But, obviously, there's a
great deal of interest in being able to use devices on these
flights and a great deal of skepticism, I would say, among the
traveling public about whether this really is a safety issue.
Mr. Huerta. Sure. Let me draw the distinction between the
use of phones and the use of other electronic devices.
Senator Collins. Yes, a valid distinction.
Mr. Huerta. The use of phones is regulated by the Federal
Communications Commission (FCC), and right now their current
rules prohibit the use of phones on aircraft in flight. The
FAA, for other electronic devices, recently committed at the
start of this year an Aviation Rulemaking Committee (ARC) to
advise us on whether we should revise the regulations that we
currently have in place that restrict the use of these devices
during critical phases of flight.
This rulemaking committee is made up of representatives not
only of the device manufacturers, but also representatives of
crews, and of aircraft operators. These members will have the
full scope of perspectives that would come into play as we
consider how to look at these things, as well as the research
and technology community so that we can really understand what
the challenges are with respect to electronic performance.
Current law provides that any airline could do an analysis
of devices on their aircraft, and if they determine there is no
interference, then they could be allowed. We recognize, though,
that there has been an explosive growth in the type and variety
of electronic devices. So it was for this reason that I made it
a personal initiative to really try to convene this group to
consider what a way forward would look like.
We're expecting the work of the ARC to be concluded this
summer, and at that time they will make recommendations to us
on what a way forward might look like. The balance they have to
achieve is what's technologically feasible, but also what can
be enforced in an operational context by crews and operators of
airlines.
Senator Collins. Thank you.
AUDIT OF LOS ANGELES INTERNATIONAL AIRPORT
And, finally, Mr. Scovel, I know that the inspector
general's office is conducting an audit of the Los Angeles
International Airport's (LAX) revenue use as a result of a
particular incident where revenue was diverted for purposes not
allowed under the law. Two questions: What is the status of
that audit? And, second, has your office uncovered revenue
diversion incidents--that's a bureaucratic term for it--at
other airports throughout the country, in other words, misuse
of revenues?
Mr. Scovel. Senator Collins, our review of supposed revenue
diversion at Los Angeles International Airport is underway. We
haven't completed it yet. So I'm not in a position to speak
specifically to that, except to note that we are conducting
that review in response to a request from three Members of the
House.
We have also received information independently through
third party sources affiliated with LAX. Some of those
allegations we referred to FAA for their review, and they have
conducted that. And my staff together with FAA is in the
process of reviewing those conclusions. But the larger piece
has fallen to one of our audit groups, and that effort is still
underway.
AUDITS OF REVENUE DIVERSIONS
To your other question, the nature of revenue diversion at
airports nationwide, unfortunately, it is--I can only call it
pernicious and persistent. It is required by Federal law that
revenues generated by airports be used for airport purposes. To
use it for anything else, such as police or fire services off
the airport, as we have found happened--the parking fees
generated in lots and garages on the airport to be used for
off-airport services--we have found numerous instances of that.
Both my office and Administrator Huerta's agency have
groups that have long experience in investigating and
attempting to resolve instances of revenue diversion. His group
as well as mine are tremendously under-resourced. We could
probably dedicate double figure FDEs nationwide to try to track
all of this down.
I can give you a very short list--and I won't take too much
of your time--but just some of the more recent projects that
we've had underway. Dating back to 2003, we looked at incidents
at Pittsburgh, Cleveland, San Antonio, Miami, Detroit; 2004,
San Francisco; 2005, Bellingham, Charlotte, Cincinnati,
Detroit, Las Vegas, Reno, Tucson; 2006, Orlando; 2011, Denver;
2011, Venice, and most recently, Los Angeles.
Over the course of the last 10 years, our office alone has
identified well in excess of $400 million of revenue diversion
or lost revenues. For instance, airport real estate sold for
less than fair market value. That's money that, had the sale
been conducted properly, should have been devoted to airport
purposes under Federal law. But all of that happened.
That's not to say that those revenues, in some instances,
could ever be recovered either by the agency or by the airport.
But, in some instances, they can, and we and FAA try to track
those instances down.
Senator Collins. Well, that's a very disturbing list of
airports, because that suggests a widespread problem and with
real money, hundreds of millions of dollars. That's the sort of
thing we have to make sure we're providing enough resources for
on the investigative front so that we can catch and deter that
kind of activity.
Senator Moran, do you have anything further?
Senator Moran. No. Thank you for the indulgence.
Senator Collins. Thank you.
I want to thank both of our witnesses for testifying today.
And, Administrator, I particularly want to recognize your
first appearance before our subcommittee.
ADDITIONAL COMMITTEE QUESTIONS
I would announce that we will leave the hearing record open
for 1 week for any additional questions for the record and
would ask our witnesses to respond to those as quickly as
possible.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Patty Murray
nextgen master schedule
Question. I continue to be concerned by the Federal Aviation
Administration's (FAA's) track record with capital programs. Too many
FAA programs go over budget, exceed their schedule, and do not deliver
on all of their promises. This past year, the FAA proposed changes with
the goal of improving program management. I was happy to approve FAA's
reorganization that created the Program Management Office (PMO), which
is designed to focus the agency on good management practices. Mr.
Scovel, in your testimony, you discuss the need for FAA to integrate
all of its Next Generation Air Transportation System (NextGen)
programs. One year ago, the FAA concurred with your recommendation that
it produce an integrated master schedule. By what date will the FAA
produce this master schedule?
Answer. Consistent with Mr. Scovel's recommendation, the FAA is
developing an Integrated Master Schedule (IMS). The NextGen IMS will
track progress activities and milestones monthly for the pre-
implementation and implementation programs.
By December 2013, the FAA IMS will include the linkages and
dependencies among NextGen programs. This capability will strengthen
program synchronization and alignments along with capturing the
timeline for maturity of the NextGen programs. Further, we will
continue to enhance the IMS as we revalidate the NextGen schedules and
definitions of capabilities. In parallel, we will continue our effort
to align the IMS with the NAS Enterprise Architecture (EA). This
alignment will include all implementation activities through 2020.
acquisitions workforce
Question. The Inspector General has issued many recommendations on
the importance of having an FAA workforce with expertise in
acquisitions. This kind of expertise means hiring the right people and
giving them the training they need. How will sequestration affect your
ability to support the PMO and develop a strong acquisitions workforce?
Answer. The Federal Aviation Administration (FAA) continues to
prioritize training and certification for the FAA's acquisition
workforce. The agency views it as a necessary investment to ensure the
FAA has a strong cadre of skilled acquisition professionals in order to
effectively manage cost, schedule, and performance of agency
acquisitions and contracts. The FAA has reduced training and travel
budgets but is still supporting core training that is required for
certification of contracting officers and specialists, contracting
officer representatives, and program/project managers. The FAA is also
continuing to offer core training to other acquisition specialists,
such as system engineers, test and evaluation specialists, cost
estimators, and integrated logistics specialists. However, reduced
travel budgets are impacting the ability of some field personnel to
attend training; local training is not available or there is an
insufficient population to bring training onsite. Additionally,
diminishing staffing levels and support contractor resources are
impacting the availability of personnel to attend training due to
increasing job demands.
While the FAA remains committed to strengthening the skillsets of
onboard acquisition staff, sequestration is impacting the FAA's ability
to hire. The FAA has had to impose restrictions that broadly curtail
hiring, including backfill hiring and career ladder promotions. While
there are provisions for exceptions for critical needs, the expectation
is that these will be very limited. Similarly, there is a general
freeze on reassignment increases, performance awards, and retention
incentives. A consequence of these restrictions is difficulty retaining
staff. Experienced acquisition professionals are in high demand and FAA
is beginning to see an increase in attrition. Losing highly skilled and
experienced professionals, and staff managing increasingly complex
acquisitions, erodes morale and puts the agency at risk for increased
costs, disruptions, and delays. In addition to a shortage of senior,
experienced professionals, a thinning pipeline of talent can have long
term impacts.
To manage under these circumstances, the FAA is focused on
developing current, available staff to best meet highest priority needs
and strategies to retain personnel and organizational knowledge/
expertise.
The FAA's Acquisition Workforce Council oversees planning and
development of the acquisition workforce. The Council is in the process
of updating FAA's Acquisition Workforce Plan. Through this process the
FAA will reassess current and projected workload and staffing
(including retirement and attrition data) and strategies to address
requirements based on assumptions and constraints. The Acquisition
Workforce Plan update is expected to be published in September 2013.
runway status lights
Question. Recently, the FAA has recognized cost increases with the
Runway Status Lights program. And I understand that the FAA may
consider installing these lights at fewer locations in order to keep
within the programs budget. What is the FAA doing to ensure that it
delivers on all of the promises of the Runway Status Lights program?
Under what circumstances would the agency decide to cut back on this
program instead of making other adjustments to its budget?
Answer. Runway Status Lights (RWSL) is a costly system because it
involves cutting into runways and taxiways in order to install the
field lighting system. In addition, the FAA must rely on the airport to
make the runways and taxiways available for suitable lengths of time so
that construction costs don't become unwieldy.
At the time of the RWSL Final Investment Decision (FID) in January
2010, based on the economic analysis, only 13 airports provided a
positive net present value; however, 23 airports were selected based on
the cumulative program net present value. Moving forward, FAA is
focusing on getting positive net present value for each airport
installation both for this program and other capital investments.
In the time since the FID, the program experienced cost growth due
to:
--changes in construction methods to costlier techniques;
--requests for additional light arrays;
--limited runway and taxiway availability; and
--additional development for supportability enhancements.
Cost containment measures were taken to address the cost growth and
an affordability analysis was initiated. The affordability analysis
included implementation progress to date, funds spent to date, life
cycle costs, and the benefit cost ratio.
Taking into account all the relevant factors, the agency is
considering a two-step approach to complete the deployment of RWSL.
First, execute a plan to achieve operational status at the appropriate
number of airports based on the affordability constraints and approved
by the FAA Joint Resources Council. Second, develop a business case to
address the remaining airports.
Employing good business practices, the approach forward for the
remaining airports will take advantage of all methods of reducing
runway incursions targeted at the specific airport environment. The
agency is institutionalizing a new process that will be inclusive of
airport partners to develop a comprehensive plan that will include a
combination of innovative non-technology and technology solutions
tailored for each airport environment. In order to achieve this
tailored approach, the FAA has chartered a Surface Safety Team to,
along with stakeholders:
--Evaluate the current set of surface technologies and risk
assessment capabilities;
--Conduct additional risk analysis based on additional information
available through voluntary reporting systems and Aviation
Safety Information Analysis and Sharing (ASIAS);
--Develop portfolios of solutions to address identified causal
factors; and,
--Identify funding solutions, including conditions for PFC and Grant
eligibility, and cost sharing opportunities.
This Surface Safety Team began its work in February and is expected
to complete its work by December 2013.
787/aircraft certification
Question. Given the size of the aviation industry in the United
States, it is not possible for FAA employees to personally oversee
everything that happens in the industry every day. To make the best use
of its resources, the FAA has been moving to a risk-based approach. The
agency has also taken advantage of employees who work in the aviation
industry, but perform oversight work on behalf of the FAA. As part of
its investigation into recent events with lithium batteries on the 787,
the FAA has reviewed its own oversight of aircraft certification. What
lessons has FAA learned from this review?
Answer. As part of our certification processes, the FAA determines
its level of involvement in a given aspect of the design based on a
number of risk-based factors, including the safety criticality of the
design feature, the clarity of the requirements and guidance, and the
experience/competency level of the applicant and their delegation
system. Our level of involvement is not an ``all-or-nothing''
proposition. Rather, we fine tune our participation to match the
specific situation. In the case of the 787 lithium batteries, our
experienced electrical engineers maintained a high level of
involvement, even in those cases where the formal test witnessing and
documentation sign-off was delegated to the Boeing organization.
Overall, we believe our certification processes are sound and effective
in supporting our safety objectives.
There are two on-going 787 related activities we are involved with:
National Transportation Safety Board (NTSB) investigation of the in-
service battery events; and 787 Special Review Team which is conducting
a comprehensive review of the Boeing 787 critical systems, including
design, manufacture, assembly and coordination activities between
Boeing and 787 suppliers.
We will carefully evaluate any recommendations from these
activities with regard to further improvements to our overall
certification processes and oversight methods.
aircraft certification
Question. The aviation industry continues to grow and innovate. The
FAA's highest priority must always be safety, but its oversight still
has to keep up with industry--making sure that new products meet the
same standards for safety, but not at the expense of unreasonable
delay.
What is the average time today to review and approve new proposals?
Has this time increased or decreased in recent years?
Answer. Certification projects involve multiple milestones spanning
the time period from initial proposal through FAA approval. The
duration of each project is unique, with some being as short as one
week and others spanning 6-8 years.
One area that has been a challenge for FAA has been the ability to
take on numerous new projects. Since 2005, the FAA Aircraft
Certification Service has used a process to prioritize the initiation
of projects based on a number of considerations including the safety
significance of the project, scope of the project and degree of FAA
involvement.
Section 312 of the FAA Modernization and Reform Act of 2012
identified six areas for assessment and improvement. The FAA developed
an implementation plan consisting of 14 initiatives to address the six
areas. One of the initiatives seeks to improve the process and
timeliness to initiate certification projects. The FAA developed the
new process based on industry comments that better balances industry
needs with FAA priorities and resources. The new process has been
posted on the FAA Web site and the public comment period is open
through July 2, 2013. Several industry representatives and associations
have expressed favorable comments regarding the new process based on
their initial review.
Question. Given what you have learned with the 787, how do you see
the FAA continuing to improve aircraft certification?
Answer. While we believe our certification processes are effective
in supporting our safety mission, we are always looking for ways to
improve them. For that purpose, we plan to use the recommendations and
lessons learned that will come from NTSB's investigation of the 787
battery and the 787 Special Review Team.
We believe any recommendations that come from these activities will
strengthen the work that has been underway for several years within the
Aircraft Certification Service to build a stronger, system-based
approach to our certification, continued operational safety, and
oversight processes. These efforts fully support the FAA commitment to
develop and implement an overall Safety Management System.
Question. The FAA Modernization and Reform Act of 2012 required the
FAA to assess its certification process and report on the FAA's
recommendations. That report was due 180 days after enactment. What is
the status of this effort?
Answer. The Aircraft Certification Process Review and Reform
(ACPRR) Aviation Rulemaking Committee (ARC) submitted the following
recommendations to the Director of Aircraft Certification on May 22,
2012:
1. Development of Comprehensive Means To Implement and Measure the
Effectiveness of Implementation and Benefits of Certification
Process Improvements;
2. Enhanced Use of Delegation;
3. Integrated Roadmap and Vision for Certification Process Reforms;
4. Update Part 21 To Reflect a Systems Approach for Safety;
5. Culture and Change Management; and
6. Process Reforms and Efficiencies Needed for Other Aircraft
Certification Service (AIR) Functions.
Recommendations from the ARC were included in a report provided to
Congress on August 13, 2012. The FAA fully supports these
recommendations and developed a comprehensive implementation plan
consisting of 14 initiatives addressing each item. Implementation
actions began in 2012, in advance of the act requirement to begin
implementation no later than February 14, 2013.
Question. Will you be able to make these improvements in time to
develop the fiscal year 2015 budget request? Or even the fiscal year
2016 budget request?
Answer. The fiscal year 2015 budget request will use existing model
formulas to forecast resource requirements. As we improve and revise
the model for these labor challenges, these will be incorporated in the
fiscal year 2016 request.
For fiscal year 2016, the Flight Standards portion of the model
will incorporate improvements that will provide more accurate staffing
forecasts. The Aircraft Certification Service portion of the model does
not require algorithm revisions for staffing forecast. Aviation Safety
(AVS) will use December 2012 and 2013 Flight Standards Service (AFS)
Staffing Tool and Reporting System (ASTARS) model data results to
formulate our fiscal year 2015 and 2016 budget requests respectively.
performance-based navigation
For the past couple of years, the FAA has been working on its
metroplex initiative. This initiative brings teams of FAA employees to
major airports across the country to work with local stakeholders and
develop better procedures. These procedures rely on performance-based
navigation, which means that each and every aircraft must be equipped
with the right technology. Some of these avionics are more advanced and
can take advantage of more precise procedures. The FAA has been
developing these procedures for a long time, but with the metroplex
initiative, the FAA has finally shown that it is placing a priority on
procedures that will be used after these teams leave the airport. A key
element of NextGen has been the idea that the best equipped aircraft
will be able to take advantage of the best procedures. But to ensure
that procedures are being used, they need to accessible to the largest
number of aircraft.
Question. Can the FAA develop procedures that will be used on a
regular basis and also follow a policy of ``best equipped-best
served''?
Answer. The Federal Aviation Administration (FAA) has developed,
published, and maintained over 20,812 conventional and Area Navigation
(RNAV) Standard Instrument Approach Procedures (i.e., ILS/VOR/RNAV/RNP
AR/WAAS/GLS), Standard Instrument Departures and Standard Terminal
Arrivals, and 1,193 low and high altitude routes (i.e., Victor Airways,
Jet Routes, Q, T, and TK) for use by users (i.e., airlines, business,
general aviation, Department of Defense (DOD)) of the National Airspace
System (NAS).
These public procedures are available for use by all entities
identified above, provided that aircraft are properly equipped and
maintained, the aircrew is properly trained and certified, and the
flight operations to be performed are authorized and conducted in
accordance with various FAA directives and other documents, as
appropriate.
While these procedures are not segregated or developed in a manner
that follows a policy of ``best equipped-best served'' per se, aircraft
and aircrews that meet the aforementioned criteria can certainly take
advantage of operational and economic benefits provided by more
advanced Performance Based Navigation routes and procedures. This
promotes the drive for greater investment in upgrades to flight
planning capability, equipage and training on the user side, as the FAA
continues to modernize the NAS through its efforts under NextGen.
Question. Two years ago, FAA data showed a dramatic increase in
operational errors made by its air traffic controllers. That year, the
FAA had also been making changes in how such errors were reported, so
FAA has never been able to determine how many of those errors were due
to better data collection and how many were due to an actual increase
in controller errors. But even today, the FAA has not been able to
establish a new baseline that it can use to measure any improvement in
its performance. When will the FAA be able to establish a baseline for
operational errors?
Answer. As a result of FAA improvements in reporting and monitoring
systems during the last 2-plus years, the agency has indeed experienced
a significant increase in the number of reported operational incidents.
While the FAA cannot prove with 100 percent certainty that the entire
increase in reporting is related to improvements in policy, procedures,
and tools, those increases occurred concurrent to the deployment of
those improvements and the likelihood of the associated increases is
statistically high.
Those new capabilities were implemented methodically throughout the
National Airspace System beginning on January 30, 2012, and we are
nearly finished with the implementation of all planned improvements.
For example, the implementation of electronic radar monitoring in the
terminal environment via the Traffic Analysis and Reporting Program
(TARP) was rolled out from January to September 2012. The last program
to be implemented is TARP for en route facilities which we began
deploying in May 2013, and expect to be fully implemented by September
2013.
Best practices for performance measurement typically use 2 full
years of good data to establish a new baseline; meaning that the FAA
will have a new official baseline for Operational Incidents in October
2015. However, by October 2014, the FAA expects to have 1 full year of
full reporting and will establish new goals for the current System Risk
Event Rate (SRER) metric.
As part of its strategy to move beyond traditional reporting of one
dimensional safety metrics, in 2011, the FAA introduced a new metric:
the System Risk Event Rate (SRER). The SRER represents a move away from
legacy safety indicators consisting of merely counting losses of
separation and a move toward a metric that illuminates, with far
greater precision, the frequency and rate of high-risk events across
the NAS. The SRER is a 12-month rolling rate that compares the number
of high-risk Risk Analysis Events (RAEs) with the total number of
validated losses of standard separation that have occurred. As
expected, the vast increase in reported safety data in 2012 has
resulted in an increase in the overall number of events and RAEs
reported. However, it is notable that even with a significantly greater
number of recorded events and a higher number of reported RAEs, the
total number of high-risk events has remained low.
retention bonuses
Question. Please provide a table for fiscal year 2012, and another
for fiscal year 2013, listing the title, office, and salary of each FAA
employee that received a retention bonus during that year, as well as
the amount of the retention bonus itself.
Answer.
FISCAL YEAR 2012 RETENTION INCENTIVES--FAA
----------------------------------------------------------------------------------------------------------------
Retention Retention
Organization Position title Salary percent amount
----------------------------------------------------------------------------------------------------------------
ATCT NANTUCKET, MA........................ AIR TRAFFIC CONTROL SPEC..... $85,356 10 \1\ $8,536
ATCT NANTUCKET, MA........................ AIR TRAFFIC CONTROL SPEC..... 84,006 10 \1\ 8,401
ATCT NANTUCKET, MA........................ AIR TRAFFIC CONTROL SPEC..... 76,267 10 \1\ 7,627
ATCT NANTUCKET, MA........................ AIR TRAFFIC CONTROL SPEC..... 76,267 10 \1\ 7,627
ATCT NANTUCKET, MA........................ AIR TRAFFIC CONTROL SPEC..... 86,037 10 \1\ 8,604
ATCT NANTUCKET, MA........................ AIR TRAFFIC CONTROL SPEC..... 106,684 10 \1\ 10,668
ATCT NANTUCKET, MA........................ AIR TRAFFIC CONTROL SPEC..... 67,780 10 \1\ 6,778
ATCT NANTUCKET, MA........................ AIR TRAFFIC CONTROL SPEC..... 85,356 10 \1\ 8,536
ATCT NANTUCKET, MA........................ AIR TRAFFIC CONTROL SPEC..... 85,788 10 \1\ 8,579
ATCT NANTUCKET, MA........................ AIR TRAFFIC CONTROL SPEC..... 42,319 10 \1\ 4,232
ATCT NANTUCKET, MA........................ AIR TRAFFIC CONTROL SPEC \2\. 43,589 10 \1\ 4,359
ATCT NANTUCKET, MA........................ AIR TRAFFIC CONTROL SPEC..... 76,267 10 \1\ 7,627
ATCT NANTUCKET, MA........................ AIR TRAFFIC CONTROL SPEC..... 76,267 10 \1\ 7,627
ATCT NANTUCKET, MA........................ AVIATION ASSISTANT........... 43,102 10 \1\ 4,310
ATCT NANTUCKET, MA........................ AIR TRAFFIC CONTROL SPEC..... 84,006 10 \1\ 8,401
ATCT NANTUCKET, MA........................ AIR TRAFFIC CONTROL SPEC..... 76,267 10 \1\ 7,627
ATCT NANTUCKET, MA........................ SUPV AIR TRAFFIC CONTROL SPEC 119,972 10 \1\ 11,997
ATCT NANTUCKET, MA........................ AIR TRAFFIC CONTROL SPEC..... 76,267 10 \1\ 7,627
ATCT NANTUCKET, MA........................ AIR TRAFFIC CONTROL SPEC..... 89,879 10 \1\ 8,988
ATCT PORTLAND, ME......................... AIR TRAFFIC CONTROL SPEC \2\. 89,879 20 17,976
HQ-AIR TRAFFIC ORG WASHINGTON, DC......... DEPUTY CHIEF OPERATING 179,700 24.38 42,500
OFFICER \3\.
HQ-HUMAN RESOURCE MGT WASHINGTON, DC...... SUPV HUMAN RESOURCES SPEC.... 161,736 25 40,434
SSC NANTUCKET, MA......................... AIRWAY TRANSP SYS SPEC....... 103,830 20 \1\ 20,766
SSC NANTUCKET, MA......................... AIRWAY TRANSP SYS SPEC....... 79,026 20 \1\ 15,805
HQ-HUMAN RESOURCE MGT WASHINGTON, DC...... MGT & PROG ANALYST........... 141,735 ........... \4\
----------------------------------------------------------------------------------------------------------------
\1\ Denotes continuation of a group incentive authorized to supplement the pay of employees at an
extraordinarily high cost location (Nantucket Island) that is included in the ``Rest of U.S.'' locality pay
area.
\2\ Denotes the same employee as row directly above this one--location changed or modified agreement.
\3\ Retired 9/30/12.
\4\ Denotes an incentive that was stopped upon expiration or review showing incentive no longer needed.
FISCAL YEAR 2013 RETENTION INCENTIVES--FAA
----------------------------------------------------------------------------------------------------------------
Retention Retention
Organization Position title Salary percent amount
----------------------------------------------------------------------------------------------------------------
ATCT NANTUCKET, MA........................ SUPV AIR TRAFFIC CONTROL SPEC $90,478 10 \1\ $9,048
ATCT NANTUCKET, MA........................ AIR TRAFFIC CONTROL SPEC..... 84,006 10 \1\ 8,401
ATCT NANTUCKET, MA........................ AIR TRAFFIC CONTROL SPEC..... 76,267 10 \1\ 7,627
ATCT NANTUCKET, MA........................ AIR TRAFFIC CONTROL SPEC \2\. 76,267 ........... \1\ \3\
ATCT NANTUCKET, MA........................ AIR TRAFFIC CONTROL SPEC..... 86,037 10 \1\ 8,604
ATCT NANTUCKET, MA........................ AIR TRAFFIC CONTROL SPEC..... 106,684 10 \1\ 10,668
ATCT NANTUCKET, MA........................ AIR TRAFFIC CONTROL SPEC..... 20,324 10 \1\ 2,032
ATCT NANTUCKET, MA........................ AIR TRAFFIC CONTROL SPEC..... 76,267 10 \1\ 7,627
ATCT NANTUCKET, MA........................ AIR TRAFFIC CONTROL SPEC..... 85,356 10 \1\ 8,536
ATCT NANTUCKET, MA........................ AIR TRAFFIC CONTROL SPEC..... 85,788 10 \1\ 8,579
ATCT NANTUCKET, MA........................ AIR TRAFFIC CONTROL SPEC..... 67,780 10 \1\ 6,778
ATCT NANTUCKET, MA........................ AIR TRAFFIC CONTROL SPEC..... 76,267 10 \1\ 7,627
ATCT NANTUCKET, MA........................ AIR TRAFFIC CONTROL SPEC..... 76,267 10 \1\ 7,627
ATCT NANTUCKET, MA........................ MGT & PROGRAM ASSISTANT...... 46,550 10 \1\ 4,655
ATCT NANTUCKET, MA........................ AIR TRAFFIC CONTROL SPEC..... 84,006 10 \1\ 8,401
ATCT NANTUCKET, MA........................ AIR TRAFFIC CONTROL SPEC..... 76,267 10 \1\ 7,627
ATCT NANTUCKET, MA........................ SUPV AIR TRAFFIC CONTROL SPEC 119,972 10 \1\ 11,997
SSC NANTUCKET, MA......................... AIRWAY TRANSP SYS SPEC....... 103,830 20 \1\ 20,766
SSC NANTUCKET, MA......................... AIRWAY TRANSP SYS SPEC....... 79,026 20 \1\ 15,805
ATCT PROVIDENCE, RI....................... AIR TRAFFIC CONTROL SPEC..... 83,375 ........... \3\
TRACON CAPE, OTIS AFB, MA................. AIR TRAFFIC CONTROL SPEC..... 87,753 ........... \3\
HQ-HUMAN RESOURCE MGT WASHINGTON, DC...... SUPV HUMAN RESOURCES SPEC.... 166,265 25 \4\ 41,566
----------------------------------------------------------------------------------------------------------------
\1\ Denotes continuation of a group incentive authorized to supplement the pay of employees at an
extraordinarily high cost location (Nantucket Island) that is included in the ``Rest of U.S.'' locality pay
area.
\2\ Denotes the same employee as row directly above this one--location changed or modified agreement.
\3\ Denotes an incentive that was stopped upon expiration or review showing incentive no longer needed.
\4\ Retention payments terminated 6/3/13.
Question. Please describe the FAA's process for approving retention
bonuses.
Answer. An employee's manager may request a Retention Incentive
when the employee has unique qualifications or there is a special need
for the employee's services which makes it essential to retain the
employee. The employee must be likely to leave the Federal service in
the absence of a retention incentive and have a performance rating of
acceptable. The employee must have completed a minimum of 1 year of
continuous service with FAA, immediately prior to receiving the
incentive, or have been employed by FAA for a period established under
a service agreement resulting from the payment of a recruitment or
relocation incentive, whichever is longer.
The requesting office must complete an Authorization Request form.
The form has the employee's position information, salary, requested
amount, and other information required to process the incentive
request. It also includes sections for narrative justification that are
designed to present the business reasons for the incentive and to
address the various factors prescribed by the Department of
Transportation policy, Departmental Personnel Manual (DPM), chapter
575, Recruitment, Relocation, and Retention Incentives. Finally, the
form has a concurrence/approval section with signature blocks to
facilitate the review and approval process.
Along with the form, any supporting documentation that may be
necessary to support the request is added to the package. This may
include the employee's latest performance assessment, documentation of
an outside job offer, or documentation of any other expression of the
employee's intention to leave Federal service absent an incentive. The
package will also usually include an FAA Retention Incentive Service
Agreement that outlines the conditions that the employee must agree to
while receiving the incentive, such as the payment method, agreement
termination and repayment liability rules, and specific performance
objectives that the Line of Business or Staff Office (LOB/SO) has
identified to be achieved or maintained in exchange for the retention
incentive.
Requests are initiated by the employee's manager and forwarded
through channels to the head of the employee's LOB/SO within the FAA.
If the Head of the LOB/SO concurs, the request is forwarded for review
by the servicing Human Resource Management Office to validate any
staffing information outlined in the request and to ensure compliance
with FAA policy. The request is then presented to the Assistant
Administrator for Human Resource Management for concurrence.
The FAA administrator considers the request as the Reviewing
Official. Only requests approved by the FAA administrator are forwarded
to the Department of Transportation, Office of the Secretary for
consideration. At the Department, the request first goes to the
Departmental Office of Human Resource Management (DOHRM) for technical
review to ensure it meets the requirements outlined in DPM-575 and FAA
policy. The DOHRM office forwards each request to the Assistant
Secretary for Administration for consideration. When the requested
incentive amount is 25 percent or less of the employee's basic salary
rate times the number of years required by the service agreement, the
Assistant Secretary for Administration makes the final decision and
serves as the Approving Official. If the amount requested exceeds that
25 percent amount, the request must be forwarded to the Deputy
Secretary of Transportation for decision as the Final Approving
Official.
The DOHRM notifies the FAA's Assistant Administrator for Human
Resource Management of the final decision.
______
Questions Submitted by Senator Dianne Feinstein
unmanned aircraft systems
Question. Under the 2012 Federal Aviation Administration (FAA)
Modernization and Reform Act, the FAA is directed to develop a
``comprehensive plan'' to integrate unmanned aircraft into the national
airspace. The law sets a deadline for the integration of ``civil''
drones--those in private hands--by ``no later than September 30,
2015.'' It also instructs the FAA to integrate ``public'' drones--those
in Government hands--on an expedited basis.
I believe the integration of drone technology poses serious privacy
risks--especially the danger of unwanted surveillance of the
individual.
Will you assure this subcommittee that the FAA will work with other
appropriate agencies and Congress to establish rules protecting
Americans' privacy before drones are integrated into the national
airspace?
Answer. The FAA engaged our interagency partners (including the
National Aeronautics and Space Administration (NASA), the Department of
Defense (DOD), and the Department of Homeland Security (DHS)) and
sought input in the development of the FAA proposed privacy approach
for the Unmanned Aircraft Systems (UAS) test sites.
The FAA is analyzing the public input received regarding its
proposed approach to include terms and conditions in the ``other
transaction agreement'' (OTA) that would, among other things, require
operators to develop privacy policies and make them publicly available.
By the end of July 2013, the FAA plans to finalize the terms to include
in the OTAs with the test site operators. The FAA will continue to work
with appropriate agencies on the issue of privacy protection.
unmanned aircraft systems test ranges
Question. Under the 2012 FAA Modernization and Reform Act, the FAA
is directed to select six ``test ranges'' for the integration of drones
into the national airspace. These test ranges are supposed to help
develop certification standards, air traffic requirements, and to
provide for verification of the safety of unmanned aircraft before
their integration into the national airspace.
What specifically does the FAA plan to test at these test ranges?
Answer. We will consider how well an applicant's research goals
align with the overarching goal of safely integrating UAS into the
National Airspace System. In order to be selected as a site operator,
the applicant must have a sound research plan consistent with the
minimum areas identified in the FAA Modernization and Reform Act of
2012.
Question. Where will these drones fly when they are being tested?
Will they be flown over populated areas?
Answer. The exact location of the test ranges will not be known
until the six test sites are selected. However, the selection process
takes into consideration the test site operator's ability to assure the
safety of people and property on the ground. The Screening Information
Request contains nine specific safeguards to protect persons and
property that must be addressed by the applicants. The FAA plans to
complete the test site selection process by the end of 2013.
Question. How can we be sure that these drones will not interfere
with manned aircraft traffic?
Answer. The evaluation will assess the applicant's ability to
protect the safety of manned aircraft operations in or near the test
range. Only sites with sound methods for protecting the safety of
manned aircraft and people and property on the ground will be selected.
The sites will not be authorized to operate until the FAA evaluates and
approves the safety system.
Question. I assume these test ranges will not be placed in highly
populated areas--where the issues of safety and privacy would be most
acute. Is that correct?
Answer. The exact location of the test ranges will not be known
until the six test sites are selected. However the selection process
takes into consideration the test site operator's ability to assure the
safety of people and property on the ground. The Screening Information
Request contains nine specific safeguards to protect persons and
property that must be addressed by the applicants.
Question. Sites all across the country, including two in
California, are competing to be these ``test ranges.'' Press reports
say there are as many as 50 applicants in 37 States. The solicitation
document (``Screening Information Request'') includes a number of
factors for the FAA to consider in deciding where to put these test
sites. I am deeply concerned that it accords no weight to whether an
applicant has a better approach to privacy. Instead, the FAA put out
its own privacy document for notice and comment. This simply says that
applicants will be required to have a ``privacy policy,'' without
specifying what (if anything) that policy must contain.
Why has privacy been omitted as a factor in choosing these test
ranges?
Answer. The selection criteria incorporate factors that Congress
directed the FAA to consider in the FAA Modernization and Reform Act:
geographic and climatic diversity, location of ground infrastructure,
and research needs. In March 2012, the FAA published a request for
comments in the Federal Register, and in April 2012, FAA hosted two
public webinars to obtain public input on the FAA proposed selection
criteria. Although there was substantial public participation, the FAA
did not receive comments advocating that privacy should be used as a
factor in choosing the test sites.
Subsequently, the FAA determined that it should address privacy
considerations at the six test sites. The FAA elected to do so by
proposing that the test sites comply with all applicable privacy laws
and policy that they establish privacy policies that are informed by
Fair Information Practice Principles--an approach that has been
successfully applied by Government agencies in other contexts.
Question. The FAA has already amended its solicitation document--
most recently on March 20. Will FAA amend the solicitation again to
make sure privacy is included as a factor in choosing the test sites?
If not, why not?
Answer. The FAA engaged our interagency partners (including NASA,
DOD, and DHS) and sought public input in the development of the FAA
proposed privacy approach for the UAS test sites.
Rather than address privacy issues in the solicitation, each
selected operator will be required to enter into an Other Transaction
Agreement (OTA) with the FAA, which will set out the terms and
conditions under which the entity will operate the UAS Test Site. The
agreement will include a requirement for each operator to publish and
comply with its privacy policy as it relates to the test sites.
Question. You testified at the hearing: ``we're not in a position
to make a determination of the content of the [privacy] plan, but what
we would require is that [a test range] develop one, that they make it
available to the public, and it is available for people to read and
understand.'' Thus, according to your testimony, a privacy policy could
essentially be devoid of content and still qualify. Why not--perhaps in
consultation with the Federal Trade Commission or privacy advocates--
make sure that the privacy policies adopted by the test ranges are
strong, not weak?
Answer. FAA will require the site operator to develop a privacy
policy that is informed by Fair Information Practice Principles.
The FAA has required each test site operator to be a public
(governmental) entity and to publicly post its privacy policy. This
promotes transparency and allows local stakeholders to ensure that the
public entity operating the site develops privacy policies that address
local concerns. The FAA believes that a public entity will be
responsive to local stakeholder concerns.
Question. You testified at the hearing: ``privacy is not something
Congress asked us to look at, nor is it something that the FAA has the
authority to regulate.'' But the portion of the 2012 FAA Modernization
and Reform Act directed at unmanned aircraft clearly recognizes that
unmanned aircraft have unique attributes that demand separate
attention. One of those attributes is the unique privacy risks they
pose. The law directs FAA to develop a ``comprehensive plan to safely
accelerate the integration of civil unmanned aircraft systems into the
national airspace system,'' which will then form the basis for final
regulations. A plan that is ``comprehensive'' would include the
paramount issue of privacy. In addition, the law lists a variety of
broadly-phrased issues (mostly related to safety) that must be
accounted for in the plan--but it also clearly says that these are the
absolute ``minimum'' of what the plan must contain. It does not prevent
FAA from considering the issue of privacy. Finally, the FAA's approach
to date seems inconsistent with your statement. So far, FAA has put out
a privacy document for notice and comment with respect to the six test
ranges. This is supposed to result in a privacy strategy incorporated
into FAA's agreement with the test ranges that are selected. Is it
truly FAA's view that it has no authority over the issue of privacy and
unmanned aircraft?
Answer. The FAA has authority in 49 U.S.C. 106(l)(6) to issue the
site operators an ``other transaction agreement'' (OTA) that will
contain the legally binding terms and conditions under which the entity
will operate the UAS site. That statute provides, in pertinent part:
``The Administrator is authorized to enter into and perform such .
. . other transactions as may be necessary to carry out the functions
of the Administrator and the Administration. The Administrator may
enter into such . . . other transactions with . . . any State,
territory, or possession, or political subdivision thereof . . . on
such terms and conditions as the Administrator may consider
appropriate.''
Due to the concerns relating to privacy at the test sites, the FAA
has proposed including terms in each OTA that will require site
operators to establish a privacy policy.
Although the authority in 49 U.S.C. 106(l)(6) allows the FAA to set
the terms under which the test sites will operate, it does not
authorize the FAA to establish privacy policy for manned or unmanned
aircraft operations generally.
unmanned aircraft systems airworthiness certificates
Question. There are many FAA regulations that apply to private
aircraft, which are called ``civil aircraft'' under FAA regulations.
These regulations include the requirement that a civil aircraft be
certified as airworthy, as well as the requirement that a civil
aircraft be operated by a licensed airman. However, a great many of
these regulations do not apply to ``public aircraft''--meaning those
operated by government agencies like a local police or fire department.
Thus, FAA regulation of police and other public aircraft generally is
quite limited. For example, as I understand it, public aircraft are not
required to have FAA airworthiness certificates, and those who fly them
are not required to have FAA airman certificates. This regulatory
approach is especially problematic with respect to drones, which raise
a whole host of safety and privacy issues that are not raised by
ordinary manned aircraft. Section 334 of the 2012 FAA Modernization and
Reform Act can be read to address this issue. It specifically provides
the FAA with authority over ``public unmanned aircraft systems,''
meaning those operated by governmental agencies. It specifically
directs the FAA to ``develop and implement operational and
certification requirements for the operation of public unmanned
aircraft systems.''
Can you confirm that FAA intends to require (1) airworthiness
certificates and (2) airman certificates with respect to the operation
of civil unmanned aircraft?
Answer. Acceptable standards for civil unmanned aircraft systems
are under development in concert with the Radio Technical Commission
for Aeronautics (RTCA) under the new special committee (SC) 228.
Requirements for certificate of authorization/experimental category
have already been published.
Question. Will these requirements--in particular the airman
certificate--be different for the operation of an unmanned aircraft,
which in many respects is unlike an ordinary manned aircraft?
Answer. The FAA will work with industry to develop standards for
licensing civil pilots of unmanned aircraft. FAA is in the process of
determining whether or not any regulatory changes are possibly needed.
Question. Does FAA believe it possesses the authority to require an
airworthiness certificate or an airman certificate with respect to
public unmanned aircraft operations under section 334 of the 2012 act?
If so, does FAA intend to use that authority?
Answer. The FAA intends to comply with the provisions of the FAA
Modernization and Reform Act's section 334 on Public Unmanned Aircraft
Systems. The current regulatory structure requires public operators to
make their own finding of compliance using their processes. FAA will
issue guidance regarding a public entity's responsibility when
operating an unmanned aircraft without a civil airworthiness
certificate issued by the FAA. FAA is in the process of determining
whether or not any regulatory changes are possibly needed.
government accountability office report on unmanned aircraft systems
Question. There remain serious concerns about whether drones can be
safely integrated into the national airspace. I direct your attention
to a September 2012 Government Accountability Office (GAO) report,
which noted the following:
``GAO Reported in 2008 that UAS could not meet the aviation safety
requirements developed for manned aircraft and that this posed several
obstacles to safe and routine operation in the national airspace
system. These obstacles still exist. . . .''
The report, beginning at page 14, goes into detail about the
serious issues that remain to be considered and addressed. As it notes:
``To date, no suitable technology has been deployed that would provide
UAS with the capability to sense and avoid other aircraft and airborne
objects.''
The report also cites other issues, including vulnerabilities in
command and control, unreliable UAS performance, the issues created by
the separation of pilot and aircraft, and the transition to Next
Generation Air Transportation System (NextGen).
Is there currently technology that would allow a drone to detect,
sense, and avoid other aircraft?
Answer. Air Force Research Labs and NASA have demonstrated new
technologies that are capable of detecting proximate aircraft and
avoiding them. A standard to allow the certification of these
technologies is under development by RTCA. The schedule for completion
of the standard is mid-2016.
Question. How are the other issues discussed in the GAO report
being addressed?
Answer. The FAA has tasked RTCA to develop standards for radios
used in command and control functions in the portion of the spectrum
allocated to safety of life uses. These standards will address many of
the issues identified in the GAO report and allow for civil aircraft
certification. The radio standards are scheduled for mid-2016.
Question. If sense-and-avoid technology is not in place and other
safety issues highlighted by GAO are not addressed, would FAA
nevertheless proceed with full integration of UAS into the national
airspace system?
Answer. The primary mission of the FAA is safety. The FAA will only
proceed with integration of UAS once safety issues have been
appropriately addressed.
armed drones
Question. The question of armed drones has, as you may know, gotten
a great deal of attention in Congress lately. One issue that appears
unsettled is whether current FAA regulations prohibit the arming of a
civilian aircraft, including a drone. Under FAA regulations, 14 CFR
section 91.15: ``No pilot in command of a civil aircraft may allow any
object to be dropped from that aircraft in flight that creates a hazard
to persons or property. However, this section does not prohibit the
dropping of any object if reasonable precautions are taken to avoid
injury or damage to persons or property.''
This regulation has been cited as authority for the point that FAA
would not allow a civil unmanned aircraft to have a weapon affixed to
it. Is this correct?
Answer. FAA Regulation 14 CFR section 91.15 is used to determine
the safety of installed equipment. This regulation currently prohibits
the use of weapons on an aircraft.
Question. Will FAA be more explicit in regulations that civil
unmanned aircraft may not have weapons affixed to them?
Answer. FAA Regulation 14 CFR section 91.15 is used to determine
the safety of installed equipment. This regulation prohibits the use of
weapons on an aircraft. However, FAA continues to evaluate whether or
not regulatory changes are needed.
grants-in-aid for airports
Question. The FAA's Grants-in-Aid for Airports, or the Airport
Improvement Program (AIP), is the primary FAA program investing in
runways, taxiways, and airport infrastructure. In fiscal year 2012,
Congress appropriated $3.35 billion. The President's budget proposes to
cut this to $2.9 billion.
The needs of our commercial airports substantially outpace these
resources. But a disproportionate amount of this program's funding (25-
35 percent) is spent at airports without any commercial service on
which almost all Americans travelers depend.
25 to 35 percent is spent at noncommercial airports even though
noncommercial aviation fuel taxes account for about 1 percent of the
total Airport and Airway trust fund revenues each year.
Unfortunately, the FAA's fiscal year 2014 budget proposes to
prioritize airports without commercial service for Airport Improvement
Program funds. The budget proposes that large hub airports cover their
infrastructure costs by raising passenger facilities charges.
Is it fair that only 65-75 percent of AIP funding is spent at
airports with commercial service when commercial aircraft account for
99 percent of revenue to the Airport and Airway Trust Fund?
Answer. This is fundamental to the safety, efficiency and
sustainability of the air transportation system. The perceived
disparity between the source of Trust Fund revenues and the types of
facilities it supports reflects the fundamental structure of the
overall U.S. system of airports. Since the early 1900s, Federal policy
has determined it is in the public interest to support a nationally
integrated aviation system citing the benefits derived from maintaining
a diverse geographic network of airports. Such a system facilitates
rural and remote access, supports military and law enforcement needs,
expedites emergency and disaster response, and ensures the timely
transport and delivery of commercial goods. Moreover, many of the
smaller, non-commercial facilities provide alternatives to airports
handling commercial passengers, thereby reducing congestion and delay
at commercial service airports. The functions supported by these
smaller airports are critical. In 2012, the FAA published a study
outlining a broad range of critical roles and functions the smaller
airports serve, from basic access to flight training, emergency
response, agricultural support, aerial firefighting, and many others.
The larger commercial airports, especially large hub airports, have
access to other means of capital, including, airport bonds and
passenger facility charges (PFCs), not available to the smaller
airports.
For more than 30 years, the Airport Improvement Program (AIP) has
helped State and local governments plan, develop, improve, and maintain
a broad-based system of integrated airport facilities. The AIP provides
capital funding to support 3,330 public use airports, heliports,
seaplane bases, and landing areas included in the federally-mandated
National Plan of Integrated Airport Systems (NPIAS).
Question. Would the FAA support a provision requiring that at least
75 percent of Airport Improvement Program Funding be spent at
commercial airports?
Answer. The FAA does not support either limiting the number of
airports funded or the reducing the minimum level of funding provided
to airports that are classified as non-commercial service airports.
Question. Which investment is likely to benefit the greatest number
of Americans: improving airports with commercial service or improving
airports without any commercial service?
Answer. The national integrated system needs to be maintained as a
whole, with both categories of airports (commercial and non-commercial)
able to meet the needs of the users that rely upon them, both directly
and indirectly. While people are most familiar with the commercial air
travel benefits offered at the 511 commercial service airports in the
United States, nearly 3,000 smaller general aviation airports form an
extensive airport network and make important social and economic
contributions to society. In 2009, non-airline operators at general
aviation airports flew an estimated 27 million flights for emergency
medical services, aerial fire-fighting, law enforcement and border
control, agricultural functions, flight training, time-sensitive air
cargo services, search and rescue, and business travel. Many of these
functions cannot be safely, efficiently, or economically supported at
larger commercial service airports.
In addition to providing unique general aviation benefits, non-
commercial service airports provide a critical safety and efficiency
complement to commercial service airports. Because of their sheer
number and geographic distribution, general aviation airports provide a
safety net to support commercial operators in the event of emergency
aircraft diversions, medical emergencies, deteriorating weather
conditions, or mechanical failures. In high-density metropolitan areas,
general aviation airports act as ``relievers'' for congested commercial
service airports by supporting high-volume activity by smaller and
slower aircraft.
In summary, it is crucial to our national life and economy that we
continue to support both commercial-service and general aviation
airports. The Airport Improvement Program has evolved over more than 30
years to achieve precisely that goal.
helicopter noise
Question. The fiscal year 2013 Senate Transportation, Housing and
Urban Development, and Related Agencies (THUD) report stated: ``The
Committee recognizes that the use of helicopters in Los Angeles County
produces quality of life and safety impacts, prompting requests for FAA
action. The Committee directs the FAA to solicit the views of
interested parties, including representatives of local communities,
regarding helicopter noise and safety issues in Los Angeles County no
later than 90 days after the enactment of this act. The committee
further directs the FAA to lead a collaborative effort with community
representatives, elected officials, helicopter operators, and other
affected interests to: (1) identify specific concerns with helicopter
operations, including noise; (2) evaluate options that would respond to
identified concerns including, but not limited to routes, operating
altitudes, and hovering practices; and (3) develop solutions to the
identified issues consistent with the FAA's statutory responsibilities.
Potential solutions should not restrict helicopter operations needed
for emergency, law enforcement, or military purposes. The committee
directs the FAA to submit a report to the House and Senate
Appropriations Committee within 12 months of enactment of this act
regarding the helicopter concerns in Los Angeles County that have been
identified, the progress in addressing these concerns including reasons
why some measures were not retained for further study, and the
mechanisms for implementing measures and monitoring their continuing
effectiveness.'' In response, FAA Regional Administrator Bill
Withycombe has held public hearings and is studying the problem. He has
committed to releasing a report in May 2013 evaluating a full set of
voluntary and regulatory options to reduce helicopter noise and address
safety issues. The report is a necessary first step. But it must be
followed by effective regulations.
During the hearing, we were able to discuss this. You indicated
that ``non-regulatory'' approaches to this problem were preferable
because they could be implemented more quickly. However, I am very
concerned that voluntary efforts are less effective than regulatory
approaches. For instance, on Long Island, New York, FAA established
voluntary routes for helicopters in 2008 without success. The FAA
finally completed regulations imposing mandatory routes in 2012.
If past voluntary efforts to curb helicopter noise above both Los
Angeles and Long Island failed, why does the FAA believe that ``non-
regulatory'' options will succeed above Los Angeles as a result of this
latest effort?
Answer. The FAA has had decades of success with fixed-wing
aircraft, voluntary noise abatement measures that can be applied to
noise abatement measures for helicopters. The FAA does not regard the
voluntary efforts in New York or Los Angeles as a failure. In fact, the
voluntary route along the north shore of Long Island, which was
developed with input from local helicopter operators and airports,
reportedly had a high rate of compliance and formed the basis for the
regulation adopted last year.
In contrast with the north shore of Long Island, the density of
land use and the diversity of helicopter activity in Los Angeles make
it difficult to identify noise abatement routes that would avoid
residential areas. Some efforts to revise Visual Flight Rules (VFR)
helicopter approach and departure tracks for Los Angeles-area airports
to minimize noise have not yet produced feasible noise abatement
routes. This reflects the challenges of safely routing aircraft in an
urbanized environment rather than a failure of the collaborative
process used to develop routes. These challenges make it more important
to fully engage both the residents and helicopter operators in
addressing noise issues in Los Angeles.
A significant positive development of the current Los Angeles
Helicopter Noise Initiative is that it has brought together community
representatives and helicopter operators to consider, in conjunction
with the FAA, specific noise-sensitive locations and helicopter
operating practices that contribute to noise concerns on a regional
scale. The group is committed to identifying measures that will provide
noise relief without degrading safety or eroding business
opportunities. This initiative has already identified targeted measures
that can provide noise relief to residents. The FAA recommends the
continued engagement of a robust local process and is prepared to
support such a process to pursue remedies that will reduce helicopter
noise, are responsive to community quality-of-life and economic
interests, and are consistent with National Airspace System safety and
efficiency.
Question. Which approach to helicopter noise is most likely to
reduce noise disturbance on the ground: regulatory or non-regulatory
options?
Answer. Success in reducing noise on the ground is directly related
to the availability of effective noise abatement procedures, rather
than the implementation mechanism. If a procedure can be designed to
minimize noise impacts on residential or other noise-sensitive areas, a
non-regulatory approach can provide just as much noise relief as a
regulatory approach.
The most effective and widely-accepted noise abatement measures are
those that are developed in collaboration with stakeholders and are
supported by local consensus. The FAA's experience is that voluntary
noise abatement procedures have a high degree of compliance when
operators can use them safely and efficiently. The current Los Angeles
Helicopter Noise Initiative identifies actions and flexible approaches
that offer the best opportunity to address helicopter noise issues
within the Los Angeles County.
______
Questions Submitted by Senator Frank R. Lautenberg
furloughs' impacts on facilities
Question. The airspace over New Jersey is among the most congested
in the country, with Newark Liberty Airport serving more than 33
million passengers each year. The Federal Aviation Administration (FAA)
has said it intends to apply sequestration in a way that prioritizes
safety and impacts the fewest air travelers. I have long been concerned
with the understaffing of air traffic controllers at Newark Liberty and
I am concerned the sequestration-imposed air traffic controller
furloughs will disproportionately impact this airport.
In applying furloughs for air traffic controllers, did you account
for the additional impact on facilities that are already understaffed
prior to sequestration, such as the Newark Liberty tower?
Answer. Yes. Individual facilities were able to determine how best
to implement the furloughs to minimize disruption based on their shift
scheduling and staffing requirements.
Question. Newark Liberty has the highest washout rate of any air
traffic tower in the country, so it recently had a simulator installed
to help trainee performance. Will furloughs impact training time on the
simulator?
Answer. The funding relief provided by the Reducing Flight Delays
Act of 2013 will enable the restoration of key support activities,
including training simulation at Newark Liberty.
operations in newark airport
Question. The fiscal year 2014 budget request proposes to transfer
the responsibility for staffing the exit lanes adjacent to passenger
screening checkpoints from the Transportation Security Administration
(TSA) to commercial airport authorities. This issue is of particular
concern to me because Newark Airport has seen numerous security
breaches over the past few years. In 2010, a man breached an exit lane
at Newark Airport without being screened and shut down the airport for
more than 6 hours, affecting 16,000 passengers around the world.
What impact could this transfer have on airport budgets and other
operations funded by airports?
Answer. The Transportation Security Administration determines the
staffing levels, qualifications, and operational requirements necessary
to meet Federal standards for airport exit lane staffing. TSA would be
in the best position to quantify the operational and other related
costs airports would assume in order to comply with TSA requirements.
The FAA would not be in a position to determine the impacts of such
decisions on a specific airport's operating budget.
Question. What challenges would this transfer in responsibility
present to Newark Airport and Atlantic City Airport?
Answer. The TSA and operators of Newark Airport and Atlantic City
are in the best position to provide specific details on the costs,
personnel, and related operating expenses that would result from the
transfer of specific TSA operations to the airport operator.
remote highjacking of aircraft
Question. A German security consultant recently claimed to have
developed technology that could be used to remotely hijack an airplane,
alleging that current security systems do not have adequate
authentication methods to ensure commands are from a legitimate source.
The FAA released a statement saying it is aware of this claim and has
said it does not pose a threat on actual commercial flights.
What steps has the FAA taken to determine and ensure this is not a
problem on commercial flights?
Answer. The FAA along with Honeywell, the U.S. manufacturer of the
system that was allegedly threatened, worked together to investigate
the technical threat immediately after learning about the allegation.
Honeywell quickly discerned and verified the methods and tools the
hacker used to create the experiment. The theoretical threat was based
entirely within a training system that runs on a desktop personal
computer (PC) whose hardware and software differed significantly from
actual aircraft equipment. A later version of the consultant's
experiment, which appeared in media coverage, used a mobile phone
application to communicate with his desktop PC. None of the experiments
involved communication with an actual airplane.
The FAA determined that the hacking technique described during the
recent computer security conference does not pose a flight safety
concern because it does not work on any actual, certified aircraft
hardware or software.
Question. When did the FAA become aware of this application?
Answer. The FAA first learned of the alleged threat on March 22,
2013, when the security consultant was preparing a briefing for a
computing conference in Amsterdam, the Netherlands. Our investigation
was completed before the conference began. Honeywell, the European
Aviation Safety Authority, and the German Police made the consultant
aware of the deficiencies in his allegations before the conference. The
consultant chose nevertheless to deliver his presentation on April 8,
2013.
Question. Will you commit to reviewing the potential threat and
updating me on steps being taken to address any deficiencies in our
security systems that could leave an aircraft open to an attack of this
nature?
Answer. We have reviewed the threat, determined it to be false,
and, as a result, plan no further action at this time. The FAA provided
this information to foreign civil aviation authorities and to the
public in press releases. Our investigation, using all information
available to us from the consultant and from Honeywell, has been
completed to our satisfaction, with no credible threat found. The
German consultant promised to provide more information to the FAA and
Honeywell in support of his claim, but none has been received.
Question. Are current laws, specifically on cyber security,
sufficient to address the nature of this threat?
Answer. The FAA believes current laws are sufficient to address the
nature of this threat. Aircraft certification regulations under title
14 Code of Federal Regulations, including special conditions we levy on
new aircraft programs which use networked or accessible computing
systems, require aircraft manufacturers to design security features
into their on-board systems. Numerous other Federal laws, outside the
scope of our certification mandate, would forbid and impose punishments
for the act by a hacker of attempting an attack against an aircraft.
contract weather observers
Question. Major airports, such as Newark Liberty, are required to
employ certified contract weather observers to ensure the accuracy of
weather reports provided to the airlines and the public. Due to
sequestration, we have heard concerns that the FAA may consider closing
down the contract weather observation program and transferring the
observation responsibilities to air traffic controllers.
Is the FAA proposing to eliminate the contract weather observation
program?
Answer. The fiscal year 2014 President's budget request includes
sufficient funding to continue the contract weather observation
program.
Question. If so, what would be the impact of transferring weather
observing responsibilities to air traffic controllers? Specifically,
what would the implications be at Newark Airport, given that the Newark
air traffic control tower is already understaffed?
Answer. The fiscal year 2014 President's budget request includes
sufficient funding to continue the contract weather observation
program.
next generation air transportation system
Question. To upgrade the air traffic control system, the FAA is
implementing the Next Generation Air Transportation System (NextGen) to
reduce gridlock, delays, and safety concerns through a satellite-based
system. The William J. Hughes Technical Center in New Jersey--the
Nation's premier facility for aviation research, development, and
testing--currently conducts NextGen research.
How will NextGen research and implementation be impacted by the
fiscal year 2014 budget?
Answer. The fiscal year 2014 NextGen investment portfolio totals
$1.002 billion, of which $928.1 million is allocated to Facilities and
Equipment (F&E), $61.4 million to Research, Engineering and Development
(RE&D), and $12.6 million to Operations activities.
The fiscal year 2014 NextGen F&E budget request is $928.1 million,
an increase of $65.3 million above the fiscal year 2012 enacted level.
This level of F&E program funding enables the agency to continue
support of near-term NextGen commitments. The funding allows the
migration of pre-implementation activities from NextGen-Reduced Weather
Impact solution set into an implementation program beginning in fiscal
year 2014.
The fiscal year 2014 NextGen RE&D budget request is $61.4 million,
an increase of $1.7 million above the fiscal year 2012 enacted level.
This allows us to continue the progress we've made in NextGen-specific
research into wake turbulence, human factors, and clean aircraft
technologies.
The fiscal year 2014 NextGen Operations budget request is $12.6
million; an increase of $0.2 million above the fiscal year 2012 enacted
level. This level of Operations activities continue to support the
dedicated full-time equivalents (FTEs) required to implement NextGen.
The NextGen investment portfolio enables the implementation of
Performance Based Navigation (PBN) procedures. The PBN is an aircraft
navigation capability which allow for greater operational flexibility.
An example is reducing the environmental footprint of greenhouse gas
emissions and noise created by the aviation industry.
Finally, the FAA NextGen capabilities continue to provide
significant improvement to the aviation industry; such as:
--System Wide Information Management (SWIM).--Allows operators to
make better-informed decisions that improve their efficiency.
This capability has been demonstrated by receiving surface
movement data through this single portal at 19 external
consumers.
--Automatic Dependent Surveillance-Broadcast (ADS-B).--Transform the
Nation's air traffic system by utilizing global satellites to
provide more precise location data. This capability has been
demonstrated by supporting surface advisory services at 24
airports.
______
Questions Submitted by Senator Mark Kirk
contract towers
Question. The Federal Aviation Administration (FAA or
Administration) issued an appeals process for contract towers slated
for closure and established four criteria for national security
concerns that the FAA would evaluate.
Did the Administration rank all the appeals in order of national
security importance? If not, how were decisions made regarding what met
the FAA's criteria? If they were ranked, please provide the list of
airports and towers in order of national security interest priority for
all airports that appealed the closure decision.
Answer. The FAA did not rank the airports by order of national
security. The FAA considered all of the input provided by the
Department of Defense (DOD) and other agencies during the review
process. FAA coordinated with the DOD, and the DOD provided FAA with
feedback on their top priorities. In addition, the FAA coordinated with
the Transportation Security Administration (TSA), the United States
Coast Guard (USCG), the United States Secret Service (USSS), the
Federal Bureau of Investigation (FBI) and the U.S. Marshal Service.
Question. Did FAA conduct a separate and distinct safety management
assessment for each impacted contract tower prior to the closure
announcements?
Answer. The FAA conducted a safety assessment for each tower prior
to implementation of any proposed change as required by FAA
regulations. In accordance with Air Traffic Organization (ATO) Order JO
1000.37, the Air Traffic Organization Safety Management System, and the
Air Traffic Organization Safety Management System Manual (SMS Manual):
all proposed changes to the National Airspace System (NAS) require
Safety Risk Management (SRM) evaluation. SRM is broadly applied to
changes that may affect the NAS to ``ensure that hazards are identified
and unacceptable risk is mitigated and accepted prior to the change.''
This includes ``any change to or modification of airspace;
airports; aircraft; pilots; air navigation facilities; air traffic
control (ATC) facilities; communication, surveillance, navigation and
supporting technologies and systems; operating rules, regulations,
policies, and procedures; and the people who implement, sustain, or
operate the system components.''
The level at which an SRM is conducted varies by organization,
change proponent and/or type of change. In some cases, SRM Panels will
perform SRM at the national level, and in other cases, SRM Panels will
perform SRM at the service area or local level. There are five phases
of a SRM safety analysis, which culminates in a Safety Risk Management
Document (SRMD). A SRMD describes the safety analysis for a proposed
change and documents the evidence to support whether the proposed
change is acceptable from a safety risk perspective. The SRMD is
intended to enable the relevant management officials to understand the
proposed change, its associated risks, and corrective steps taken (or
proposed) to reduce the initial and subsequent residual risks to an
acceptable level.
Prior to the decision or announcement to withdraw funds from
Federal contract towers, subject matter experts (SME) from the Air
Traffic Organization (ATO) and other FAA offices, namely Flight
Standards and Airports, conducted a thorough review of the safety
implications and determined that the FAA had adequate and long-standing
controls to address the risk associated with the potential closure of
towers and the transfer of airspace among facilities. In fact, all but
one of the identified towers close for several hours each day; so, the
FAA was assured that any potential closure or airspace transfer
procedures and processes are exercised daily; although a permanent
closure might require additional planning requirements. Additionally,
there are approximately 5,000 non-towered public use airports in the
United States with daily operations; which validates the safety of
those environments.
Following the determination that sufficient and long-standing
safety standards and processes exist to operate at both towered and
non-towered environments, ATO convened an SRM Panel from April 2-4, to
ensure that stakeholders had an opportunity to address hazards and/or
potential mitigations assuming a worst case scenario where all 149
towers would close and transition to non-towered operations; and, to
develop additional risk controls and, if needed, implement them before
any tower closures.
Question. Why did the FAA choose to cut specific towers completely
from the program instead of reducing contract support for the entire
program?
Answer. The FAA guiding principle, as we planned for sequester, was
to minimize the impact to the greatest numbers of passengers.
Therefore, initial plans impact smaller, lower activity locations more
significantly than locations serving larger blocks of passengers. The
criteria used identified towers that had less than 150,000 total
operations and 10,000 commercial operations annually.
sequester coordination
Question. You have obviously been working on a sequestration plan
for some time and have known the potential impacts have a cascading
effect. Air travel is a joint effort between several agencies including
FAA, TSA and Customs.
Given your travel prognosis, what type of coordination have you
done with TSA and Customs?
Answer. As part of sequestration planning efforts, numerous
operational components of the FAA, TSA, and Customs and Border
Protection (CBP) participated in several interagency telecons to
discuss possible trans-agency impacts and mitigation strategies.
Additionally, there was frequent contact between the FAA, TSA, and CBP
at the managerial and executive levels to exchange information and
discuss ways to synchronize mitigation efforts.
Question. If no coordination occurred, why didn't the
Administration work out a strategy in advance? There have been several
weeks of lead-up to this situation; why would you wait until the last
minute to release your plan to the industry and Congress?
Answer. As we have planned for and implemented measures to achieve
the mandatory sequester reductions, we have consistently shared the
potential impact that sequester could have on the National Airspace
System with Congress, the aviation sector, our employees, and the
traveling public. As early as February, we advised that we expected the
automatic cuts to have a significant adverse impact on the aviation
system and air travelers. We urged our stakeholders to work with us to
minimize these impacts to the extent possible. Our outreach included
written communications, congressional briefings, meetings, and
testimony on Capitol Hill.
______
Questions Submitted by Senator John Boozman
general aviation alternative fuels
Question. The administration included funding in the fiscal year
2014 budget for an Alternative Fuels for General Aviation program that
seeks to move the work of the Federal Aviation Administration (FAA) and
industry from research to a phase focused on coordinating and
facilitating the fleet-wide evaluation, certification and deployment of
an unleaded fuel in piston engine aircraft. Why is this program
important?
Answer. The intent of this initiative is to implement an unleaded
fuel for piston-powered aircraft engines to replace the current leaded
aviation gasoline (avgas) 100 low lead (100LL). The continuation of FAA
research is necessary to test, identify, and approve a replacement fuel
that can be safely used by as much of the existing fleet of aircraft as
possible. This program is important for human health impacts, fuel
security, and the continued viability of the general aviation
community.
Aviation gasoline (avgas) is a vital element of the piston engine
aircraft safety system. Approximately 167,000 aircraft in the United
States and 230,000 worldwide rely on 100LL avgas for safe operation.
100LL is the only remaining transportation fuel that contains the
additive tetraethyl lead (TEL). TEL has been used as an avgas additive
for decades to create the high octane levels required to prevent
detonation (engine knock) in high power aircraft engines. Operation
with inadequate fuel octane can result in engine failure in flight and
aircraft accidents.
The U.S. Environmental Protection Agency (EPA) is currently
evaluating the health and environmental impacts of lead emissions from
aircraft, and has identified that general aviation contributes to
possible violations of ambient air quality lead standards. Petitions
and litigation from environmental organizations have called for the EPA
to consider regulatory actions to eliminate or reduce lead emissions
from aircraft. These activities raise concerns about the continued
availability and use of leaded avgas.
Equipment manufacturers, owners and aircraft operators fear that
the uncertainty about the future availability of a safe fuel for their
airplanes is affecting the value of existing aircraft, impacting new
aircraft development, and affecting the growth of the general aviation
market. In response to the rapidly increasing concerns expressed by the
general aviation community regarding the continued availability of
100LL, the Unleaded AVGAS Transition Aviation Rulemaking Committee (UAT
ARC) was chartered on January 31, 2011, by the Federal Aviation
Administration (FAA) Administrator. The final report of the UAT ARC can
be found on the FAA Avgas Web site at the following URL: http://
www.faa.gov/about/initiatives/avgas/ in the Archived Articles section.
The UAT ARC recommended that the FAA collaborate with industry to
establish an unleaded avgas testing and evaluation program that would
facilitate the development, approval and deployment of a replacement
fuel for 100LL that would have the least possible impact on the
existing fleet of aircraft. It was recommended that this program rely
on the vast experience of the FAA William J. Hughes Technical Center to
perform this testing. The research to be conducted at this facility
will shift from developing a drop-in unleaded fuel to testing and
identifying the best possible replacement unleaded fuel.
In addition, section 910 of the 2012 FAA Modernization and Reform
Act specifies Research, Engineering and Development (RE&D) requirements
to facilitate the transition to unleaded avgas. The FAA has developed a
plan to implement the recommendations of the UAT ARC and will integrate
the fuel evaluation and testing program with the requirements of
section 910.
Finding a safe, high octane unleaded replacement for leaded avgas
is an ongoing technical challenge that can benefit greatly from
continued FAA research. Piston engine aircraft are used for many
purposes including business and personal travel, aerial surveys,
agriculture, firefighting, law enforcement, medical emergencies,
express freight, and instructional flying. The collective, continued
service of piston engine aircraft in an operationally safe manner is
essential. This program, to develop and promote an unleaded replacement
avgas, will address environmental concerns associated with leaded fuels
and provide a safe option for the general aviation industry.
certification process
Question. In the last FAA reauthorization, Congress included
language to identify some needed reforms in the certification process.
These reforms would focus FAA resources more effectively on safety
critical activities and also begin to address the certification backlog
that threatens the competitiveness of the U.S. aviation industry.
Are you moving forward with implementation of these reforms?
Answer. Yes. The Aircraft Certification Service (AIR) developed an
implementation plan, issued on August 13, 2012, to address the reforms
identified in section 312 of the FAA Modernization and Reform Act of
2012. The implementation plan addresses each of the six recommendations
developed from an industry and FAA assessment of the existing
certification and approval processes. As individual projects or
improvements from the implementation plan are completed, we will
measure how effective the change was in addressing specific goals. This
will allow us to iterate the process to continue the improvement until
the goal has been fully met.
Question. What is the most challenging aspect of these
improvements?
Answer. The Aircraft Certification Process Review and Reform
(ACPRR) Aviation Rulemaking Committee (ARC) submitted the following
recommendations to the Director of Aircraft Certification on May 22,
2012:
1. Development of Comprehensive Means To Implement and Measure the
Effectiveness of Implementation and Benefits of Certification
Process Improvements;
2. Enhanced Use of Delegation;
3. Integrated Roadmap and Vision for Certification Process Reforms;
4. Update Part 21 To Reflect a Systems Approach for Safety;
5. Culture and Change Management; and
6. Process Reforms and Efficiencies Needed for Other Aircraft
Certification Service (AIR) Functions.
Recommendations from the ARC were included in a report provided to
Congress on August 13, 2012. The FAA fully supports these
recommendations and developed a comprehensive implementation plan
consisting of 14 initiatives addressing each item. Implementation
actions began in 2012, in advance of the act requirement to begin
implementation no later than February 14, 2013.
There are two large and comprehensive rulemaking projects to update
part 21 and reorganize part 23. These are multi-year projects that
require extensive coordination within the Government and with industry.
Another challenge is to streamline the adoption of airworthiness
directives issued by other civil airworthiness authorities. This
initiative includes an evaluation of statutory impediments.
Question. Do you have the resources to manage these changes?
Answer. In fiscal year 2013 we have allocated sufficient resources
to initiate certification process reforms. The 2014 budget request also
fully supports this work. However, this is a difficult budgetary
environment. In fiscal year 2013 under sequestration, we instituted a
hiring freeze for FAA beginning March 1. Staffing levels can impact
progress on our implementation plan, and as a result we are closely
monitoring attrition and overall staffing levels.
contract towers
Question. Congress recently enacted legislation giving the FAA
flexibility to: (1) end furloughs that threaten to disrupt our economy
and destroy jobs that depend on air travel; and (2) prevent the planned
closure of 149 contract towers.
When will you announce your plan to carry out the clear,
unambiguous intent of Congress and forestall the planned closure of 149
towers that had been schedule to start on June 15, 2013?
Answer. Secretary LaHood announced on Friday, May 10, 2013, that
the Department of Transportation (DOT) has determined that the recently
enacted Reducing Flight Delays Act of 2013 will allow the FAA to
transfer sufficient funds to end employee furloughs and keep the 149
low-activity contract towers, originally slated for closure in June,
open for the remainder of fiscal year 2013.
business aviation and general aviation--economic impact and
opportunities
Question. Aviation manufacturing and businesses that utilize
general aviation (GA) are critical to economic opportunity in Arkansas
and across our country. General aviation pumps more than $1 billion
into the Arkansas economy every year, and our State is a proud home to
large and small manufacturers that serve the general aviation sector,
as well as other businesses that service and/or rely on GA aircraft.
Our country is a leader in aviation manufacturing and technology, and
this sector provides tremendous opportunities for growth and export. GA
is a diverse sector that includes medical transport, business aviation,
agricultural aviation, search and rescue, recreational flying, aerial
firefighting, air charter, bush flying, and a variety of other
activities.
I remain concerned about political rhetoric that castigates
business aviation and general aviation to score cheap political points.
Do you believe that business aviation is essential to economic strength
and job opportunities in our country, and do you believe that it should
not be unfairly targeted as an activity deserving disparate treatment
under Federal law?
Answer. The FAA recognizes the critical role general aviation (GA)
plays in supporting jobs and generating significant economic activity
for the country. FAA's latest aviation forecast sees growth in business
aviation demand over the long term driven by a growing U.S. and world
economy especially in the turbo jet, turboprop and turbine rotorcraft
markets. As the fleet grows, the number of general aviation hours flown
is projected to increase an average of 1.5 percent a year through 2033.
Support for GA is part of the administration's goal to invest in
the Nation's transportation infrastructure. The U.S. Department of
Transportation and the Federal Aviation Administration (FAA) continue
to invest in and improve GA and airports that serve GA through ongoing
initiatives including direct support to airports, Next Generation Air
Transportation System (NextGen) safety enhancements, and improving
access to data.
Question. Will you address the importance of general aviation to
our economy?
Answer. According to a study done by the FAA in 2011, general
aviation operations added nearly $39 billion and approximately 496,000
jobs to the United States economy. To support the Nation's GA airports,
FAA awards an average of $1 billion in Airport Improvement Program
(AIP) grants annually. These grants help GA airports fund safety,
capacity, standards and environmental improvements. Moreover, under the
State Block Grant Program, participating States are allowed to
administer AIP funds at non-primary airports. In addition, FAA has been
working with the GA community on an ongoing study to develop a
strategic plan for GA airports in the United States.
Through NextGen, the FAA has demonstrated its commitment to
ensuring improved access and level of service for GA operators. For
example, with the implementation of new technologies and procedures for
the Wide Area Augmentation System (WAAS), and Localizer Performance
with Vertical Guidance (LPV), GA operators have unprecedented access to
airports where no ground-based instrument landing systems exist. Using
these technologies and procedures, GA aircraft can land at airports
even when visibility is limited. As of February 2012, there were nearly
2,800 WAAS LPV approach procedures to more than 1,400 airports
throughout the United States.
Enhancing safety in GA operations is an FAA priority and is
critical to supporting the growth of GA. Reducing the fatal accident
rate for GA is one of the agency's strategic goals. We are also
improving tracking of aircraft position and providing GA operators with
tools that provide increased awareness of weather, terrain, aircraft
and other conditions in the national airspace. Through another NextGen
technology, Automatic Dependent Surveillance-Broadcast (ADS-B), GA
pilots will have greater situational awareness.
To further enhance access and capabilities of GA aircraft and
pilots, the FAA is currently developing technologies and policies that
make FAA data more accessible to GA pilots through Internet-based
portals. These portals support open government initiatives and will
enable individual pilots to access new sources of information. The FAA
is also making data and services more accessible through the use of new
tools like the Apple iPad, which, when used as an Electronic Flight
Bag, can be used for viewing navigational charts and approaches to
airports.
Through these initiatives, FAA continues its active support of the
GA industry.
user fees
Question. The administration's use-fee proposal could potentially
levy a fee on aircraft used to conduct aerial application activities by
thousands of dollars per day, since they take off and land frequently
to treat farmers' crops. This would cause great harm to farmers, aerial
applicators, and food consumers.
Are you concerned about the impact this proposal would have on
agricultural aviation and other users that require frequent take offs
and landings?
Answer. This proposal would create a per flight fee by aviation
operators who fly in controlled airspace. Military aircraft, public
aircraft, recreational piston aircraft, air ambulances, aircraft
operating outside of controlled airspace, and Canada-to-Canada flights
would be exempted. Aircraft conducting aerial application activities
and that fly outside of controlled airspace, like those used in
agricultural aviation, would not pay the flight surcharge fee.
agricultural aviation and low-level airspace safety issues
Question. Agricultural aviation is extremely important to many
Arkansas farmers. Do you recognize the importance of this niche sector
in the aviation community, and will you commit to work with
stakeholders and with my office to address the unique needs and
concerns of this sector?
Answer. The Federal Aviation Administration recognizes the vital
link between the agricultural aviation industry and American farmers,
including those in the State of Arkansas. In order to communicate with
this specific industry segment, we have participated in meetings hosted
by the Arkansas Agricultural Aviation Association. In addition, we have
a long-standing partnership with the director for the Arkansas
Department of Aeronautics, including meetings on at least a quarterly
basis to exchange updates on aviation topics of interest at the State
and/or Federal levels.
At the regional level, our staff performs regularly scheduled
outreach efforts with congressional staff to address any identified
State-level issues of interest and share updates on agency efforts
related to local areas of interest including NextGen, Unmanned Aircraft
Systems, and obstacle evaluation, marking and lighting efforts.
Question. The FAA is rightly working to integrate Remotely Piloted
Aircraft (RPAs) into the airspace. As this work continues, what is the
Administration doing to ensure other, long-standing users of low-level
airspace, such as aerial applicators, are protected from mid-air
collisions and other operations that may prevent them from safely and
effectively treating crops, protecting the public health, and combating
forest fires at low levels?
Answer. The integration of Unmanned Aircraft Systems (UAS) into the
National Airspace System (NAS) will require the FAA to carefully
evaluate safety impacts on current NAS users, regardless of their
altitude, size, or mission. Once the FAA has evaluated the safety
impacts for a specific type of UAS operation, we will develop the
appropriate regulatory requirements and risk mitigation strategies. We
will ensure that UAS operations do not diminish safety or increase risk
to persons or property in the air or on the ground.
Question. What is the status of the feasibility study FAA is
conducting on the development of a database that would show the
location of free-standing and guy-wired towers below 200 feet?
Answer. The FAA has completed the analysis as directed in section
219 of the FAA Modernization and Reform Act (Public Law 112-95). Our
report is in final executive review and will be delivered to Congress
in the near future.
Question. Does FAA believe it possesses the authority to require an
airworthiness certificate or an airman certificate with respect to
public unmanned aircraft operations under section 334 of the 2012 act?
If so, does FAA intend to use that authority?
Answer. The FAA intends to comply with the provisions of the FAA
Modernization and Reform Act's section 334 on Public Unmanned Aircraft
Systems. The current regulatory structure requires public operators to
make their own finding of compliance using their processes. FAA will
issue guidance regarding a public entity's responsibility when
operating an unmanned aircraft without a civil airworthiness
certificate issued by the FAA. FAA is in the process of determining
whether or not any regulatory changes are possibly needed.
Question. I am told that agricultural aviation interests have
requested that the FAA expand Advisory Circular (AC) No. 70/7460-1 to
include marking guidance not just for meteorological evaluation towers
under 200 feet but for all towers--freestanding and guy-wired. Is the
FAA considering this expansion of the AC?
Answer. Requirements to file notice under 14 CFR part 77 generally
do not apply to structures at heights lower than 200 feet unless they
are close to an airport environment. Meteorological evaluation towers
(METs) under 200 feet do not meet the provisions of part 77 and the FAA
does not conduct aeronautical studies to determine whether these
structures are obstructions or whether they adversely impact air
navigation. However, the FAA acknowledges that METs in remote, rural
agricultural areas may be difficult to see by low-level agricultural
flights operating under visual flight rules. It was the combined
factors of these structures being in rural, remote areas, the speed of
their construction, and skeletal composition that led to additional,
limited marking guidance. Guidance was not applicable to METs that are
erected in urban areas and far removed from rural agricultural spraying
operations.
The request to expand marking guidance for structures other than
METs is not based on safety of flight issues. The guidance used for
METs is not feasible or warranted for other structures under 200 feet.
Other structures do not carry the same visibility concerns of skeletal
METs, and additional marking guidance may cause an undue burden on the
public.
SUBCOMMITTEE RECESS
Senator Collins. This hearing is recessed.
On next Thursday, April 25, at 10 a.m., we will hold a
hearing on the Federal Housing Administration. Thank you all.
[Whereupon, at 11:56 a.m., Thursday, April 18, the
subcommittee was recessed, to reconvene at 10 a.m., Thursday,
April 25.]
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
APPROPRIATIONS FOR FISCAL YEAR 2014
----------
TUESDAY, JUNE 4, 2013
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 2:30 p.m., in room SD-138, Dirksen
Senate Office Building, Hon. Patty Murray (chairman) presiding.
Present: Senators Murray, Collins, and Boozman.
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
STATEMENTS OF:
HON. CAROL GALANTE, COMMISSIONER AND ASSISTANT SECRETARY FOR HOUSING,
FEDERAL HOUSING ADMINISTRATION
HON. DAVID A. MONTOYA, INSPECTOR GENERAL, OFFICE OF INSPECTOR GENERAL
OPENING STATEMENT OF SENATOR PATTY MURRAY
Senator Murray. The subcommittee will come to order.
Senator Collins will be here in just a few minutes, but we'll
go ahead and get started.
But before we do begin, I do want to just take a moment to
remember Senator Frank Lautenberg. He was a passionate public
servant who wasn't afraid to fight for what he believed in. It
goes without saying he was a wonderful member of this
subcommittee, and he was actually former chairman of this
subcommittee and added a really important voice to many of our
housing and transportation issues. He was a tireless advocate
for his State and for policies that protected Americans.
He fought hard to make sure we funded Amtrak and banned
smoking on airlines and raised the drunk driving standard. We
owe him a tremendous debt. So I just wanted to start today by
remembering him and letting his family know how much all of us
have them in our thoughts and prayers.
During this hearing this afternoon, we will hear from
Federal Housing Administration (FHA) Commissioner Carol Galante
and Housing and Urban Development (HUD) Inspector General David
Montoya.
I want to thank both of you for your patience with
scheduling this hearing. Both Senator Collins and I had
conflicts and had to move this around, and I really appreciate
your coming and being here today. FHA is an important issue and
your input is really valuable to this subcommittee. So thank
you for accommodating our changes and welcome to both of you.
It has been almost 6 years since the housing market
collapsed. In the lead-up to that crisis, home prices were on a
seemingly unstoppable upward climb while home ownership became
a new reality for millions of Americans. But the promises made
to homeowners and investors alike were too good to be true, and
when the risks associated with these mortgages began to
materialize, it was too late to stop the damage.
When defaults and foreclosures skyrocketed, the impact was
felt not only by the defaulting homeowners but by entire
communities that watched their home values plummet, by
investors who bet on these products and lost, and, of course,
by older Americans who saw the value of their retirement
savings tumble. During this crisis, FHA quickly stepped in to
ensure a functioning mortgage market, and there's no question
that intervening in the faltering housing market exposed FHA to
greater risk.
FHA INSURANCE FUND
But FHA took on this risk in order to support the broader
housing market, and without its support, the cost to the market
and to taxpayers today would likely have been far higher.
Today, we are finally starting to see signs of recovery. New
homes are being built. Home sales are up. Foreclosures are
down, and home prices are now beginning to rise.
But we are still dealing with the fallout from the housing
market's boom and bust. While some homeowners are feeling
relief from increased home prices, this is not true for
everyone. I still hear from families that are underwater in
their homes and unable to refinance. They feel trapped, unable
to move to a new job or to a neighborhood with a better school.
Unable to refinance at today's historically low rates, they
remain saddled with excessive mortgage payments, money that
could be better spent on family and at local businesses or
saved for their kids' college education.
We are acutely aware of the consequences for FHA and
possibly the taxpayer, as the Mutual Mortgage Insurance (MMI)
Fund has sustained significant losses in recent years. The
President's fiscal year 2014 budget indicates that FHA may
require taxpayer funding to cover the losses to its mutual
mortgage insurance fund this year. This would represent the
first time the fund would need taxpayer funding in its history.
In the past 3 years, HUD has taken numerous steps to
strengthen the fund. It has raised insurance premiums five
times, it tightened its standards, and it placed new
requirements on program participants. Yet the biggest drain on
the fund continues to be those older loans originated at the
height of the housing market when lending standards and program
rules were too lax.
So we must ensure that HUD has the authority it needs and
is taking all the steps necessary to mitigate losses from those
loans. This includes recovering money from servicers and
lenders that did not follow HUD rules and regulations. The $25
billion settlement that 49 States, the District of Columbia,
and the Federal Government reached last year with the five
largest servicers resulted in $684 million being returned to
Federal housing programs.
But the work determining responsibility for losses didn't
stop with that settlement. FHA's Office of Inspector General
(OIG) and the Department of Justice continue to investigate
lenders to ensure that FHA is not paying for losses on loans
that should never have been made.
As a result, there have already been five further
settlements, bringing the total amount returned to the MMI Fund
to over $1.1 billion. I want to thank both the Commissioner and
the Inspector General for the important work they're doing on
that issue. The taxpayer should not have to pay for losses of
lenders who did not follow the rules.
We also need to ensure that the terms of settlement
agreements are being honored. And I am concerned by recent
reports that some of the banks may not be providing the relief
to borrowers that they committed to under the terms of the
settlement. So the work to hold the lenders accountable
continues.
HOME EQUITY CONVERSION MORTGAGE
While we must hold lenders accountable for not following
the rules, we must also make sure that we have the right rules
in place. As we discussed with the Secretary when he testified
before us several weeks ago, the Home Equity Conversion
Mortgage, or HECM, requires careful examination. This product
can be a good option for seniors who want to stay in their
homes as they get older. But the recent crisis has exposed
serious flaws in this program, and it is clear that as
currently designed, the program is not working for taxpayers
or, in many cases, for borrowers.
Some seniors and their families did not fully understand
the product and are now facing foreclosure. These loans have
resulted in significant losses to the MMI Fund. In fact,
without the HECM mortgages, FHA's insurance fund would have a
positive balance. HUD has suggested steps Congress can take to
strengthen the program. I know the Inspector General's Office
has studied this subject and suggested improvements as well.
So I look forward today to a discussion on how we can work
together to preserve a responsible product for people who need
it while ending the practices and policies that add unnecessary
risks to borrowers and to the FHA's insurance fund.
In addition to HECM changes, HUD, its Inspector General,
and the Government Accountability Office (GAO) have identified
other steps that can be taken to strengthen FHA. For example,
HUD has sought additional enforcement authority to ensure that
unscrupulous lenders can't continue to originate FHA-insured
loans. And the Inspector General has recommended changes to how
HUD manages loans that experience early default.
But it's also important to recognize many of these changes
can't be made quickly or at all without the help of Congress.
So we need to hear from both of you about what happens if
Congress doesn't provide the necessary legislative authority to
make additional program changes.
We must also continue to ensure effective management of
FHA's programs and operations. For many years, staffing
challenges and outdated information systems have compromised
effective management of FHA programs. HUD must have staff with
the necessary skills to monitor its programs and understand the
risks in both the market and its portfolio.
In recent years, this subcommittee has provided HUD with
resources to address its staffing needs, including funding for
the recently established risk office. Since 2010, Congress has
also invested millions of dollars in upgrading FHA's
information technology (IT) systems to increase its efficiency
and to better detect risk.
The success of the FHA Transformation IT Project is
critical to FHA's short- and long-term health. This
subcommittee is closely following the management of this
project, so I want to discuss its current status as well as its
future.
While HUD has made progress in improving its information
systems and filling important positions, sequestration creates
new challenges for FHA. HUD will be forced to make difficult
decisions about which of its IT projects will continue to go
forward and which ones will be slowed down or even canceled.
Staff will be furloughed, and some positions lost through
attrition may not be filled.
SEQUESTRATION
The broad consequence of sequestration cuts across the
Government could also impact FHA. Sequestration threatens our
fragile economy and housing market. The financial position of
the MMI Fund benefits as the housing market and economy
improve, but it will also suffer if our economy slows. So we
have to continue to work for a fair and balanced solution that
provides certainty to our Federal agencies and to the American
people.
The budget we recently passed in the Senate provides a path
forward that balances responsible spending cuts with necessary
investments. I look forward to working with my colleagues in
both the House and Senate soon, I hope, to enact a responsible
budget compromise.
PREPARED STATEMENT
Ms. Galante and Mr. Montoya, both of you serve in important
roles as we continue to deal with the consequences of the
housing crash and think through the future of FHA and America's
housing finance system, and I look forward to our discussion
today.
[The statement follows:]
Prepared Statement of Senator Patty Murray
lautenberg remembrance
Before we begin, I'd like to take a moment to join my colleagues in
remembering Senator Frank Lautenberg. Frank was a passionate public
servant who was not afraid to fight and vote for what he believed in.
As a member of this subcommittee and former Chairman, Frank added
an important voice on the many housing and transportation issues we
consider.
He was a tireless advocate for his State and for policies that
protected the safety of Americans, whether it was ensuring funding for
Amtrak, banning smoking on airlines or strengthening the drunk driving
standard. Frank gave everything he had to public service and those who
served with him know that it gave him all the satisfaction in the
world.
He will be missed by all those who served with him on this
committee and here in the Senate.
hearing introduction
This afternoon we will hear testimony from Federal Housing
Administration (FHA) Commissioner Carol Galante and Department of
Housing and Urban Development (HUD) Inspector General David Montoya.
I want to thank Commissioner Galante and Inspector General Montoya
for their patience with the scheduling of this hearing. Both Senator
Collins and I had scheduling conflicts that made it necessary to
reschedule. But the FHA is an important issue and your input is
valuable to this subcommittee, so thank you for accommodating the
changes and welcome.
It has been almost 6 years since the housing market collapsed. In
the lead up to the crisis, home prices were on a seemingly unstoppable
upward climb while homeownership became a new reality for millions of
Americans.
But the promises made--to homeowners and investors alike--were too
good to be true. And when the risks associated with these mortgages
began to materialize, it was too late to stop the damage. When defaults
and foreclosures skyrocketed, the impact was felt not only by
defaulting homeowners, but also by entire communities that watched
their home values plummet, investors who bet on these products and
lost, and older Americans who saw the value of retirement savings
tumble.
During this crisis, FHA quickly stepped in to ensure a functioning
mortgage market. And there is no question that intervening in the
faltering housing market exposed FHA to greater risk. But FHA took on
this risk in order to support the broader housing market, and without
its support, the cost to the market and to taxpayers today would likely
be far higher.
Today, we are finally starting to see signs of recovery:
--new homes are being built;
--home sales are up;
--foreclosures are down; and
--home prices are rising.
But we are also still dealing with the fallout from the housing
market's boom and bust. While some homeowners are feeling relief from
increased home prices, this isn't true for everyone. I still hear from
families that are underwater in their homes and unable to refinance.
They feel trapped, unable to move for a job or to a neighborhood with a
better school. Unable to refinance at today's historically low rates,
they remain saddled with excessive mortgage payments--money that could
be better spent on family and at local businesses, or saved for the
kids' college education.
We are acutely aware of the consequences for FHA--and possibly the
taxpayer as the Mutual Mortgage Insurance (MMI) Fund has sustained
significant losses in recent years.
losses to the mutual mortgage insurance fund
The President's fiscal year 2014 budget indicates that FHA may
require taxpayer funding to cover the losses to its Mutual Mortgage
Insurance Fund this year. This would represent the first time that the
fund would need taxpayer funding in its history. In the past 3 years,
HUD has taken numerous steps to strengthen the fund. It has:
--raised insurance premiums five times;
--tightened its standards; and
--placed new requirements on program participants.
Yet the biggest drain on the fund continues to be those older loans
originated at the height of the housing market when lending standards
and program rules were too lax. So we must ensure that HUD has the
authority it needs and is taking all of the steps necessary to mitigate
losses from these loans. This includes recovering money from servicers
and lenders that did not follow HUD rules and regulations. The $25
billion settlement that 49 States, the District of Columbia, and the
Federal Government reached last year with the five largest servicers
resulted in $684 million being returned to Federal housing programs.
But the work determining responsibility for losses did not stop with
that settlement.
FHA, HUD's Office of Inspector General, and the Department of
Justice continue to investigate lenders to ensure that FHA isn't paying
for losses on loans that should never have been made. As a result,
there have already been five further settlements bringing the total
amount returned to the MMI Fund to over $1.1 billion.
I want to thank both the Commissioner and the Inspector General for
the important work they are doing on this issue. The taxpayer should
not have to pay for losses of lenders who didn't follow the rules. We
also need to ensure that the terms of settlement agreements are being
honored. I am concerned by recent reports that some of the banks may
not be providing the relief to borrowers they committed to under the
terms of the settlement. So the work to hold lenders accountable
continues.
home equity conversion mortgage loans
While we must hold lenders accountable for not following the rules,
we must also make sure that we have the right rules in place. As we
discussed with the Secretary when he testified before us several weeks
ago, the Home Equity Conversion Mortgage, or HECM, requires careful
examination. This product can be a good option for seniors who want to
stay in their homes as they get older. But the recent crisis has
exposed serious flaws in the program.
And it is clear that, as currently designed, the program is not
working for taxpayers, or in many cases, for borrowers. Some seniors
and their families didn't fully understand the product and are now
facing foreclosure. These loans have resulted in significant losses to
the MMI Fund. In fact, without HECM mortgages, FHA's insurance fund
would have a positive balance.
HUD has suggested steps Congress can take to strengthen the
program. I know the Inspector General's Office has studied this subject
and suggested improvements as well. So I look forward to a discussion
on how we can work together to preserve a responsible product for
people who need it, while ending the practices and policies that add
unnecessary risk to borrowers and FHA's insurance fund.
other areas of risk
In addition to HECM changes, HUD, its Inspector General, and the
Government Accountability Office (GAO) have identified other steps that
can be taken to strengthen FHA. For example, HUD has sought additional
enforcement authorities to ensure that unscrupulous lenders can't
continue to originate FHA insured loans. And the Inspector General has
recommended changes to how HUD manages loans that experience early
default.
But it is also important to recognize that many of these changes
can't be made quickly, or at all, without the help of Congress. So we
need to hear from both of you about what happens if Congress does not
provide the necessary legislative authority to make additional program
changes.
fha operations
We must also continue to ensure effective management of FHA's
programs and operations. For many years, staffing challenges and
outdated information systems have compromised effective management of
FHA programs. HUD must have staff with the necessary skills to monitor
its programs and understand the risks in both the market and its
portfolio. In recent years, this subcommittee has provided HUD with
resources to address its staffing needs, including funding for the
recently established Risk Office.
Since 2010, Congress has also invested millions of dollars in
upgrading FHA's information technology (IT) systems to increase its
efficiency and better detect risk. The success of the FHA
Transformation IT project is critical to FHA's short and long-term
health. This subcommittee is closely following the management of this
project, so I want to discuss its current status, as well as its
future.
sequestration
While HUD has made progress in improving its information systems
and filling important positions, sequestration creates new challenges
for FHA. HUD will be forced to make difficult decisions about which of
its IT projects will continue to go forward and which ones will be
slowed down, or even canceled. Staff will be furloughed and some
positions lost through attrition may not be filled.
The broad consequences of sequestration cuts across the Government
could also impact FHA. Sequestration threatens our fragile economy and
housing market. The financial position of the MMI Fund benefits as the
housing market and economy improve, but it will also suffer if our
economy slows.
So we must continue to work for a fair and balanced solution that
provides certainty to our Federal agencies and to the American people.
The budget we recently passed in the Senate provides a path forward
that balances responsible spending cuts with necessary investments. I
look forward to working with my colleagues in both the House and Senate
to enact a responsible budget compromise.
closing
Ms. Galante, Mr. Montoya, both of you serve in important roles as
we continue to deal with the consequences of the housing crash and
think through the future of FHA and America's housing finance system. I
look forward to our discussion today.
With that, I am delighted to be joined by my colleague,
Senator Collins, and will turn to her for an opening statement.
STATEMENT OF SENATOR SUSAN M. COLLINS
Senator Collins. Thank you very much, Madam Chairman. Thank
you for holding this important hearing on the Federal Housing
Administration and the future of the housing finance market. I
join you in welcoming Commissioner Galante and Inspector
General Montoya before the subcommittee this afternoon.
The administration has made several announcements regarding
our housing policies and programs. Yet there is much more that
must be done to stabilize the housing market and to
reinvigorate private sector participation. HUD faces many
challenges in balancing the goal of strengthening responsible
home ownership while minimizing the financial risk to the FHA
and to the taxpayer.
Eventually, FHA should play a more limited role, in my
judgment, in the mortgage market and help encourage the private
sector to reassert its primacy. Nevertheless, I believe there
will always be some role for the FHA to play. Since its
inception, FHA has provided mortgage insurance for more than 41
million single family home mortgages and 53,000 multifamily
mortgages.
FHA continues to partner with current and prospective
homeowners during these difficult economic times. In addition
to helping FHA program participants refinance at lower interest
rates, FHA also assists non-FHA homeowners in refinancing
untenable mortgages. A financially sound FHA is an essential
component in the recovery of the housing market. The weakening
of our housing sector over the past several years has had a
tremendous impact on families and communities throughout the
Nation. The housing market is slowly coming back, but a
sustained recovery is still uncertain.
The agency's role has dramatically expanded since the
beginning of this crisis. Prior to the housing collapse, FHA
accounted for approximately 3 percent of the single family
housing market, reaching upwards of 21 percent in the year
2010. I am pleased to hear that HUD's FHA market share
continues to decline as the housing market recovers and that
we're now at about 14 percent of market share.
It is, however, troubling to me that year after year, FHA
is unable to meet its statutory requirement of maintaining a 2-
percent capital reserve ratio. The President's fiscal year 2014
request shows that FHA anticipates drawing on its permanent
indefinite budget authority with Treasury for $943 million
starting this fiscal year to hold in reserve against expected
future losses. If FHA does draw funds from Treasury, it will
mark the first time that it has ever needed to take this
action.
While HUD has taken a number of steps since January of this
year to improve the program, I am concerned about the need to
draw this level of funding at the end of the fiscal year. This
is attributed to the poor performance of the HECM loans due to
borrowers' longevity, house prices declining over recent years,
as well as a failure to pay taxes and insurance. We need to
ensure that borrowers, especially seniors, are not taken
advantage of and are able to make informed decisions regarding
their mortgages, both because of the impact on them, but also
the impact on the fund.
PREPARED STATEMENT
These are not easy issues to resolve, but they are
critically important to our Nation's long-term economic health.
I remain concerned that we must reform our present housing
finance programs, and in doing so, we must remain mindful of
the need to limit the exposure of taxpayers to additional
financial losses.
I look forward to working with the chairman, the other
subcommittee members, and both of you on these important
issues.
Thank you.
[The statement follows:]
Prepared Statement of Senator Susan M. Collins
Chairman Murray, thank you for holding this important hearing on
the Federal Housing Administration (FHA) and the future of the housing
finance market. I join you in welcoming Commissioner Galante and
Inspector General Montoya before our subcommittee this morning.
The Administration has made several announcements regarding
existing housing programs, yet there is much more that must be done to
stabilize the housing market and reinvigorate private sector
participation.
The Department of Housing and Urban Development (HUD) faces many
challenges in balancing the goal of strengthening responsible
homeownership while minimizing the financial risk to FHA and the
taxpayer. Eventually, FHA should play a more limited role in the
mortgage market and help encourage the private sector to reassert its
primacy.
Since its inception, FHA has provided mortgage insurance for more
than 41 million single-family home mortgages and 53,000 multifamily
mortgages.
FHA continues to partner with current and prospective homeowners
during these difficult economic times. In addition to helping FHA
program participants refinance at lower interest rates, FHA also
assists non-FHA homeowners in refinancing untenable mortgages. A
financially sound FHA is an essential component in the recovery of the
housing market.
The weakening of our housing sector over the past several years has
had a tremendous impact on families and communities throughout the
Nation. The housing market is slowly coming back, but a sustained
recovery is still uncertain.
The agency's role dramatically expanded since the beginning of the
housing crisis. Prior to the crisis, FHA accounted for approximately 3
percent of the single family housing market; reaching upward of 21
percent in 2010. I am glad to hear that HUD's FHA market share
continues to decline as the housing market recovers, with just below 14
percent of the market share.
It is troubling that year after year, the FHA is unable to meet its
statutory requirement of maintaining a 2 percent capital reserve ratio.
The President's fiscal year 2014 request shows that FHA anticipates
drawing on its permanent indefinite budget authority with the
Department of the Treasury for $943 million during fiscal year 2013 to
hold in reserve against expected future losses. If FHA does draw funds
from Treasury, it will be the first time that it has ever needed to
take this action. While HUD has taken a number of steps since January
of this year to improve the program, I am concerned about the need to
draw this level of funding at the end of the fiscal year. This is
attributed to the poor performance of the home equity conversion
mortgage (HECM) loans due to borrowers' longevity, home prices
declining over recent years, as well as failure to pay taxes and
insurance.
We need to ensure that borrowers, especially seniors, are not taken
advantage of and are able to make informed decisions regarding their
mortgages.
These are not easy issues to resolve, but they are critically
important to our Nation's long-term economic health. I remain concerned
that we must reform our present housing finance programs. In doing so,
we must remain mindful to limit taxpayers' exposure to additional
financial losses.
I look forward to working with you on these important issues.
Senator Murray. Thank you very much.
With that, Ms. Galante, we'll begin with you.
STATEMENT OF HON. CAROL GALANTE
Ms. Galante. Thank you, Chairman Murray and Ranking Member
Collins. I appreciate the opportunity to testify today on the
fiscal year 2014 budget proposal.
Before I begin, I did want to take a moment to echo your
comments and Secretary Donovan's statement in offering my
condolences on the passing of Senator Lautenberg. As a Member
of this body, he was a champion of preserving access to
affordable housing for all Americans. I join you in mourning
his passing.
I also want to thank HUD's Inspector General, David
Montoya, and his entire staff for their dedication and
partnership as we work to protect FHA and taxpayers.
FHA has played a significant role in lessening the severity
of the financial crisis and contributing to our Nation's
economic recovery, temporarily increasing its market share to
ensure stability and preserve access to credit. However,
playing this role during the crisis was not without an impact
to our portfolio, requiring decisive action to strengthen FHA.
The Mutual Mortgage Insurance Fund is already seeing strong
results from our efforts to improve lender oversight,
strengthen credit policies, increase premiums, improve loss
mitigation and asset management, and establish a risk
management office and portfolio surveillance capability. FHA's
new books of business are the strongest in agency history.
FHA SHORTFALL
However, due to loans insured during the crisis as well as
stress caused by the HECM reverse mortgage program, the 2014
budget projects that FHA capital reserve will need support from
the Treasury. The shortfall is estimated at $943 million. But,
as you know, the level of support from Treasury will not be
known until the end of the fiscal year. Second, this amount
would be added to over $30 billion FHA already has in reserves.
The fund's performance has continued to improve, and if
losses from the HECM program are excluded, our actions and the
ongoing recovery would leave the capital reserve at positive $4
billion. We look forward to working with Congress on several
legislative requests that will further strengthen the fund,
increasing our ability to hold lenders accountable, improving
recoveries on defaulted loans, and allowing FHA greater ability
to respond quickly to risks as they emerge.
One of these requests, granting FHA the explicit authority
to make changes to the HECM program via mortgagee letters, is
crucial. Given the challenges HECM currently faces, we must
make further changes immediately, both to preserve the program
and to minimize risk to the fund.
FHA has also proven to be a critical source of financing
quality affordable rental homes and healthcare facilities. In
fiscal year 2012, FHA supported the construction, improvement,
substantial rehabilitation, or refinance of nearly 234,000
apartments and more than 91,000 beds in healthcare facilities.
And while our multifamily and healthcare programs were not
stressed as severely as the single family portfolio, we have
nonetheless made substantial changes in our risk management and
loan review processes, including increasing premiums for the
first time in 10 years, protecting these programs for the
future.
For fiscal year 2014, we have requested $30 billion in
commitment authority for multifamily and healthcare programs.
Furthermore, we now estimate that the $25 billion approved for
fiscal year 2013 will be insufficient to support the current
level of program activity, including refinancing and
strengthening our existing portfolio and providing financing
for important initiatives such as the Rental Assistance
Demonstration Program.
Therefore, we are requesting an additional $5 billion in
commitment authority for the remainder of the fiscal year.
Without legislative action, we project that we will exhaust our
current authority by mid August. In fact, this morning, I
notified this subcommittee and others that as of today, we have
exhausted 75 percent of our authority for the year.
Finally, our 2014 budget request continues to support
transforming the way HUD does business. This means addressing
both the infrastructure and processes that support our
operations, ensuring that they are compatible with the 21st
century financial system. Given the dynamic nature of the
mortgage market, it is vital that FHA has the ability to assess
and analyze current market trends, borrowers, and lender data
for risks.
Through the FHA Transformation Initiative, we have made
significant progress in developing and implementing a modern
information technology environment. However, without dedicated
and sustained funding, we will not be able to implement or
maintain these improvements.
Last, another part of our continued efforts is the
reorganization and consolidation of the Office of Multifamily
Housing at headquarters and in our field offices. These
organizational improvements are being undertaken to ensure that
even in a constrained budget environment we have an effective
delivery model for the future.
PREPARED STATEMENT
While the fiscal year 2014 budget is the result of many
tough choices, it is also an opportunity for FHA to continue to
support HUD's mission and our Nation's continuing economic
recovery while effectively managing risk.
Madam Chairman, thank you for the opportunity to testify
today. I look forward to your questions.
Senator Murray. Thank you very much.
[The statement follows:]
Prepared Statement of Hon. Carol Galante
Thank you, Chairman Murray and Ranking Member Collins, for this
opportunity to discuss how the Department of Housing and Urban
Development's (HUD's) fiscal year 2014 budget proposal will grow our
economy from the middle class out--not from the top down--while
supporting the recovery in our housing market and economy.
As the President has said, housing is an important part of our
economic recovery. In 2012, rising home values lifted 1.7 million
families back above water and created $1.6 trillion in equity. New home
construction levels are at their highest since before the financial
crisis and new home purchases are up 12 percent over last year. The
number of new foreclosure actions has been cut in half since the height
of the crisis. And the Federal Housing Administration (FHA) has played
a critical role in ensuring that we remain on the path to a complete
recovery.
This budget provides FHA with the ability to assist HUD in meeting
three goals that are critical to the Agency's mission. Using a variety
of strategies, it allows us to focus on strengthening the Nation's
housing market to support the economy while also protecting consumers.
And, despite the challenging fiscal climate, this budget allows us to
meet the need for quality, affordable rental homes across the Nation.
Finally, this budget continues our efforts to transform the way HUD
does business--creating a more modern, efficient, and responsive
agency.
goal 1: strengthen the nation's housing market to bolster the economy
and protect consumers
This Administration entered office confronting the worst economic
crisis since the Great Depression--with mortgages sold to people who
couldn't afford or understand them, while banks packaged them into
complex securities on which they placed huge bets. And while this
crisis was largely market driven, the American people have turned to
Congress and the Administration for leadership and action in righting
our Nation's housing market. HUD remains firmly committed to working
together with communities and individuals to cope with the
unprecedented challenges facing the housing market.
Responding to the Market Disruptions and Serving Underserved
Populations
The Federal Housing Administration (FHA), along with the Government
National Mortgage Association (GNMA), continues to have a significant
impact on the Nation's economic recovery. The activities of the Federal
Government are critical to both supporting the housing market in the
short term and providing access to homeownership opportunities over the
long term, and doing both in a way that minimizes risks to taxpayers.
For fiscal year 2014, HUD is requesting $400 billion in loan
commitment authority for the Mutual Mortgage Insurance Fund, which will
provide an estimated 1.2 million single-family mortgages--at a
projected $199.3 billion in loan volume for forward and reverse
mortgage loans as well as loans insured under the FHA Short Refinance
program for borrowers in negative equity positions. HUD is also
requesting $30 billion in loan guarantee authority for the General and
Special Risk Insurance Fund, which will provide an estimated 273,000
units in multifamily housing properties and an estimated 75,700 beds in
healthcare facilities. The need for this investment is clear as FHA
continues to play an important countercyclical role that has offered
stability and liquidity throughout the recession. While a recovery of
the housing market is currently underway, FHA continues to act as a
crucial stabilizing element in the market, by assuring ongoing access
to credit for qualified first-time, low-wealth or otherwise underserved
borrowers. However, FHA's expanded role is and should be temporary.
FHA's share of the single family mortgage market (purchase and
refinance transactions) has gone from a low of 3.1 percent of loan
originations in 2005, up to a peak of 21.1 percent in 2010, and more
recently down to 13.9 percent in the 3rd quarter of 2012 (U.S. Housing
Market Conditions Report, 3rd Quarter 2012). In fact, the number of FHA
single family loan endorsements by loan count, has declined to levels
comparable to those seen in fiscal years 2002 and 2003, when FHA's
market share was lower than it is today, indicating that FHA's current
market share is primarily due to a substantial decrease in the size of
the total mortgage market rather than exceptionally high FHA loan
volumes. As the market continues to recover and private capital returns
at more normal levels, FHA's role will naturally recede and FHA has
demonstrated that it is committed to policies that facilitate this
return. However, during this crisis, access to FHA insured financing
has been critical to bolstering the housing market and providing access
to credit to creditworthy, low-wealth borrowers.
Figure 1. FHA Market Share as a Percent of Total Market
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
As has been true throughout its history, FHA is particularly
important to borrowers that the conventional market does not adequately
serve, including qualified borrowers who would otherwise be shut out of
the mortgage market. According to the latest Home Mortgage Disclosure
Act (HMDA) data, half of all African Americans who purchased a home in
2011, and 49 percent of Hispanics, did so with FHA insured financing.
Seventy-eight percent of the loans insured by FHA go to first time
homebuyers.
FHA Single Family Programs
Redoubling Efforts To Keep Homeowners in Their Homes
While there is work still to be done, HUD is proud of the progress
this administration has made in tackling ongoing foreclosure
challenges. Between April 2009 and February 2013, more than 6.4 million
foreclosure prevention actions were taken--including nearly 1.7 million
FHA loss mitigation and early delinquency interventions.
As part of the Administration's commitment to help responsible
homeowners stay in their homes, we have actively sought to use our
current programs and authorities to make homeownership sustainable for
millions of American families. Examples of our efforts include:
--FHA Streamline Refinance.--An option that allows borrowers with
FHA-insured loans who are current on their mortgage to
refinance into a new FHA-insured loan at today's low interest
rates without requiring additional underwriting, permitting
these borrowers to reduce their mortgage payments. This program
benefits current FHA borrowers--particularly those whose loan
value may exceed the current value of their home--and, by
lowering a borrower's payment, also reduces risk to FHA. And,
because we see potential for more widespread use of this
product, FHA made changes to the way in which streamline
refinance loans are displayed in the Neighborhood Watch Early
Warning System (Neighborhood Watch) to encourage lenders to
offer this product more widely to homeowners with FHA-insured
mortgages, and offered reduced premiums for borrowers who could
benefit most from a Streamline Refinance.
--Changes to FHA's Loss Mitigation Waterfall.--A mortgagee letter
published on November 16, 2012, outlined changes to FHA's loss
mitigation home retention options. One of the key elements of
this update was moving FHA's Home Affordable Modification
Program (HAMP) product up in FHA's loss mitigation waterfall so
servicers could more quickly offer deeper payment relief to
struggling FHA borrowers, resulting in an increase in the
number of borrowers being able to retain their homes.
--Housing Counseling.--In fiscal year 2014, HUD is requesting $55
million in Housing Counseling Assistance to improve access to
quality affordable housing, expand homeownership opportunities,
and preserve homeownership, all of which are especially
critical in today's economic climate. With this funding, HUD
estimates that 2,650 HUD-approved counseling agencies,
employing an estimated 8,000 housing counselors, will assist a
total of 2.5 million renters and owners. In 2012, 2,410 HUD-
approved housing counseling agencies, with grant funds from HUD
and other funding sources, assisted over 1.9 million renters
and owners. HUD-approved counselors help clients learn about
purchasing or refinancing a home; rental housing options;
reverse mortgages for seniors; foreclosure prevention; loss
mitigation; preventing evictions and homelessness; and moving
from homelessness to a more stable housing situation.
HUD's new Office of Housing Counseling has several initiatives to
ensure borrowers know their rights and have access to the remedies that
will allow them to stay in their homes. While HUD approved housing
counselors serve all homeowners, regardless of the type of loan,
effective loss mitigation for FHA borrowers also protects the Mutual
Mortgage Insurance (MMI) Fund. Therefore, HUD has worked closely with
interested States to determine effective ways in which funds from the
National Mortgage Servicing Settlement can be used to expand housing
counseling resources, resulting in more than $300 million in settlement
funds committed to housing counseling or legal services for affected
borrowers. HUD-approved housing counseling agencies provided
foreclosure prevention services to 774,000 families in fiscal year
2012.
In addition, FHA and the Office of Housing Counseling are exploring
ways to further integrate housing counseling into the home purchase
process, as well as continuing efforts around loss mitigation, offering
distressed FHA borrowers additional resources with which to assess
their options and make decisions appropriate to their situation.
--Short Refinance Option.--In 2010, FHA made available an option that
offers underwater non-FHA borrowers, who are current on their
existing mortgage and whose lenders agree to write off at least
10 percent of the unpaid principal balance of the first
mortgage, the opportunity to refinance into a new FHA-insured
mortgage. FHA made enhancements to the program in March of last
year and announced an extension to the expiration date of the
program in order to increase the number of borrowers who will
benefit from this initiative.
Strengthening FHA and Paving the Way for Private Capital To
Return
The President's budget shows that FHA, while still under stress
from legacy loans, has made significant progress and is on a sound
fiscal path moving forward. Like nearly all mortgage market
institutions, FHA sustained significant losses due to the precipitous
fall in the housing market and home prices and is putting additional
funds aside this year to cover those legacy losses. Moreover, like most
other market participants, recent and future books of mortgage business
are expected to bring healthy gains and perform well.
Throughout the economic crisis, as FHA faced fiscal challenges,
this administration took swift and effective action to protect the FHA
and the American taxpayer alike, as FHA continued to fulfill its dual
mission of supporting the housing market during tough times and
providing access to homeownership for underserved populations. Of the
changes made since 2009, FHA's lender oversight and credit policies
have yielded substantial improvements in the quality of new loans
endorsed by FHA, and premium increases have priced appropriately for
risk. But significant opportunity remains to reduce the impact on the
fund of poorly performing legacy loans severely impacted by the
recession, and to provide greater assistance for distressed borrowers
as they seek to recover and find meaningful assistance in dealing with
their delinquent loans. With a majority of FHA's projected losses
attributable to loans insured from 2007-2009, FHA will take several
additional steps to maximize recovery in the areas of loss mitigation
and asset management.
Counterparty Risk Management and Lender Enforcement
One of the first things this administration did upon taking office
was to take strong actions to improve FHA's monitoring and oversight of
lenders. This has included substantial improvements to risk analysis
systems and procedures, and policy changes to focus resources on the
areas of FHA's business which pose the greatest potential risk to the
MMI Fund. These efforts have resulted in lenders being withdrawn from
FHA programs, improvements in lender compliance with FHA requirements,
and a number of settlements with lenders and servicers for violations
of FHA origination or servicing requirements.
Yet, it remains important that we continue to clarify and refine
the rules of the road for FHA lenders. That is why last month FHA
issued a mortgagee letter implementing a Lender Insurance (LI) Lender
Indemnification Final Rule which was published in January 2012. This
guidance establishes better and more consistent monitoring of LI
lenders and establishes clearer parameters upon which HUD will require
indemnification for loans originated by these institutions.
Additionally, we have been concerned of late with a number of Web-
based and print advertisements that proclaim the supposed ease of
obtaining an FHA-insured loan following a foreclosure. While FHA has
taken a number of proactive steps in the past few years to clarify its
requirements regarding lender advertising and to enforce those
requirements aggressively, we determined in last year that it was
necessary to address the issue of post-foreclosure advertising
specifically. Therefore, on January 25, 2013 FHA issued a reminder to
its industry partners that advertisements that imply that little or no
qualification criteria are necessary to obtain an FHA loan are
unacceptable and that FHA will not hesitate to take action within its
authority to enforce its requirements related to lender advertising,
including sanctions by HUD's Mortgagee Review Board and/or referral to
the HUD Inspector General or the Consumer Financial Protection Bureau
(CFPB).
Credit Policy
We have also worked to strengthen our credit policies for FHA
borrowers. First and foremost, FHA implemented Congress's elimination
of seller-funded down payment assistance programs which cost the MMI
Fund more than $15 billion in economic value. Further, we enacted
increased down payment requirements for borrowers with credit scores
below 580. The long-term positive impact of these two credit policy
changes cannot be overstated. The 2005-2008 vintages, accounting for
less than 15 percent of total originations over the last 30 years, are
projected by the Actuary to contribute more than one-third of total
credit losses of the fund. Loans with credit scores below 580 and/or
seller-funded down payment assistance will have accounted for 44
percent of those losses. Additionally, we will continue work on
finalizing regulations to reduce the amount of allowable seller
concessions that increase risks to FHA arising from inflated
appraisals.
In late 2012, FHA announced several additional policy changes which
continue its work to strengthen credit policy, support the ongoing
recovery and maintain access to mortgage financing for credit worthy
borrowers while also taking steps to recede FHA's total market share.
These steps include requiring manual underwriting for borrowers with
credit scores below 620 and debt-to-income (DTI) ratios over 43
percent, enhancements to FHA's TOTAL Scorecard, and a proposed increase
in the required down payment for borrowers seeking loans in excess of
$625,500. Taken together with all the other measures outlined above as
well as those detailed in Appendix A of FHA's Annual Report to
Congress, these steps will ensure that home buyers using FHA-insured
financing are capable of meeting their mortgage obligations and will
not put undue stress on the fund.
Increased Revenue
In addition to the improvements made to the quality of new
endorsements, we have also made the difficult choice to increase
mortgage insurance premiums for FHA-insured loans multiple times in the
past 4 years. Since 2009, FHA has increased premiums five times--the
most recent increase effective April 1, 2013. Combined, the premium
increases made since 2009 have yielded more than $10 billion in
additional economic value for the fund to date. These increases have
not been undertaken lightly, and FHA has been careful to balance
changes to pricing to improve the outlook of the fund with its
countercyclical role of providing liquidity and access to credit in the
midst of the recent crisis and ongoing recovery.
Additionally, effective beginning with case numbers assigned on
June 3, 2013, FHA will cease a policy of canceling required mortgage
insurance premiums (MIPs) on loans for which the outstanding principal
balance reaches less than 78 percent of the original principal balance.
Under that policy, FHA remained responsible for insuring 100 percent of
the unpaid principal balance of a loan for the entire life of the loan,
a period often extending far beyond the cessation of MIP payments. As
written, the timing of MIP cancellation was directly tied to the
contract mortgage rate, not to the actual loan loan-to-value ratio
(LTV). That policy, which was reversed in a mortgagee letter published
on January 31, 2013, was put in place at a time when it was assumed
that home price values would not decline, but today we know that LTV
measured by appraised value in a declining market can mean that actual
LTVs are far higher than amortized mortgage LTV, resulting in higher
losses for FHA on defaulted loans. Analyses conducted by FHA's Office
of Risk Management projects lost revenue of approximately $10 billion
in the 2010-2012 vintages as a result of the current cancellation
policy. The same analyses also suggest that 10-12 percent of all claims
losses will occur after MIP cancellation. Therefore, beginning in June,
FHA plans to once again collect premiums based upon the unpaid
principal balance of FHA loans for the entire period during which they
are insured, permitting FHA to retain significant revenue that is
currently being forfeited prematurely.
Loss Mitigation and Asset Management
The Actuary projects nearly $60 billion in claims costs for FHA
from seriously delinquent loans that will go to claim by the end of
fiscal year 2014, largely arising from loans insured between 2007 and
2009. As a result, reducing the severity of losses derived from these
loans will exert a demonstrable positive impact to Fund performance
over the next few years. Throughout the past fiscal year, FHA has been
executing on an overall asset management strategy aimed at ramping up
real estate owned (REO) alternatives. REO alternatives (primarily short
sales) comprised about 15-20 percent of total dispositions since 2010,
yielding average loss severities about 20 percent lower than REO. In
recent months, as noted, FHA also unveiled its Distressed Asset
Stabilization Program (DASP), another REO alternative that improves
Fund performance. These and other actions have had a measurable effect,
as loss severities have already fallen by 9 percent in the last year. A
reduction in loss severities will further improve fund performance.
And, compared to March 2012, serious delinquencies are down in March
2013, with non-seasonally adjusted serious delinquencies dropping below
9 percent for the first time in over a year, showing that FHA and the
market have made some progress in clearing the backlog of seriously
delinquent loans previously withheld from a final disposition.
FHA expects further gains on this front through a number of
initiatives:
--Streamlining of the FHA Short-Sale Policy.--Although FHA is deeply
committed to providing loss mitigation alternatives to
borrowers which permit them to retain their homes, home
retention is simply not an option for some borrowers. For these
borrowers, pre-foreclosure sales (short-sales) offer an
opportunity to transition out of their homes. This enables both
FHA and the borrowers to avoid the costs and damages of the
foreclosure process. This month, FHA will introduce a
streamlined pre-foreclosure sale policy which removes certain
barriers for borrowers in obtaining a short sale on an FHA-
insured mortgage. This change is expected to increase the
number of defaulted loans that end in short sales rather than
in foreclosures. Because losses from short-sales are
substantially lower than from the traditional FHA REO process,
the shift of greater numbers of distressed homeowners to short-
sale dispositions rather than foreclosures is anticipated to
yield better results for the MMI Fund while allowing distressed
borrowers to start anew without having to go through the
difficult and costly foreclosure process.
--Claim Without Conveyance Pilot Program.--FHA is expanding a pilot
in which properties secured by non-performing FHA-insured loans
are offered for sale by the lender who has completed the
foreclosure process. At a reserve price slightly below the
outstanding unpaid principal balance of the loan, the
properties are sold to third party purchasers without ever
being conveyed to FHA. This method of disposing of these
properties is expected to yield lower losses for the MMI Fund
than selling them through FHA's normal REO disposition process,
as carrying costs associated with preserving, managing, and
marketing an REO property are eliminated.
--Proactive Strategies To Further Improve Recoveries.-- In addition
to the policy and programmatic changes outlined above, FHA will
also take several innovative and proactive steps to increase
utilization of loss mitigation options and reduce unnecessary
asset disposition losses. First, beginning in 2013, FHA will
launch a large-scale proactive marketing campaign to promote
modification and short-sale strategies for delinquent
borrowers. This effort is expected to increase utilization of
these programs, which will permit more borrowers to become
aware of and take advantage of these opportunities, while
reducing foreclosures and decreasing associated losses for FHA.
In addition, FHA will also pursue more creative strategies to
dispose of REO properties in geographies where traditional
asset disposition methods yield net negative recoveries for
FHA. This approach is anticipated to both save money for FHA on
unnecessary losses as well as contribute to community
stabilization initiatives in cities hit hard by the recession.
Due to these changes, resulting in higher quality of loans and
reduced loss severities, and combined with the large volume of current
loans, we project FHA will generate approximately $18 billion in
receipts during fiscal year 2013. This includes $3 billion generated
from the new premium increase that went into effect April 1, 2013, and
reversal of a policy that caused FHA to forfeit collection of MIP after
a loan reached 78 percent of its original principal balance. Further,
as a result of these same changes, the fiscal year 2014 budget projects
FHA receipts of almost $13 billion, even as FHA market share and loan
volume continue to be reduced.
Fiscal Year 2013 MMI Fund Budget Re-Estimate
The President's budget forecasts that the FHA MMI Fund, which
provides the fiscal capital to support FHA's single family and reverse
mortgage guarantees, will use $943 million of its mandatory
appropriation authority to supplement its reserves at the end of fiscal
year 2013. The MMI Fund currently has approximately $32 billion in cash
available to pay claims, so this is not a cash on hand problem; it is
one of setting aside the right size of loan loss reserves. The $943
million figure is based on an annual re-estimate of the reserves FHA
will need to hold as of September 30, 2013, for the payment of expected
losses over the next 30 years on its portfolio of guaranteed loans as
of last September, based upon Federal Credit Reform Act (FCRA) scoring.
This re-estimate is done as part of the development of the President's
budget.
The potential for a mandatory appropriation to the MMI Fund is
largely due to the existing reverse mortgage (Home Equity Conversion
Mortgage or HECM) portfolio. This product, particularly as it has been
structured to date, is sensitive to borrower longevity, home prices,
and economic conditions. Lower than anticipated home price appreciation
substantially affected the expected performance of the portfolio.
Further, changes to the ways in which borrowers utilize the HECM
product have shifted the risk profile of the program.
Originally designed to be used like an annuity, in recent years
market circumstances and lender preferences have shifted greater
numbers of borrowers to take full draws via the Fixed Rate Standard
product. Thus, borrowers are taking all of the funds available to them
up front and often do not have the resources necessary in later years
to pay property taxes and insurance, thereby triggering a default on
the loan. Due to these changes in usage and performance, the budget
estimates that the use of the HECM program results in a negative value
of $5.248 billion and a disproportionately negative impact to the fund.
FHA will take immediate action under its limited authorities to
better align the HECM program with its objective of enabling seniors to
age-in-place. These changes, which will significantly impact consumer
use of the program, will protect FHA from losses and reduce the
likelihood of borrower defaults.
In administrative guidance dated January 30, 2013, FHA consolidated
the Fixed Rate Standard program with the Fixed Rate HECM Saver product,
which will result in a reduction of the maximum amount of funds
available to a HECM borrower.
Additionally, in an effort to reduce losses associated with the
conveyance and disposition of properties mortgaged with an HECM, FHA
will issue new incentives for estate executors of HECM borrowers to
dispose of properties themselves rather than conveying them to HUD.
Executors are permitted to either sell such properties or convey them
to HUD. Reversing the historical trend, over the past few years, larger
numbers of executors have been choosing to convey these properties to
FHA rather than sell them, adding costs and reducing recoveries for
FHA. By incentivizing the sale of properties by executors, FHA is able
to avoid property management, maintenance, and marketing costs
associated with the REO disposition process, thereby reducing losses to
the fund on these properties.
Whether there will be an actual need for a mandatory appropriation
from the Treasury General Fund to the MMI fund will not be determined
until September 2013, and will be based on FHA's realized revenues and
any other developments through the end of the fiscal year. Notably, any
mandatory appropriation to FHA would not involve approval from
Congress, as all Federal loan programs have this standing authority. As
we consider this potential mandatory appropriation, we must also
acknowledge that FHA played a crucial, countercyclical role in bringing
the housing market from the brink of collapse to a place where it is
positive and growing again. This task did not come without its stresses
which we are experiencing today. Nevertheless, FHA will remain vigilant
in implementing the policies and practices discussed here to protect
the fund.
Legislative Requests To Support FHA Single Family Programs
Since 2010, Congress has moved in important ways to strengthen and
protect FHA. Indeed, were it not for the flexibility granted by
Congress to FHA in setting mortgage insurance premiums, the current
economic value of the MMI Fund would be more than $10 billion lower
than it is today. And the work Congress has done to establish FHA's
first ever Office of Risk Management has been instrumental to our
improved ability to identify risks in FHA programs and take action to
mitigate them. We appreciate the commitment to making FHA stronger and
more secure over the long term.
We have several legislative requests that, when coupled with
actions taken previously and the support provided by this budget, will
allow us to further strengthen the FHA fund and the larger housing
market. The proposals outlined below will enhance FHA's ability to hold
lenders accountable for non-compliance with FHA policy, allow FHA to
increase recoveries on defaulted loans, and provide greater flexibility
for FHA to make changes to policies and procedures as emerging needs
and trends are identified. As a result, FHA will better be able to
avoid unnecessary losses before they occur.
--Indemnification Authority for Direct Endorsement Lenders.--This
provision, which FHA has been seeking since 2010, would allow
FHA to seek indemnification from Direct Endorsement lenders,
which represent 70 percent of all FHA approved lenders.
Currently FHA only has authority to require indemnification for
lenders with Lender Insurance (LI) approval. In granting this
authority, FHA will be able to obtain indemnification from all
of its approved lenders for loans that do not comply with its
guidelines.
--Authority To Terminate Origination and Underwriting Approval.--This
legislation would give FHA enhanced ability to review lender
performance and, if a lender is found to have an excessive rate
of early defaults or claims, would provide greater flexibility
in terminating the approval of the lender to originate or
underwrite single family mortgages for FHA insurance. FHA has
been seeking this authority since 2010.
--Revised Compare Ratio Requirement.--This provision would revise the
statute governing the Credit Watch Termination Initiative to
provide greater flexibility in establishing the metric by which
FHA compares lender performance so that it more effectively
captures the true performance of a lender during all market
conditions, minimizing further poor performance by FHA lenders
while reducing uncertainty for them. Specifically, this
legislation would allow the Secretary to compare the rate of
early defaults and claims for insured single family mortgage
loans originated or underwritten by a lender with those same
rates for other lenders on any basis the Secretary determines
appropriate, such as geographic area, varying underwriting
standards, or populations served. Further, the provision would
permit the Secretary to implement such comparisons via
regulations, notice, or mortgagee letter. This will allow FHA
to tailor the compare ratio so it provides meaningful
comparisons of lenders in varying market conditions, providing
greater clarity for lenders and a more refined understanding of
their performance for FHA.
--Authority To Transfer Servicing.--In order to facilitate more
effective loss mitigation, this change would give FHA the
authority to require any of the following actions when a
servicer is at or below a servicer tier ranking score (TRS) of
III, or when the Secretary deems the action necessary to
protect the interests of the MMI Fund: (1) transfer servicing
from the current servicer to a specialty servicer designated by
FHA; (2) require a servicer to enter into a sub-servicing
arrangement with an entity identified by FHA; and/or (3)
require a servicer to engage a third-party contractor to assist
in some aspect of loss mitigation (e.g. borrower outreach).
Such authority would permit FHA to better avoid losses arising
from poor servicing of FHA-insured loans, yielding better
results for both borrowers and FHA.
--Authority To Structurally Change the HECM Program Through Mortgagee
Letter.--While the HECM product is an important tool to permit
seniors to age in place, the challenges outlined previously
necessitate immediate changes to the program. To make such
changes in a timely fashion and preserve the program for
seniors, FHA is seeking statutory authority to temporarily make
changes to the HECM program via mortgagee letter while formal
rule making is simultaneously in progress. Specifically, FHA
would make the following changes via mortgagee letter:
--Limit the amount of the allowable draw;
--Mandate the use of escrow accounts to ensure continued and timely
payment of property charges including taxes and insurance,
and;
--Require the use of a financial assessment as part of the loan
origination process to ensure the appropriateness of HECM
products for potential borrowers.
These changes will enable FHA to ensure that new HECM originations
meet the needs of the target population and reduce risks to the MMI
Fund. Absent ability to make these structural changes, later this
fiscal year, FHA will have to take more dramatic action to ensure that
new HECM originations are actuarially sound.
HECM Non-Borrowing Spouse.--The intent of the HECM program is to
provide an age-in-place option for senior citizen homeowners. However,
from an operational standpoint, those homeowners must be party to the
reverse mortgage for HUD to manage an actuarially sound program.
Currently, if a mortgagor dies and no other HECM mortgagor continues to
reside in the home, the loan becomes due and payable. The Department
believes that in order to benefit from the HECM loan, a party must be
eligible under the terms of the HECM, including the requirement that
one be aged 62 or older and also have legal claim to the property. In
order to clarify the responsibilities of non-borrowing spouses under
the HECM program, HUD is proposing a general provision in the fiscal
year 2014 budget that amends the National Housing Act to clarify that
the HECM becomes due and payable upon the death of the mortgagor spouse
in order to avoid future misunderstanding. The proposed amendment would
make clear that HUD's longstanding regulations--in effect since the
beginning of the program--comport with Congress' original intent.
goal 2: meet the need for quality, affordable rental homes and
healthcare facilities
At a time when more than one-third of all American families rent
their homes and over 8.5 million unassisted families with very low
incomes spend more than 50 percent of their income on rent and/or live
in severely inadequate conditions, it is more important than ever to
provide a sufficient supply of affordable rental homes for families of
modest means--particularly since, in many communities, affordable
rental housing does not exist without public support. Compounded by an
aging population and increasing healthcare costs, strong support for
quality, accessible healthcare is also an essential component in
achieving the Department's mission of strong, sustainable, inclusive
communities and quality, affordable housing and services for all
Americans.
Office of Multifamily Housing Programs
Reducing Administrative Burdens and Increasing Efficiency
This budget recognizes the need to simplify, align, and reform
programs to reduce administration burdens and increase efficiency
across programs. The Office of Multifamily Housing is beginning to
realize savings in salaries and expenses as a result of several major
initiatives.
--Breaking Ground.--Completed in mid-fiscal year 2012, Breaking
Ground was an initiative in Multifamily Housing Development to
reduce backlogs, improve timeframes, and create an early
warning system that allows for more effective risk management
by creating extensive tools to monitor and access credit for
multifamily insured loans. These tools include a stronger
credit review of borrowers; an early warning system that
targets loans early in the process that do not meet FHA
underwriting criteria; and a dashboard monitoring tool to track
accountability of field offices; and establishment of a queue
in order to more efficiently manage workload and provide
greater transparency to lenders.
Adopting this approach has produced positive results. Offices that
had large application backlogs prior to Breaking Ground have reported
processing efficiency improvements, methodically clearing out older
applications--the number of applications in process for over 90 days
dropped from 191 to 50 in just 7 months. In addition, offices that
began Breaking Ground without a large backlog have begun to meet
aggressive application processing time cycles. The Department will
continue to track these metrics and looks forward to reporting on these
results.
--Sustaining Our Investments.--The Sustaining Our Investments
initiative, which was fully implemented last month, has
resulted in an overhaul of the processes used to manage the
portfolio of the Office of Multifamily Asset Management. The
initiative focuses on Risk Based Management--allowing project
managers at both the headquarters and field level to focus day-
to-day operations on managing at-risk loans in the portfolio.
Risk-based reports keyed on financial and physical risk
triggers direct project managers to act early on potential
problems with particular assets. The first step in this
initiative was to complete a full ranking of FHA's entire
multifamily market rate portfolio to better assess and address
potential risk factors. The ranking of the non-insured
portfolio is now underway.
--Loan Committee.--FHA Multifamily has also implemented a new loan
committee approval process, aligning Hub and Program Center
commitment authority and practice to ensure consistency in
underwriting throughout the regional offices, as well as to
provide a platform to share best practices. Loan committees at
the hub and national levels provide oversight for high-risk
transactions in the multifamily insurance program, based on
loan size and a project's number of units. Loan committee
approval processes are standard practice in the lending
community and are an important tool to prudently manage credit
risks and ensure the integrity and stability of the General and
Special Risk Insurance (GI/SRI) insurance fund. The Loan
Committee has also proven to be an effective tool for
increasing communication and a more consistent FHA platform.
Adjusting Premiums To Properly Price for Risk
Given the unprecedented increase in the number and dollar volume of
loans insured under the GI/SRI, particularly with respect to ``market
rate\1\'' loans, in the President's fiscal year 2013 budget proposal,
the Department announced proposed premium increases for programs in the
GI/SRI. Implemented on October 1, 2012, this was the first premium
increase in 10 years for these programs.
---------------------------------------------------------------------------
\1\ Generally, market rate housing covers a range of rental housing
opportunities. In the FHA portfolio, market rate housing is generally
affordable to those at approximately 80 percent of area median income.
---------------------------------------------------------------------------
GI/SRI funds provide financing for the FHA multifamily and
healthcare loan guarantee programs and several very small specialized
loan products. This account also continues to hold a sizable portfolio
of single family loan guarantees (HECM, condominium, and rehabilitation
loans) insured prior to fiscal year 2009 when responsibility for new
lending under these programs was transferred to the Mutual Mortgage
Insurance Fund.
In contrast, premiums for single family programs situated in FHA
Mutual Mortgage Insurance (MMI Fund) have been increased four times
since 2010. As with the premium increases for MMI programs, higher
premiums for market rate loans originated under the GI/SRI funds ensure
that FHA products are priced appropriately to compensate for FHA's
risk, consistent with current market conditions. This premium change
should also have the indirect benefit of encouraging the return of
private capital to the Nation's mortgage markets.
Going forward, FHA will continue to examine its business models and
practices, with an eye toward continuing to improve its risk management
capabilities and operational efficiencies while expediting processing
and approval timelines.
Rebuilding Our Nation's Affordable Housing Stock
Over the last 75 years, the Federal Government has invested
billions of dollars in the development and maintenance of public and
multifamily housing, which serve as crucial resources for some of our
country's most vulnerable families. Through its mortgage insurance
programs, over just the past 18 months, FHA facilitated lending of $4
billion for new construction and substantial rehabilitation of over
40,000 apartment units. FHA insured over $11 billion of mortgages that
supported improvements and moderate rehabilitation of more than 150,000
units of multifamily housing over the same period.
Despite this sizable Federal investment and the great demand for
deeply affordable rental housing, we continue to see a decline in the
number of available affordable housing units. Unlike other forms of
assisted housing that serve very similar populations, the public
housing stock is nearly fully reliant on Federal appropriations from
the Capital Fund to make capital repairs. Funding and regulatory
constraints have impaired the ability for these local and State
entities to keep up with needed life-cycle improvements. The most
recent capital needs study of the public housing stock, completed in
2010, estimated the backlog of unmet need at approximately $26 billion,
or $23,365 per unit. Available funding is vastly insufficient to meet
accruing needs of approximately $3 billion per year. Under the strain
of this backlog, and without financing tools commonly available to
other forms of affordable housing, the public housing inventory loses
an average of 10,000 units annually through demolitions or
dispositions. Through FHA and other programs, HUD is taking steps to
address this shrinking inventory.
Rental Assistance Demonstration
In addition to the public housing stock, the Rental Assistance
Demonstration (RAD) program targets certain ``at-risk'' HUD legacy
programs. The 24,000 units assisted under section 8 Moderate
Rehabilitation (MR) are limited to short-term renewals and constrained
rent levels that inhibit the recapitalization of the properties. The
approximately 21,000 units assisted under Rent Supplement (RS) and
Rental Assistance Program (RAP) have no ability to retain long-term
project-based assistance beyond the current contract term. As a result,
as their contracts expire, we can no longer depend on these projects to
be available as affordable housing assets.
Conversion to long-term section 8 rental assistance, as permitted
under RAD, is essential to preserving these scarce affordable housing
assets and protecting the investment of taxpayer dollars these programs
represent. Long-term section 8 rental assistance allows for State and
local entities to leverage sources of private and public capital to
rehabilitate their properties. While the Department expects and
continues to process public housing conversions of assistance without
additional subsidy, HUD requests $10 million in fiscal year 2014 for
the incremental subsidy costs of converting assistance under RAD for
very limited purposes. Such funding will be targeted only to public
housing projects that are: (1) not feasible to convert at current
funding levels; and (2) located in high-poverty neighborhoods,
including designated Promise Zones, where the Administration is
supporting comprehensive revitalization efforts. The Department
estimates that the $10 million in incremental subsidies will support
the conversion and redevelopment of approximately 3,300 public housing
units that would not otherwise be feasible to convert and sufficiently
stabilize over the long-term, while helping to increase private
investment in the targeted projects and surrounding neighborhoods.
In addition to the funding request, each of the legislative
requests in the 2014 budget for RAD are designed to allow for maximum
participation by those public housing agencies (PHAs) and owners whose
current funding levels are sufficient for conversion. In the first
component of RAD, an increase in the 60,000 unit cap to 150,000 units,
and the exclusion of section 8 MR properties from the cap will both
allow for a greater portion of both the public housing and MR stock
that can convert at no cost to the Federal Government to participate in
the demonstration. It is expected that approximately 40 percent of the
transactions conducted through the RAD program will leverage FHA
insured financing, actually contributing to the generation of
offsetting negative subsidy receipts for the Government.
Legislative Requests To Support Multifamily Housing
Nearly a third of the Nation's renters, more than 20 million
households, live in small, unsubsidized apartment buildings. These 5-
to 49-unit properties tend to be owned by small businesses and are
typically more affordable to low and moderate income families. These
properties are at risk of continued disinvestment as small building
owners are less likely than other multifamily property owners to be
able to secure financing for repairs and improvements. Small properties
are less likely to have mortgage financing and just 14 percent of all
fiscal year 2010 FHA-insured properties were for projects with fewer
than 50 units.
The fiscal year 2014 budget includes a legislative provision to
support small building finance, and to strengthen the Risk Share
program as a rental finance tool, seeks congressional authority for
Ginnie Mae to guarantee securities containing FHA multifamily Risk
Share loans, thereby increasing liquidity and decreasing cost of
capital. This proposal would apply to both State and local Housing
Finance Agency Risk Share lenders under section 542(c) and new Risk
Share lenders under section 542(b). The proposal would also amend
section 542(b) of the statute to allow for flexibility in how
affordability is determined in order to make it a more effective tool
to recapitalize existing naturally affordable 5-49 unit rental
properties.
Section 542(c) HFA Risk Share.--The extension of Ginnie Mae
securitization to the 542(c) Risk Share program would improve HFAs'
ability to finance affordable rental housing that serves some of the
poorest and most vulnerable Americans, without requiring any Federal
budgetary appropriation.
Section 542(b) Risk Share and Small Building Finance.--The 542(b)
Risk Share authorizing statute provides HUD with significant
flexibility to take on risk-share partners. HUD plans to partner with
mission-driven lenders to make loans on small multifamily rental
buildings on a 50/50 risk share basis with HUD. In order for this
program to work for small multifamily lending, two legislative changes
are required. Access to Ginnie Mae guarantees for small building risk-
share lenders combined with flexibility on the statutorily imposed risk
share affordability standard which otherwise requires ongoing rent and
income restrictions will allow us to use this tool to meet the needs of
these smaller properties and prevent disinvestment in a valuable
portion of our Nation's housing stock.
Office of Healthcare Programs
FHA's healthcare programs for hospitals and residential care
facilities (nursing homes, assisted living facilities, and board and
care homes) have helped private lenders fill the gap left by shrinking
conventional finance resources. Since 1934, over 4,000 residential care
facility mortgage insurance commitments were issued in all 50 States
under the section 232 program. In 1968, enabling legislation amending
the National Housing Act was signed into law, creating the section 242
program for hospital facilities. Since the section 242 program's
inception, over 400 mortgage insurance commitments have been issued for
hospitals in 42 States and Puerto Rico. And while the economy seems to
be rebounding and with it, sources of private capital, we continue to
expect high levels of mortgage insurance activity for fiscal year 2014
due in large part to refinancing activity as healthcare facilities take
advantage of current low interest rates. Furthermore, following
implementation of a final rule in 2013, hospitals can now obtain FHA-
insured refinancing loans. As of December 31, 2012, the FHA's portfolio
of healthcare loan guarantees had an unpaid principal balance of $28.3
billion on 2,900 loans.
Evolution of FHA Healthcare Programs--Balancing Risk and
Improving Processes
This Administration, in continuing to improve the program has
brought in positive risk management changes to both balance risk and
improve processes. Given the unprecedented increase in the number and
dollar volume of loans insured under GI-SRI, in fiscal year 2013,
premium increases for FHA's General Insurance and Special Risk
Insurance healthcare programs were instituted to increase the stability
of the insurance fund. With the premium increases, FHA healthcare loans
are priced more appropriately to encourage the return of private
capital while, at the same time, continuing to ensure sufficient levels
of available capital in these sectors.
Proactive Asset Management.--In FHA's Office of Healthcare
Programs, weekly loan committees are held to review and approve loan
submissions and to monitor healthcare industry trends and risks. By
implementing proactive asset management using early intervention
monitoring tools, the Office of Healthcare Programs succeeded in
maintaining claim rates of less than 1 percent in both healthcare
facility mortgage insurance programs in fiscal year 2012.
LEAN Business Process Reengineering.--LEAN Business Process
Reengineering has also played an integral part in streamlining business
operations within FHA's healthcare programs. Despite volume increases,
LEAN processing improvements reduced loan processing times while
increasing risk management efforts. Revised program requirements and
documents were established to enhance accountability for borrowers,
operators, and lenders. To further manage risk in the healthcare
portfolio, in areas of large risk concentrations, such as insuring
portfolios of multiple healthcare facilities, reviews are conducted at
both the corporate and individual loan levels. In the residential care
facility mortgage insurance program, implementation of a Master Lease
Structure to cross-collateralize properties not only works to improve
the overall risk profile of FHA's healthcare portfolio, but ultimately
reduces claims.
The Office of Healthcare Programs is in ongoing collaboration with
the Department of Health and Human Services (HHS), Centers for Medicare
and Medicaid Services (CMS), and State public health departments to
support efforts to ensure quality of care for the most vulnerable
populations. Also, by incorporating State survey inspection results,
cost reports, and data from other Federal and State agencies into FHA's
underwriting and asset management procedures, the shared utilization of
data and cross-collaboration has been instrumental in keeping
healthcare claim rates low within FHA.
Legislative Request To Support Healthcare Programs
As part of the efforts of FHA's healthcare programs to strengthen
communities by addressing specialized financing needs, HUD is seeking
passage of the language in the Transportation, Housing and Urban
Development, and Related Agencies (THUD) appropriations bill to permit
rural Critical Access Hospitals to be eligible for FHA insurance.
Before their eligibility expired in 2011, 29 Critical Access Hospitals
received FHA-insured loans, with results that were positive, both in
terms of loan performance and the jobs created by hospital construction
projects. Also, quality of life improved in their communities; these
hospitals by definition are geographically remote from other hospitals,
and they provide not only emergency, outpatient, and acute inpatient
services but also nursing and rehabilitation services that avoid the
need for the elderly and recuperating patients to leave the community
for care.
We appreciate the Congress' longstanding support for Critical
Access Hospitals by amending section 242 to permit these important
facilities to be eligible for FHA insurance, and hope that this
language will be approved to allow Critical Access Hospitals to
continue to be eligible for FHA insurance.
goal 3: transform the way hud does business
A 21st century American economy that is a magnet for jobs and
equips its residents with the skills they need for those jobs demands a
Government that's leaner, smarter, and more transparent. The current
economic and housing crisis; the structural affordability challenges
facing low-income homeowners and renters; and the new, multidimensional
challenges facing our urban, suburban, and rural communities all
require a HUD and an FHA that can meet those challenges. As such, we
remain committed to improving the way HUD does business. HUD remains at
the forefront of the Federal response to the national mortgage crisis,
economic recovery, Hurricane Sandy recovery, and the structural gap
between household incomes and national housing prices--roles that
require an agency that is nimble and market-savvy, with the capacity
and expertise necessary to galvanize HUD's vast network of partners.
HUD's 2014 budget reflects these critical roles, by investing in
transformation, research, and development that will be implemented
persistently over time.
Strategically Investing in Our Staff While Improving Efficiencies and
Processes
HUD's greatest resource is its dedicated staff. When employees
attain skills and are motivated to use those skills to help their
organization reach goals, the capacity of the organization grows and
employees in the organization grow as well. This is why HUD is
providing its employees training and leadership development
opportunities. HUD is also in the process of simplifying and
streamlining programs and reforming its information technology, human
resources, procurement, and other internal support functions to provide
flexibility to managers and better service to HUD customers.
Multifamily Office Reorganization and Consolidation
Beginning in fiscal year 2013, the Office of Multifamily Housing
will begin reorganizing its headquarters structure and consolidating
field office operations. Phased in over 2\1/2\ years, this plan will
increase efficiency and consistency, modernize our services, and once
fully implemented has the potential to save an estimated $40 million to
$45 million in annual costs.
By taking proactive steps, the Office of Multifamily Housing
Programs will better serve customers and stakeholders, by operating
more efficiently and consistently and improving risk management, all in
an era where HUD and agencies across the Government are working
diligently to determine how best to do more with less. This
transformation builds upon the success of Breaking Ground and
Sustaining Our Investments through four initiatives:
--Launching More Routine and Effective Workload Sharing Across the
Country.--By more equitably distributing workloads in the areas
of Production and Asset Management, Multifamily Housing will be
able to reduce unevenly distributed pressure on staff and
reduce customer wait times and the application backlog. A
workload sharing pilot is already in process throughout the
country, receiving positive feedback from customers and staff.
--Introducing Risk-Based Processing and Underwriters in the Office of
Multifamily Production.--In order to increase processing
efficiencies, improving customer service and more effectively
manage risk, FHA Multifamily will segment and process
applications according to their risk profile and complexity,
assigning an underwriter to oversee the review of the
application from start to finish, drawing in technical experts
as needed.
--Creating Specialist Support in the Office of Multifamily Asset
Management.--The newly created positions of Troubled Asset
Specialist and Account Executives will allow Multifamily to
assign the most experienced staff to focus on risky, complex or
troubled assets, ensuring that the most skilled staff is
engaged to manage risk to the portfolio. Other Account
Executives with less expertise will focus on non-troubled
portfolio while building the expertise and skill sets to manage
more complex transactions.
--Streamlining Organizational Structures.--In headquarters, FHA
Multifamily will reduce the number of offices by merging the
Office of Housing Assistance and Grants Administration and the
Office of Housing Assistance Contract Administration Oversight
into other existing headquarters offices. A dedicated Associate
Deputy Assistant Secretary role will be created to support the
field while leadership also examines other offices for ways to
streamline and reduce duplication of efforts. In the field, 17
hubs will be consolidated into 5--and the total number of field
offices with Multifamily presence will decline from 50 to 10.
Affected employees will have the ability to relocate, accept a
buy-out, or take early retirement.
Upgrading the Department's Information Technology Infrastructure
In fiscal year 2014, HUD is requesting $285 million to support and
modernize its information technology (IT) infrastructure. This request
includes $45 million for the development, modernization, and
enhancement of key outdated systems; $116 million for the operations
and maintenance of our current systems; and $124 million to complete
the transition to our new IT infrastructure system, HUDNET. Department-
wide efforts will focus on transitioning the department to a modern,
sustainable IT infrastructure, and to continue the development of a
modern financial management system that will improve HUD's ability to
measure, track, and report on program costs and efficacy, and
transitioning the current FHA systems to a modern platform. These steps
are integral to the build the FHA systems and tools needed to manage
risk.
FHA in particular expects to expand its portfolio evaluation tool
capacity to get an ``early look'' at where the value of the MMI fund is
trending, and to incorporate new business policies or products when/
where needed. HUD has begun to decommission legacy FHA applications and
will continue this through the fiscal year 2014 request, freeing up
those IT dollars for reinvestment. These changes will allow HUD to
deliver services and manage its multi-billion dollar programs faster,
more accurately and using better information for analysis. These funds
are crucial to complement HUD's transformation efforts, providing
resources for maintaining and improving Department-wide information
technology systems.
conclusion
Madam Chairman, the HUD budget reflects the Administration's
recognition of the critical role the housing sector must play to ensure
that America becomes a magnet for jobs that strengthen the Nation's
middle class, including providing ladders of economic opportunity for
all Americans. Equally important, it expresses the confidence of the
President in the capacity of HUD to meet a high standard of
performance.
By targeting resources where they are most needed, making tough
choices in order to do more with less, and ensuring the protection of
taxpayer interests, FHA's Single Family, Multifamily, and Healthcare
Programs, are ensuring more Americans have the opportunity to realize
or maintain the economic security of the middle class. Our focus on
transforming the way we do business will ensure that we can continue to
remain a relevant and effective support to the housing market--one that
helps build the economy from the middle class out and ensures that we
create opportunity for everyone, everywhere. Thank you.
Senator Murray. Mr. Montoya.
SUMMARY STATEMENT OF HON. DAVID A. MONTOYA
Mr. Montoya. Thank you, Senator. Chairman Murray, Ranking
Member Collins, I am David Montoya, the Inspector General for
the Department of Housing and Urban Development. We join you in
remembering Senator Lautenberg's contributions to the United
States.
I want to take the opportunity to thank you for inviting us
to discuss issues on FHA and also to thank the Commissioner for
her collaborative efforts with my office over the last 1\1/2\
years that I've been there and some of the changes that we've
been looking to make with them.
FHA is an important spoke in the Nation's housing industry,
as FHA-insured mortgages finance approximately one-fourth of
all home purchases in the United States. For this reason, my
office has been aggressive in its oversight of the FHA program.
In fact, over the years, my office has consistently expressed
concerns about the level of oversight and risk taken on by FHA
and the effect this has had on its financial health.
PROPOSED RULEMAKING REQUIREMENTS
Unfortunately, and for a number of reasons, FHA has been
slow to respond to many of our recommendations. One reason is
FHA's requirement for proposed rulemaking. This process can
take years to finish and delays FHA's ability to make
regulatory changes or respond quickly to market conditions and
financial forces. Another reason for the slowness is a
reluctance, at times, to adopt our recommendations because of
FHA's concern over the impact changes would have on its market
share and how such changes would affect the industry.
One notable example dates back to 1999 regarding
recommendations my office made back then to discontinue the use
of seller-funded downpayment assistance. It took almost 9 years
for FHA to change this practice, and that inaction reverberates
today as these loans are expected to cost the Mutual Mortgage
Insurance Fund over $15 billion.
In another example, the Office of Inspector General
testified in 2009 about FHA taking on new risks, such as the
expansion of FHA's HECM program that you just mentioned. This
product has disproportionately and negatively impacted the MMI
Fund, and the President's budget has assigned a negative value
of approximately $5.2 billion to the HECM portfolio for 2013.
Overall, FHA estimates that it will need to use just under $1
billion of its appropriation authority to supplement its
reserves, largely due to the poor performance of the HECM
portfolio.
It remains that the fund has failed to maintain a capital
ratio of 2 percent for the past 4 years and each year has seen
a further decline in the fund's economic value, which has now
fallen to a negative $16.3 billion. Based on current actuarial
projections, the capital ratio will now not reach the 2 percent
level until 2017, which would represent 8 years continually
below the 2 percent threshold mandated by Congress.
REAL ESTATE-OWNED PROPERTIES
In addition to unprecedented levels of claims,
approximately $67 billion in just the last 4 years, FHA can
expect to see a continuing influx of claims for the foreseeable
future. FHA's reported default rate on seriously delinquent
loans as of January 2013 stood at approximately 9.5 percent.
Based on our analysis of FHA data, the total unpaid balance on
FHA's single family loans in default now exceeds $100 billion.
HUD also continues to face challenges in managing its
inventory of real estate-owned (REO) properties. HUD's
oversight will be critical to ensure that returns on property
sales are maximized, thereby reducing further losses to the
fund. FHA's losses on REO property sales exceeded $9 billion in
2012.
Another significant concern we continue to express is FHA's
ability to perform required financial management functions on
legacy systems that are at least 15 to 30 years old. FHA needs
to enhance its integrated insurance and financial systems.
Unfortunately, FHA's ability to replace the antiquated
infrastructure on which many FHA single family applications
reside has been delayed.
While FHA has taken various measures to restore the
financial health of the fund, we think more can be done with
adjustments to their actuarial modeling and in the area of risk
management and lender oversight. With regard to lender
oversight, my office continues to conduct reviews that have
shown high percentages of loans containing not only significant
deficiencies, but material incurable violations of HUD
underwriting requirements and standards that expose the fund to
an unacceptable level of risk and claims that FHA never agreed
to take on under the insurance program.
In conclusion, we remain concerned over the lack of
flexibility that would allow FHA to respond to market changes
and to our recommendations in a more timely way. FHA's
competing mandate to continue its role in restoring the housing
market, ensuring the availability of mortgage credit, and
continued lender participation in the FHA program should
heighten these concerns for policy makers.
My office is strongly committed to working with the
Department and the Congress to ensure that FHA remains the
viable and strong program it was intended to be.
PREPARED STATEMENT
This concludes my testimony. Again, thank you for allowing
me to speak to you today. I look forward to answering
questions.
[The statement follows:]
Prepared Statement of Hon. David A. Montoya
Chairman Murray, Ranking Member Collins, and members of the
subcommittee, I am David A. Montoya, Inspector General of the U.S.
Department of Housing and Urban Development (HUD). Thank you for the
opportunity to discuss the oversight of the Department that my office
conducts and current issues relating to the Federal Housing
Administration (FHA).
As part of the Department's primary mission to create strong,
sustainable, inclusive communities and quality, affordable homes for
all, HUD also assists families in obtaining housing by providing FHA
mortgage insurance. HUD is an important spoke in the Nation's housing
industry in that FHA-insured mortgages finance approximately one-fourth
of all home purchases in the United States.
Since becoming the Inspector General, I have had an ongoing
dialogue with FHA Commissioner Carol Galante on the challenges that the
Department and FHA face and the work my office has done in its
oversight capacity.
In a very coordinated effort, the Department and Office of
Inspector General (OIG) worked collaboratively to achieve a historic
result with last year's national mortgage settlement of more than $25
billion--the largest consumer financial protection settlement in U.S.
history. We are building on that success and have undertaken an
initiative to review fraudulent loan originations made by some of the
Nation's largest mortgage companies in the FHA program. These endeavors
showcase the accomplishments that we are engaged in, not only with the
Department, but also working closely with the U.S. Department of
Justice (DOJ).
While I continue to support our activities relating to these
reviews, I also endeavor to manage my limited resources to provide
proper oversight of the many other programs and operations within the
Department and its role in responding to Hurricane Sandy and other
disasters. The following testimony highlights some of the more pressing
issues facing the Department's administration of the FHA program,
particularly in light of its increased role in the marketplace.
a history of oig concerns and fha's slow response
HUD OIG has consistently expressed its concerns over the years
about the level of oversight and risk taken on by FHA and the effect on
its financial health. Unfortunately and for a number of reasons, FHA
has been slow to respond to many of our recommendations and has only
recently finally implemented some of them. For example, it has been
noted that while seller-funded downpayment-assisted loans have been
prohibited since the end of 2008, OIG has expressed its concern to FHA
over the negative impact of seller-funded downpayments on FHA as far
back as 1999. Loans using seller-funded downpayment assistance have
proven to place a substantial stress on FHA's Mutual Mortgage Insurance
(MMI) Fund.
OIG completed its first comprehensive analysis of seller-funded
downpayments in March 2000, looking in depth at this and the associated
program risks, as these loans increasingly began to consume a larger
share of FHA loan originations. We concluded that HUD allowed nonprofit
organizations to operate downpayment assistance programs that
circumvented FHA requirements. The downpayment loan transactions did
not meet the intent of FHA requirements in that the downpayment
assistance was not a true gift from the nonprofit; sellers raised the
sales price of properties to cover the cost of the seller-funded
downpayment assistance, causing buyers to finance higher loan amounts;
and default rates for buyers receiving downpayment assistance from
nonprofit organizations were significantly higher than for other FHA
loans. We recommended back then that HUD implement a proposed rule to
eliminate seller-funded nonprofit downpayment programs.
Our long-term concerns and findings were later validated by several
FHA-commissioned studies and by a U.S. Government Accounting Office
(GAO) study in 2005, 6 years after we first raised concerns. However,
FHA still resisted implementing our recommendation, in part because the
change would have required the Department to go through the rulemaking
process and there were concerns about whether FHA would prevail. More
significantly, however, was FHA's concern at the time about the impact
such a change would have on its market share. By 2006, the
concentration of nonprofit downpayment assistance had approached 25
percent of FHA's new business portfolio, including purchase and
refinance loans. FHA did not act to end the practice until 2007, and
then legal challenges caused further delay. Ultimately, legislation to
disallow the practice was enacted in 2008, too late to prevent the
looming losses we are now seeing.
The legacy of this delayed inaction reverberates today as seller-
funded downpayment-assisted loans continue to place significant stress
on the MMI Fund. According to HUD's fiscal year 2012 report on the
financial status of the fund, these loans account for only 4 percent of
the outstanding portfolio but are 13 percent of all seriously
delinquent loans. Over the life of the loans, seller-funded downpayment
loans are expected to cost the MMI Fund more than $15 billion.
Similarly, in 2007, FHA was pressing for ``reform'' legislation
that, among other things, would have raised loan limits and allowed FHA
to insure loans with no borrower downpayment requirement. At the time,
FHA's share of the mortgage market had fallen to less than 4 percent of
the total market and less than 2 percent of the total dollars for
mortgages originated in the United States. Indeed, with the ready
availability of conventional subprime financing, FHA was perceived as
becoming increasingly irrelevant, and the primary concern at FHA was to
find ways to increase its market share. It focused more on marketing
FHA loans than on instituting sound risk management and lender
oversight.
HUD OIG testified in March 2007 and expressed its concern as to
whether FHA was headed in the same direction as the subprime market
with its seemingly continued deregulation and introduction of
``riskier'' products as part of its proposed reform. FHA seemed to have
lost sight of the fact that since its inception, it has played a
cyclical role in the housing market, sometimes gaining market share in
times when it was needed to bolster the market and sometimes losing
share when the conventional marketplace was addressing the constituency
that FHA has always focused on: low- to moderate-income and first-time
potential home buyers. However, this always remained true; whether in
the conventional or Government mortgage programs, no loans should have
been given if the purchaser was unable to pay back the loan.
Finally, in April 2009, when the effects of the economic crisis and
collapse of the housing market were becoming more and more ominous, OIG
testified before this subcommittee and expressed its concern about the
impact of FHA's precedence-setting increased market share and HUD's
ability to manage the increased workload with its limited and stagnant
resources. FHA was also taking on new risk that needed to be managed.
As an example, the Housing and Economic Recovery Act of 2008 authorized
changes to FHA's Home Equity Conversion Mortgage (HECM) program that
enabled more seniors to tap into their home's equity and obtain higher
payouts. This office, at the time, raised concerns about HUD's ability
to provide proper oversight as there was a critical need for more
resources for FHA. Those resources were needed to:
--enhance its information technology (IT) systems;
--increase its personnel to meet escalating processing requirements;
--increase its training of personnel to maintain a workforce with the
necessary skills to deal with the responsibility of this new
portfolio;
--oversee the many contractors it maintained; and
--increase its oversight of all critical front-end issues, including
such important areas as the appraisal, lender approval, and
underwriting processes.
The HECM program was originally projected to be profitable for FHA
but has turned out to be a substantial drain on the insurance fund. I
will discuss the HECM program in more detail later in my testimony.
While Secretary Donovan and FHA Commissioner Galante are proactive and
supportive of OIG and its recommendations, I have to note, as described
above, that FHA's reluctance over the years to more quickly deal with
its looming issues has taken a toll, a toll we are only now beginning
to understand. FHA has been trying to improve its financial position in
recent years with legislative and regulatory proposals. But as we said
years ago at the beginning of the subprime crisis, movement in the
Department is more like turning an ocean liner than driving a fast boat
through the tempests and currents of an ever-changing mortgage market.
A recent example of FHA's apparent inability to quickly react to
changing conditions can be seen in its efforts to require lenders to
indemnify HUD for serious and material violations of FHA origination
requirements and for fraud and misrepresentation in connection with the
origination of FHA loans. Historically, HUD has sought such
indemnifications through agreement with the lenders. HUD already
possesses the statutory authority to require such indemnifications for
lenders participating it its Lender Insurance program and issued a
proposed rule in October 2010 to, among other things, provide
additional guidance on HUD's regulations implementing this authority.
The rule was not finalized until January 2012, and the mortgagee letter
to implement the change in policy was not issued until a month ago on
April 10. According to the mortgagee letter, the revised
indemnification policy is effective for all loans insured by Lender
Insurance program lenders on or after that date. Thus, 2\1/2\ years
have passed since the rule was proposed, and it remains to be seen
whether this will be an effective tool in recovering losses since FHA's
homeownership centers have yet to implement the change. To further
exacerbate this situation, since 2010, HUD has been seeking statutory
authority to require indemnifications from the remaining 70 percent of
its direct endorsement lenders that do not participate in the Lender
Insurance program.
Based on OIG's experience in dealing with FHA over the years, we
remain concerned about HUD's resolve in taking the necessary actions
going forward to protect the fund. HUD is often hesitant to take strong
but needed actions against lenders because of its competing mandate to
continue FHA's role in restoring the housing market and ensure the
availability of mortgage credit and continued lender participation in
the FHA program. Nevertheless, OIG has generally been supportive of
FHA's initiatives to raise premiums and better manage its risk,
including the establishment of its Office of Risk Management.
Similarly, we strongly agree with HUD's position that FHA needs
legislative changes to afford it greater flexibility to make changes to
its policies and procedures as history has shown that it needs to be
able to react more quickly to market changes and avoid losses that can
accrue during a lengthy rulemaking process. In this light, my office is
developing its own set of recommended legislative initiatives that we
believe can further strengthen FHA's ability to mitigate risk and
recover losses to the insurance fund and enhance OIG's ability to
address fraud, waste, and abuse in the program. We will be vetting
these proposals with FHA and the appropriate committees.
financial health of the fha mutual mortgage insurance fund
FHA's MMI Fund is the largest of its four mortgage insurance funds.
The fund consists of a system of accounts used to manage FHA's single-
family mortgage insurance programs. The Cranston-Gonzalez National
Affordable Housing Act of 1990 mandated that the MMI Fund maintain a
capital ratio of 2 percent from October 1, 2000, forward. The capital
ratio is defined as the ratio of the fund's economic value to its
insurance in force. The economic value essentially represents capital
that exceeds the amount needed to cover anticipated losses. Clearly,
when establishing this mandate, Congress voiced its concerns that some
sort of cushion was important to maintain. The capital ratio has been
below this required 2 percent level for the past 4 years, and each year
has seen a further decline in the ratio to the point at which, based on
the latest actuarial study in November of last year, the ratio has
fallen below zero to negative 1.44 percent, which represents a negative
economic value of $16.3 billion. The economic value of the forward
portfolio was estimated at negative $13.5 billion and the HECM
portfolio at negative $2.8 billion. These economic values represent
capital reserve ratios of negative 1.28 percent and negative 3.58
percent, respectively.
Over the last several years, FHA has increased premiums and taken
other steps to restore the financial health of the MMI Fund.
Nevertheless, based upon FHA's deteriorating financial condition, in
February 2013, GAO included FHA concerns in its ``high risk'' section
relating to ``Modernizing the U.S. Financial Regulatory System and
Federal Role in Housing Finance.'' It was not FHA itself that was
deemed a high risk but, rather, FHA as part of the larger high-risk
concern over the Federal role in housing finance.
While we acknowledge the Department's actions to address the MMI
Fund's finances, my office remains concerned about whether the actions
are enough to make up for the losses FHA has sustained and to reach the
required 2 percent level anytime in the near future. For example, FHA
is now using credit scores as part of the eligibility requirements for
FHA loans. As of October 2010, borrowers with credit scores below 500
are no longer eligible for FHA insurance, and the maximum loan-to-value
ratio for borrowers with credit scores between 500 and 579 is 90
percent. At the time these changes were being proposed, we expressed
our overall support but also took the position that the changes did not
go far enough and would likely have minimal impact on the MMI Fund in
terms of bringing in additional premiums. While FHA enacted increased
downpayment requirements for borrowers with credit scores below 580, we
noted that loans for borrowers with credit scores below 580 were less
than 1 percent of new activity. Moreover, the 580 credit score
threshold is well into what is traditionally considered subprime
territory in the conventional marketplace. A higher downpayment
requirement at the appropriate credit score level would force borrowers
to have more personal stake and financial exposure, which we believe
would have a more meaningful impact in protecting the fund due to the
larger volume of loans at higher credit score levels. The more a
borrower is personally financially invested in a loan, the more
unlikely he or she will be willing to give up on the investment.
As shown in the chart below from data we obtained from HUD's
systems as of April 12, 2013, FHA has experienced high levels of claims
in recent years compared with levels seen before the financial crisis.
For purposes of illustration, the following chart reflects total FHA
insurance claims from calendar years 2005 through 2008, the year that
the current financial crisis began.
FHA INSURANCE CLAIMS
--------------------------------------------------------------------------------------------------------------------------------------------------------
Forward mortgage claims Home equity conversion Loss mitigation claims Total
------------------------------ mortgage claims -----------------------------------------------------------
Year ------------------------------
Claims Amount paid Claims Amount paid Claims Amount paid Claims Amount paid
--------------------------------------------------------------------------------------------------------------------------------------------------------
2005............................ 68,455 $6,562,000,000 1,187 $87,000,000 75,407 $119,000,000 145,049 $6,768,000,000
2006............................ 57,243 5,595,000,000 1,514 143,000,000 82,365 170,000,000 141,122 5,908,000,000
2007............................ 54,556 5,629,000,000 2,257 256,000,000 84,758 150,000,000 141,571 6,035,000,000
2008............................ 62,440 6,981,000,000 3,149 381,000,000 104,092 204,000,000 169,681 7,566,000,000
-----------------------------------------------------------------------------------------------------------------------
Total 2005 to 2008........ 242,694 24,767,000,000 8,107 867,000,000 346,622 643,000,000 597,423 26,277,000,000
-----------------------------------------------------------------------------------------------------------------------
2009............................ 83,881 10,163,000,000 4,652 567,000,000 131,115 268,000,000 219,648 10,998,000,000
2010............................ 119,830 15,654,000,000 5,681 559,000,000 208,876 411,000,000 334,387 16,624,000,000
2011............................ 118,475 15,144,000,000 8,684 928,000,000 173,163 563,000,000 300,322 16,635,000,000
2012............................ 155,266 20,245,000,000 14,207 1,432,000,000 142,551 660,000,000 312,024 22,337,000,000
-----------------------------------------------------------------------------------------------------------------------
Total 2009 to 2012........ 477,452 61,206,000,000 33,224 3,486,000,000 655,705 1,902,000,000 1,166,381 66,594,000,000
=======================================================================================================================
Grand total 2005 to 2012.. 720,146 85,973,000,000 41,331 4,353,000,000 1,002,327 2,545,000,000 1,763,804 92,871,000,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
As reflected in the charts above, the amount FHA paid in claims
during the last 4 years was about 2\1/2\ times the amount paid during
the preceding 4 years ($66.6 billion vs. $26.3 billion). The total
amount of claim payments rose substantially in 2009 and has continued
to increase.
Apart from the obvious financial implications, this situation
creates a challenge for FHA, since the Prompt Payment Act requires HUD
to pay the claim on a defaulted FHA-insured mortgage within 30 days and
only then can it go back to the lender that underwrote the loan to
recover losses incurred if it finds that the loan was ineligible for
insurance. Thirty days is an insufficient amount of time for HUD to
determine whether a loan was ineligible for insurance due to fraud or
misrepresentation in the loan origination process. The result of this
requirement places HUD in a ``pay and chase'' situation as our past
audits have expressed concern over HUD's exposure when paying claims on
loans that were not qualified for insurance. In addition, FHA has been
resistant and slow in implementing a rigorous claim review process and
to recover losses from lenders instead relying primarily on a strategy
to focus efforts on loans that had not reached claim status. FHA only
recently agreed with recommendations we made as far back as 2006 and
again in 2011 to review all loans for which a claim was paid within the
first 24 months, claims we define as high-risk claims. This matter
takes on even greater importance in light of the significant amount of
claims projected to be filed by lenders in the coming months and HUD's
current limited capacity for reviewing submitted claims.
In addition to the unprecedented levels of claims noted above, FHA
can expect to see a continuing influx of claims in the foreseeable
future. The latest FHA-reported default rate (seriously delinquent
loans) as of January 2013 stood at 9.49 percent. By comparison, the
default rate in September 2008 was 6.91 percent. Based on our analysis
of FHA data, the total unpaid balance of FHA single-family loans in
default now exceeds $100 billion.
FHA LOANS IN DEFAULT (3 MONTHS OR MORE DELINQUENT) AS OF MARCH 31, 2013
------------------------------------------------------------------------
Loans Unpaid balance
------------------------------------------------------------------------
724,173........................................ $103,324,000,000
------------------------------------------------------------------------
While FHA has taken a position that its current losses are
primarily from loans made from 2007 to 2009, it continues to project
that the current and future years' books of business will be profitable
and make up for these past years' losses. However, what we have seen in
the past 4 years is a troubling trend, whereby the point at which the
MMI Fund is expected to reach its mandated capital level is pushed
farther into the future. In the fiscal year 2009 independent actuarial
study, it was predicted that by the end of fiscal year 2011, the MMI
Fund's capital ratio would be 1.74 percent and that the MMI Fund would
meet the 2 percent mandate sometime during fiscal year 2012. In the
following 3 years, that forecast has changed dramatically as the
capital ratio has continued to move in the wrong direction and is now
negative. In addition, we now have concerns about the fiscal year 2010
and 2011 books of business as their profitability appears to be lower
than projected and budgeted, as indicated and supported in the fiscal
year 2014 Federal Credit Supplement to the Budget, although not as
substantially different as the reestimates from the earlier years of
2007 to 2009.
Based on current projections, the capital ratio will not reach the
2 percent level until 2017, marking 8 years below the 2 percent
threshold. Moreover, these estimates are heavily influenced by the pace
at which housing prices will recover. Any additional slowdown in the
housing market will increase FHA losses and further delay FHA's ability
to meet its statutorily mandated 2 percent requirement. We continue to
work with FHA to ensure that it is instituting sound risk management
and lender oversight practices to avoid further exposure of the MMI
Fund to losses.
My office also continues to stress that the FHA actuarial model is
complicated and difficult to audit, use, and employ for risk management
and strategic planning purposes. The model inhibits frequent updates as
well as the ability to understand changes in specific programs or risk
categories. Ultimately, its current design and objective are to be in
statutory compliance and do not promote FHA's timely use of policy
corrections based on products, cohorts, or risk classifications for
current or interim benchmarking decisions. While we have recommended
modeling at the midterm or quarterly, which we believe would provide
FHA a better basis for timely policy corrections and assessing the
actuarial value of the MMI Fund, the model cannot be easily changed
because it is proprietary and owned by the actuarial firm. I continue
to have discussions with the FHA Commissioner regarding these issues.
With regard to one recent change in the modeling, the 2012
actuarial study applied a stochastic method to estimate the net present
value of future cash flows. This was done to a large extent because of
recommendations by OIG and GAO, recommendations that had been made for
some years before 2012.
home equity conversion mortgage program
The FHA HECM program is the only Government-insured reverse
mortgage program. The HECM program guarantees that the lender will meet
its payment obligations to the homeowner, limits the borrower's loan
origination costs, and insures full repayment of the loan balance to
the lender up to the maximum claim amount; that is, the lesser of the
appraised value at origination or the national HECM loan limit of
$625,500. HECM insurance endorsements in fiscal year 2012 were down by
25 percent from fiscal year 2011 levels to 54,591. Fiscal year 2012
marks the third consecutive year in which HECM volume has declined.
Yet, with a declining HECM demand, FHA asserts that the fiscal year
2014 budget request for $943 million is largely due to the existing
HECM portfolio. This product, particularly as it has been structured to
date, is sensitive to home prices and economic conditions. This
condition has resulted in a negative value of $5.248 billion and a
disproportionately negative impact to the MMI Fund from the HECM
program.
FHA is proposing, either through the granting of the legislative
authority described below or via the much longer rule-making process,
the following measures:
--Limiting the draw at origination to mandatory obligations;
--Addressing the issue of non-borrowing spouse language in the fiscal
year 2015 budget;
--Performing a financial assessment of borrowers as a basis for loan
approval and determining the suitability of various HECM
products to protect consumers from acquiring loans not fit for
their situation; and
--Establishing a tax and insurance set-aside to ensure that
sufficient equity or an annuity is available to pay taxes and
insurance on the mortgaged property so that defaults resulting
from nonpayment of taxes and insurance can be avoided.
While OIG supports these proposed changes, it continues to raise
concerns about FHA's belated actions. Since 2008, OIG has been
proposing similar changes to the HECM program based on results of its
audit and investigative work. The four OIG reports discussed below
identified problems with reporting borrowers' deaths, payment of
required property taxes and insurance, reliability of financial data,
and compliance with the HECM residency requirement.
A 2008 audit found that HUD did not ensure that FHA lenders
reported HECM borrowers' deaths in accordance with Federal
requirements. HUD could not be assured that FHA lenders appropriately
met HUD's time requirement for initiating the foreclosure process or
recording the deeds-in-lieu to take possession of the property, which
impacted the amount of the lender's insurance claims.
In an internal audit issued in August 2010, we determined that HUD
had not tracked almost 13,000 defaulted HECM loans with maximum claim
amounts of potentially more than $2.5 billion. The audit found that an
increasing number of borrowers had not paid required taxes or
homeowner's insurance premiums, thus placing the loan in default. We
noted that HUD granted foreclosure deferrals routinely on these
defaulted loans but it had no formal procedures to do so. HUD's
informal foreclosure deferral policy had a negative effect on the
universe of HECM loans and loan servicers. After canceling its informal
policy, HUD did not issue guidance to servicers advising them of what
action to take regarding defaulted loans. Thus, servicers continued to
service the loan and paid the taxes and insurance for the borrowers
without notifying HUD. As a result, four servicers contacted were
holding almost 13,000 defaulted loans with a maximum claim amount of
more than $2.5 billion, and two of the four servicers said they were
awaiting HUD guidance on how to handle them.
The servicers had also paid approximately $35 million in taxes and
insurance on these loans. HUD was unable to identify the deferred or
defaulted loans in its system and did not track the number of borrowers
who were unable to pay their taxes or insurance premiums. Since
unreported defaulted loans were only obtained from 4 of a total of 16
HECM servicers nationwide, more defaulted loans may have existed. Since
HUD could not track these loans, it did not know the potential claim
amount in the event of foreclosure of about 7,700 loans of which HUD
was aware and about 13,000 loans of which it was not aware and could
lose an additional estimated $1.4 billion upon the sale of the
properties.
In June 2011, we issued a report on HECM loan payments made after
the death of the borrower. Our results indicated a few instances in
which unscheduled advance payments were made after the death of the
borrower, which resulted in claims paid by HUD, although we did not
believe this was a systemic problem. In most cases, we found that
scheduled payments were not actually made after the death of the
borrower but were incorrectly recorded in HUD's Insurance Accounting
Collection System by the lenders. More noteworthy was the fact that
loan proceeds from the sale of property and claims paid by HUD were not
credited to the HECM loan balances in a timely manner, resulting in
inaccurate information being reported to HUD, causing unreliable
financial data to be used by HUD. This evaluation also noted instances
in which HECM loan servicing files contained indications of suspicious
or potentially fraudulent transactions; however, there was no evidence
that such matters were referred to HUD for further action. Lender
officials stated that HUD's guidance in this area was too broad and
that specific fraud indicators should be included in any future
guidance.
Finally, in an internal audit issued in December 2012, we found
that HUD policies did not always ensure that borrowers complied with
program residency requirements under the HECM program. A review of 174
borrowers indicated that 37, or 21 percent, were not living in the
property associated with the loan as required by the residency
requirement to participate in the HECM program. These 37 loans were
ineligible and should have been declared in default and due and payable
to reduce the potential risk of loss of about $525,000 to HUD's
insurance fund. These 37 loans had already been advanced $5.8 million,
with the $525,000 remaining to be disbursed, although the borrowers
were not living in the home.
In addition to the above-mentioned audits and reviews, the OIG
Office of Investigation completed a number of criminal cases in which
the criminals used elderly straw buyers to obtain HECM loans.
Due to the negative value of the MMI Fund, OIG plans to work
closely with FHA in obtaining its proposed changes to the HECM program
and in furthering other OIG-recommended changes to the program.
oig efforts to recover losses and address fraud against the mmi fund
As noted earlier, FHA has taken various measures to restore the
financial health of the MMI Fund. OIG has also played an active role in
this regard by aggressively pursuing and recovering losses from lenders
that were engaged in questionable and often fraudulent underwriting of
FHA loans. In the early part of 2011, OIG, in partnership with HUD and
DOJ, initiated a number of mortgage lender reviews, whereby statistical
samples of claims, defaults, and all other loans were drawn to
determine the accuracy and due diligence of the underwriters of FHA
loans by a number of the Nation's largest lenders. The reviews
completed to date have resulted in a total of $1.24 billion in civil
settlements for alleged violations of the False Claims Act and for
failure to fully comply with FHA requirements. Some of these
settlements involved some of America's largest lending institutions.
The loan-level reviews OIG has been conducting and which have
resulted in large civil fraud settlements with major lenders are on the
order of what we would expect HUD to be doing for itself as an inherent
program responsibility. Examples of these activities include (1)
reviews of seriously delinquent loans before claim submission and
terminated loans upon claim submission for origination and
misrepresentations and (2) claim mitigation in which claims are
reviewed for documentation issues, violations of servicing
requirements, and potential collateral-related defects. These examples
are normal and expected practices in the private mortgage insurance
sector. This issue relates to earlier comments about FHA's resistance
to and slowness in implementing a rigorous claims review process and
going back to the lenders to recover losses instead relying primarily
on a strategy to focus efforts on loans that had not reached claim
status.
OIG continues to aggressively review lender origination and
underwriting practices as part of its ongoing oversight efforts in a
housing market that for years was reckless about lending money.
Imprudent business practices became a pervasive problem, and now those
loans underwritten during that time are having a significant negative
impact on the MMI Fund. The result has been a dramatic increase in
mortgage delinquencies, defaults, and foreclosures. Too often lenders
ignored FHA requirements to get a loan approved. Borrowers were sold
unsustainable mortgages, sometimes unsuspectingly and sometimes with
their full knowledge, which encouraged widespread indifference to the
ability of many consumers to repay their loans. Some lenders thought
they could make money on a loan even if the consumer could not pay back
that loan, by either banking on rising housing prices or passing along
the mortgage into the secondary market.
Adding to this problem was a 100 percent insurance guarantee by
FHA, which created no real financial exposure to these losses on the
part of the lender and in some cases, no real incentive to comply with
the requirements of participation. The practices of many lenders were
not just the result of poor procedures but involved real infractions of
good business stewardship and proper behavior when participating in the
FHA program. A failure by FHA to create a strong and meaningful
oversight atmosphere creates an environment that virtually invites the
abuses we have seen in our lender reviews. Quite simply, lenders are
responsible for complying with all applicable HUD regulations and in
turn are protected against default by FHA's insurance program for doing
so. To provide some context, mortgage fraud is second only to
healthcare fraud on DOJ's list of investigative and prosecution
priorities.
Indeed, our reviews have shown high percentages of loans containing
significant deficiencies, loans that clearly should not have been
underwritten. Our reviews look for major noncompliance and a failure to
follow the rules that have long been established. We are not looking at
close-call interpretations of underwriting but wholesale abandonment of
the core requirements that leads to huge default and claim rates for
FHA-insured mortgages.
By way of example, my office is currently reviewing one lender's
claims to FHA using a statistically representative sample of all claims
it made in a given period. The statistical sample pool was 85 loans.
While these results are preliminary, 91 percent of those loans had
significant deficiencies, 77 of 85 loans. Of those loans with
significant deficiencies, 87 percent, or 67 loans, had material,
incurable violations of HUD underwriting requirements and standards.
These violations were essentially incurable by the lender and exposed
the FHA insurance fund to an unacceptable level of risk and claims that
it did not agree to take on under the insurance program.
In another ongoing example, we conducted a review of a
statistically representative sample of claims at another lender. Again,
the statistical sample pool was 85 loans. Again citing preliminary
results, the percentage of those loans that had significant
deficiencies was 100 percent. Of those 85 loans, 78 loans (92 percent)
had material, incurable violations of HUD underwriting requirements and
standards. We expanded our review to defaults for this lender using a
statistically representative sample, which resulted in a sample pool of
110 loans. Our preliminary review found that every one of those loans--
110 of 110 (100 percent)--had significant deficiencies. Of those 110
loans, 95 (86 percent) had material, incurable violations of HUD
underwriting requirements and standards that also exposed the FHA
insurance fund to an unacceptable level of risk and claims that it did
not agree to take on under the insurance program.
To be clear, we are not talking about minor deficiencies. These
reviews are exposing violations of HUD's underwriting requirements and
standards, which constitute substantive material violations. Therefore,
the underwriter's certifications to HUD are false, and those loans can
form the basis of a False Claims Act case. The types of substantive
material violations that we are uncovering amount to violating
fundamental requirements of insuring a loan, which include failing to
document a borrower's income and employment, failing to evaluate all
recurring debt obligations that FHA requires an underwriter to
consider, and failing to verify that the borrowers possess the
necessary funds to close the loan.
It is OIG's contention that if lenders follow a well-established
quality control plan, exercise due diligence and good industry
practices, follow required procedures, and submit documented conforming
loans based on a reasonable good faith determination of a consumer's
ability to repay the loan, their lending behavior does not have to be
unduly constrained nor should they overly restrict making responsible
loans.
inventory of foreclosed-upon single-family properties
In prior years, we have reported on various concerns relating to
HUD's procurement and contract management, including HUD's IT
infrastructure contracts and HUD's transition to the third generation
of its management and marketing contracts that are used to manage and
dispose of its extensive inventory of foreclosed-upon single-family
properties, known as real estate-owned (REO) properties. HUD continues
to be challenged by its overreliance on contractors in general and its
ability to allocate sufficient resources to adequately oversee its
contractor workforce. Since taking this position, I have made it a
priority to take a closer look at the Department's procurement and
contract management processes to ensure that waste, fraud, or
mismanagement can be identified at its earliest occasion.
HUD's inventory of REO properties had increased dramatically from
about 45,700 properties in March 2010 to nearly 69,000 at the end of
March 2011. The inventory declined after HUD restructured its
management and marketing contracts and as of January 2013, stood at
about 39,000. While the decline from the historically high levels of 2
years ago is a positive trend, the percentage loss on the sale of these
properties remains high but has begun to decline. Still, during fiscal
year 2012, losses averaged about 62 percent of HUD's acquisition cost.
In contrast, HUD's average loss during 2007 was about 40 percent. HUD's
oversight of these management and marketing contractors will be
critical to ensure that returns on property sales are maximized,
thereby reducing further losses to the FHA insurance fund. During
fiscal year 2012 alone, FHA's losses on REO property sales exceeded
$9.2 billion.
We recently completed an audit of HUD's oversight of its REO
Management and Marketing program to determine whether HUD's policies
and procedures provided for efficient and effective oversight of asset
managers and field service managers under the program. We determined
that HUD did not have adequate procedures in place to ensure consistent
and adequate enforcement of asset and field service manager contracts.
Specifically, (1) list prices were not always reduced according to the
marketing plans, (2) bids were approved that did not meet HUD's
flexible threshold, (3) bids were rejected that met the marketing plan
thresholds, (4) bids that met applicable thresholds were not always
counteroffered or forwarded to the government technical representative
for approval, and (5) properties were not assigned to field service
managers based on performance even when HUD identified performance
issues.
financial management systems
Since fiscal year 1991, OIG has annually reported on the
Department's lack of an integrated financial management system,
including the need to enhance FHA's management controls over its
portfolio of integrated insurance and financial systems. We continue to
report that HUD's financial management systems have not substantially
complied with the requirements of the Federal Financial Management
Improvement Act of 1996, which encourages agencies to have systems that
generate timely, accurate, and useful information with which to make
informed decisions and to ensure accountability on an ongoing basis.
This situation could negatively impact HUD's ability to perform
required financial management functions and efficiently manage
financial operations of the agency, notably FHA, which could translate
to lost opportunities for achieving mission goals and improving mission
performance.
In August 2009, FHA completed the Information Technology Strategy
and Improvement Plan, which identified FHA's priorities for IT
transformation. The plan identified 25 initiatives to address specific
FHA lines of business needs. Initiatives were prioritized, with the top
five being single-family related.
To date, FHA has completed a few of the goals but not all due to a
lack of funding. FHA is working on acquiring risk management tools but
has only made substantive progress with its initial objective. During
our upcoming audit of FHA's fiscal year 2013 financial statements, we
will be reviewing FHA's progress in implementing this plan.
The plan also called for FHA to create a program management office
to facilitate coordination and communication, track and report
progress, provide support to managers, and support organizational
change management activities. This office was put into place almost
immediately after the funding became available and is being led by a
long-term IT staffer.
Since fiscal year 2009, the FHA Transformation Initiative's focus
has been on improving its counterparty management by automating the
certification processes and acquiring risk management tools to monitor
lender activity. In conjunction with these development activities, FHA
has procured the IT infrastructure needed for its planned improvements
to multifamily underwriting and single-family insurance program
support.
Our biggest remaining IT concern is FHA's ability to replace the
antiquated infrastructure on which many FHA single-family applications
reside in a timely manner. For example, FHA's general ledger is an
Oracle system, which has to interface with multiple older COBOL
systems. None of the older legacy COBOL systems have received
sufficient funding to be replaced, yet they are expensive to maintain.
Due to a lack of funding, interfaces and the related systems are still
in place. While there may have been some programming changes, we
understand that these were basically patches or temporary fixes to
implement specific policy changes.
Overall, it appears that funding constraints have reduced the FHA
Information System Transformation project to a continuation of high-
level planning without a defined timetable to complete the new
application systems and to phase out and deactivate the current
outdated systems. These delays bring about another concern: the ability
to maintain the antiquated infrastructure on which some of the HUD and
FHA applications reside while the Transformation Initiative is
underway. Workloads have dramatically increased and are processing on
systems that are 15 to 30 years old. These legacy systems must be
maintained to effectively support the current market conditions and
volume of activity. However, the use of aging hardware and software can
result in poor performance and high maintenance costs. If the IT
infrastructure is not modernized in a timely manner, it will become
increasingly difficult and expensive to maintain operations, make
legislatively required system modifications, and maintain interfaces to
other IT systems.
recent oig investigative and audit results
As mentioned earlier, HUD OIG conducts criminal investigations
involving allegations of fraud against HUD's programs, including theft,
embezzlement, and false statements by program participants and
recipients. The investigations may be generated from leads provided by
HUD program staff, the mortgage industry, and other sources and may be
conducted jointly with Federal, State, and local law enforcement
agencies. Our long-term investigative experience in the area of
mortgage fraud schemes has given us proficiency and extensive knowledge
to address these issues. Many ``traditional'' fraud schemes continue to
affect FHA, such as appraisal fraud, identity theft, loan origination
fraud, rescue and foreclosure fraud, and fraud in the HECM program.
The following represent some examples of recent investigations:
--A former mortgage company loan officer was sentenced to 54 months
incarceration and 3 years supervised release and was ordered to
pay more than $9.2 million in restitution to FHA. He conspired
with others to create and submit false and fraudulent FHA
mortgage loan applications and accompanying documents to a
lender on behalf of unqualified borrowers. He created false pay
stubs, Federal tax forms, verification of employment forms,
explanation letters, and other documents to ensure that
otherwise unqualified borrowers could obtain FHA-insured loans.
He enticed borrowers to obtain an FHA mortgage by paying them
an incentive of up to $20,000 per loan. More than 75 FHA loans
were approved using this false information with more than 31
claims identified. The loss to FHA was estimated at $6.5
million. The mortgage company was terminated as an FHA-approved
lender, and the loan officer and others were suspended pending
debarment action. Our investigation is continuing.
--A former senior vice president and loan officer, a former senior
vice president of residential lending, a former underwriter,
and a former loan processor pled guilty to conspiracy to submit
false statements in loan applications and submitting false
statements in loan applications to FHA. The defendants were
involved in originating and approving FHA-insured loans and
conventional loans that contained fraudulent information. The
case involved approximately 1,900 FHA loans. To date, FHA has
incurred losses in excess of $36 million after paying claims on
and disposing of 234 foreclosed-upon properties. An additional
393 loans, with an unpaid balance in excess of $92 million,
have been identified as delinquent or in various stages of the
foreclosure process. The bank was closed by the Federal Deposit
Insurance Corporation and is no longer in business. The above-
noted defendants have been recommended for suspension and
debarment action, and our investigation continues.
--Two former principals of a HUD-approved mortgage company pled
guilty to one count of racketeering following their indictment
in June 2011. The defendants were involved in a complex scheme
to defraud FHA through a series of false statements on at least
65 FHA loans totaling in excess of $10 million. The fraudulent
acts included the use of straw purchasers, phony employers,
bogus bank statements and pay stubs, forged college
transcripts, counterfeit court documents, and phony downpayment
gifts. Additionally, the defendants profited from the scheme by
recording junior mortgages that were payable to business
entities or associates from the loan proceeds. The mortgage
company's FHA approval was terminated, and the company's
principals were suspended pending their debarment.
OIG's Joint Civil Fraud Division conducts reviews of FHA-approved
lenders. The reviews continue to disclose serious deficiencies in the
originating and underwriting of FHA mortgages. As noted earlier, many
of these reviews were conducted in support of our efforts to recover
losses. These reviews and our audit work focus on areas in which HUD
can improve its oversight and management of its single-family mortgage
insurance programs. For example, as noted earlier, OIG reviewed the
foreclosure practices for five of the largest FHA mortgage servicers
(Ally Financial, Incorporated; Bank of America; CitiMortgage; JPMorgan
Chase; and Wells Fargo Bank) due to reported allegations made in the
fall of 2010 that national mortgage servicing lenders were engaged in
widespread questionable foreclosure practices involving the use of
foreclosure ``mills'' and a practice known as ``robosigning.''
In September 2012, we summarized the results of the five reviews,
which were used by DOJ and 49 State attorneys general to negotiate a
settlement with the five lenders totaling $25 billion. The Federal
settlement payment amount of more than $684 million would be used for
(1) losses incurred to FHA's capital reserve account and the Veterans
Housing Benefit Program Fund or as otherwise directed by the U.S.
Department of Veterans Affairs and the U.S. Department of Agriculture's
Rural Housing Service and (2) the resolution of qui tam actions.
As result of this work, OIG recommended that HUD:
--determine the changes needed to FHA's servicing and foreclosure
policies based on the consent judgments and ensure that the
servicers incorporate the necessary changes into their
procedures for servicing FHA-insured loans;
--ensure that the servicers establish or implement adequate
procedures and controls to address the control deficiencies
cited in the five issued memorandums, including but not limited
to the withholding of claims for insurance benefits and the
retention of appropriate legal documentation supporting the
appropriateness of the foreclosure for all FHA-insured
properties for the life of the loans; and
--pursue appropriate administrative sanctions against attorneys who
may have violated professional obligations related to the
foreclosure of FHA-insured properties.
Finally, the Department continues to face challenges in ensuring
that its single-family programs benefit eligible participants and do
not pay improper claims. In a recent audit of FHA's Preforeclosure Sale
Program, OIG identified that, based on a statistical projection FHA
paid an estimated $1.06 billion in claims for 11,693 preforeclosure
(short) sales that did not meet the criteria for participation in the
program. This condition occurred because HUD did not have adequate
controls to enforce the program requirements and requirements were not
well written. Specifically, FHA relied entirely on the lenders in
approving borrowers for the program and did not provide lenders with
detailed instructions for reviewing borrower assets. As a result, the
FHA insurance fund may have taken unnecessary losses while borrowers,
who may otherwise have been able to sustain their obligations, were
inappropriately relieved of their debt using FHA insurance fund
reserves. FHA has agreed that existing program policy and lender
execution against that policy are inconsistent. In response to our
recommendations to improve alignment and ensure that the long-term
interest of the FHA insurance fund are met, FHA is working toward (1)
introducing a streamlined program approval policy based on loan
characteristics and a borrower credit profile and (2) specifying income
documentation requirements for the income deficit test that must be met
for borrowers who do not meet the streamlined requirements.
conclusion
The Department's role has greatly increased, while staffing has
decreased, over the last decade as it has had to deal with
unanticipated disasters and economic crises in addition to its other
missions, which have increased its visibility and reaffirmed its vital
role in providing services that impact the lives of our citizens. The
Department can do more to address the internal control and program
weaknesses in FHA. 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 for the benefit of the
American taxpayers now and into the future. I look forward to working
with the Department and this subcommittee to accomplish some of these
goals.
Senator Murray. Thank you very much, both of you.
MUTUAL MORTGAGE INSURANCE FUND
Commissioner Galante, let me start with you. The budget
states that $943 million may be needed to cover losses in FHA's
MMI Fund in fiscal year 2013. This follows on the most recent
actuarial report showing that the capital reserve account is
expected to go negative.
Can you explain the process HUD goes through to come up
with these estimates, including any changes to this year's
model?
Ms. Galante. Certainly. Thank you, Chairman, for the
question. To be clear, FHA goes through two different
processes. The independent actuarial that is done and was
released in November 2012 looks at the 30-year projections of
what is necessary for projected losses under the fund under
economic conditions that they are projecting through
independent indices.
The President's budget takes a look at the same kinds of
conditions, but uses their own analysis of interest rates,
house prices, and what-not in terms of how the projection of
the budget re-estimate is made. So they're similar processes,
but they're two different processes.
With respect to the actuarial, I would just say we made a
number of changes, or the actuarial made a number of changes
this year, including going to what's called stochastic
modeling, which models a variety of economic paths more
clearly, more distinctly than it had done in the past, as well
as how it looked at the defaulted loans and how they would
transition from performing to non-performing and how that
works--so a number of important changes in the model.
Senator Murray. Mr. Montoya, you raised concerns about the
2010 and 2011 books of business. Can you tell us what your
specific concerns are?
Mr. Montoya. Our concerns are that they aren't appearing to
be as profitable as we think FHA has sort of rested their
future estimates on. While they're not far off from some of the
estimates FHA has, it's our feeling they may be weighing too
much on how successful they will be.
Senator Murray. Weighing too much?
Mr. Montoya. Yes, ma'am, that they would be less successful
than they anticipate to be.
Senator Murray. Commissioner Galante, do you want to
respond to that?
Ms. Galante. Certainly. The budget re-estimate process, as
part of the President's budget, every year re-estimates every
cohort of business that FHA does and determines whether the
estimates that had been done the year before, based on current
economic conditions, would still hold. So the Inspector General
is correct that for 2010 and 2011, the re-estimate this year
was that those books of business were not as profitable as they
had been anticipated to be. But they certainly still were very
profitable and successful books of business.
On the flip side, the 2012 cohort was demonstrated as
actually adding value to the fund that had been unanticipated.
So this is really the result of the budget estimation process
requiring long-term projections in terms of looking at the
economic success of each of the cohort years of business.
Senator Murray. We already talked about HECM loans, that
they continue to represent a disproportionate share of losses
to the fund. HECM loans can be a great resource for seniors who
want to stay in their homes, but there are a lot of problems
with the current product.
HECM HIGH DEFAULT RATE
Commissioner Galante, I wanted you to explain to us why the
HECM loans are experiencing such high default rates and what
reforms you are proposing to reduce the risk on that.
Ms. Galante. Yes, thank you. There are a couple of reasons
for the challenge with the HECM program. First, I would say
that like the forward book of business, the HECM loans are
suffering from projections of a decrease in home prices. And
that affects--particularly for the HECM loans, long-term house
price projections definitely affect the reverse mortgage
program projections more severely than they would in a forward
mortgage because they are for a longer period of time. So that
is one reason.
The other reason is that, frankly, the way they have been
underwritten is based on the longevity of the life of the
individual borrower, and there is improvement in longevity. So
some folks are outliving, so to speak, the original actuarial
projections there.
Those things are magnified by other challenges that I would
say are in the program design today that we really want to get
to the heart of fixing. One is that the way the program is
designed today encourages people to take a large amount of the
mortgage proceeds up front, and then sometimes what happens is
they don't have enough over the life of the mortgage to
continue to pay, say, their property taxes and insurance
liability and other challenges of that nature.
So what we are really asking for, I would put in three
buckets. One is to be able to immediately, through mortgagee
letters, as opposed to going through 1\1/2\ years plus
rulemaking process, make some immediate changes on the
principal amount that borrowers are allowed to take out up
front.
Senator Murray. And you can do that without legislation?
Ms. Galante. We can do that without legislation, but we
would have to go through rulemaking. Without you giving us
authority to do it by mortgagee letter, we would have to go
through a longer process to get there. But, statutorily, we
could do it.
Second--and I know I'm taking a bit of time here. But,
second, I would say that demanding that we do a financial
assessment of the borrowers and their ability to pay the taxes
and insurance on an ongoing basis--right now, we are
encouraging lenders to look at that, but it is not a
requirement of the program. So that's an important measure that
we would want to do, and, also, requiring set-asides for taxes
and insurance, for example, for those owners who really need
that, to be sure that they can pay their ongoing charges.
Lastly, I would say there is a challenge in the current
environment where non-borrower spouses are not being--if
they're not on the mortgage loan, they're not getting the
protection of being on the mortgage loan and being able to----
Senator Murray. In my understanding, sometimes that's done
because of the age of the spouse.
HOME EQUITY CONVERSION MORTGAGE COUNSELING
Ms. Galante. Yes, sometimes--you know, what we believe is
happening is by the age of the spouse, they are not eligible to
be part of the HECM mortgage. But what we want to make sure of
is that we have rules going forward where they're part of the
mortgage and, therefore, get the protection. But their age is
also taken into consideration in the underwriting so that we
are actuarially pricing this according to the life of the
borrowers.
And so there's some confusion perhaps in the market or
disagreement about whether that provision--whether we can do
that correctly today based on statute. We have taken the
position for the past 25 years that we can. But there's been
some challenge to that, and we would like legislation to
clarify the intent that we can continue to do that.
Senator Murray. Mr. Montoya, what do you think about those
proposed reforms?
Mr. Montoya. We certainly support FHA's proposals. One of
the concerns that we have seen through a lot of the failings
with these loans and, quite frankly, from a lot of the fraud
aspects that we see is that we don't believe that counselors
are doing as good a job as they should be in really identifying
for these seniors the loan they're getting into and really what
they're getting into.
They're not really instructed on how much and how expensive
it would be, sometimes not instructed on the taxes and
insurance and homeowner's fees that will need to be paid,
sometimes two or three times more than what they make in a
monthly income. Many times, they don't even see these homes
before they get into them, if they're buying a new home under
the HECM program, to make sure they fit their needs as they
begin to age.
So there's a lot of other things that we think we can work
with FHA to do to tighten up just sort of the knowledge that
these seniors need before they take this product.
Senator Murray. My time--I've gone way over.
So, Senator Collins, I'll turn to you.
Senator Collins. Thank you, Madam Chairman. Let me follow
up on the question on reverse mortgages.
Commissioner, you referred very briefly to an issue that I
want to ask you a little more about. And that is some seniors
with reverse mortgages insured through the HECM program have
failed to pay their property taxes and/or their homeowner's
insurance premiums, which technically, at least, puts them in
default on their mortgages.
In order to avoid this problem, could HUD require lenders
to set up an escrow account where, as with forward mortgages,
property taxes, and insurance are paid out of that account and
then added to the mortgage balance? Many of us have escrow
accounts built into our mortgages to make sure we do have the
funds available for property taxes and insurance when they come
due.
And second and related to that--because you did refer to
doing something in that area, but I'm unclear exactly what--are
you in need of legislative authority in order to avoid this
very lengthy rulemaking that the Inspector General has referred
to in order to implement such a change? So, first of all, are
you considering an escrow account type requirement, and,
second, if so, can you do it administratively quickly?
Ms. Galante. Yes. In order to do it administratively
quickly through a mortgagee letter, we need authority from you
to do it by a mortgagee letter, as opposed to going through the
full rulemaking process, because the current regulations for
the HECM program do not permit us to do this.
Having said that, I do want to be clear. We would really
like that authority, but I do want to be clear, though, that we
have been working on this with whatever tools we can in the
interim. We actually issued a mortgagee letter asking lenders
to go out and notify borrowers, for example, who were in
default on their taxes and insurance, and work with them for
repayment plans. We did that about 1 year ago, and it is being
successful.
HOME EQUITY CONVERSION MORTGAGE ESCROW ACCOUNTS
That isn't going to turn the tide for the future of really
ensuring that up front. We are setting aside the funds so that
we know that there is an escrow there for those homeowners to
pay those property taxes and insurance charges--and also to
evaluate the borrower on their ability once they take out this
mortgage to continue to be able to pay those taxes and
insurance. In order to do that, we need to change the
regulation, and that means either going through a 1\1/2\ years
long process, or, if you give us the authority to do it, by
mortgagee letter, we could do it more quickly.
Senator Collins. Do you think it's a good idea in concept?
Ms. Galante. Absolutely. If I didn't make that clear, we
think it's a very necessary component to the program.
Senator Collins. Why is your rulemaking so slow? I assume
you follow the APA the way any other agency would.
Ms. Galante. Yes. Let me just be clear: We are working on
guidance today so that if we need to go through the rulemaking
process, we will try to do it as quickly as we possibly can.
The proposing of the notice, getting comments back, evaluating
those comments, putting back out--you know, hopefully, you
don't get any major controversy; if you get major controversy,
then you may have to re-propose--it just takes a significant
amount of time to do that analysis and back and forth.
Senator Collins. I guess what I don't understand--if I were
in your shoes--and you've identified this problem, and you've
identified something you could do about it--I'd be in the midst
of rulemaking right now. I wouldn't wait. I would still ask us
for authority for you to do it in a more expeditious manner.
But I wouldn't be waiting to do rulemaking. And it seems to me
that a point that the Inspector General has made in his reports
is this slowness of response by FHA.
Ms. Galante. Yes. To be clear, we did spend the time to
immediately--so 1 year ago, we put out the guidance----
Senator Collins. But guidance isn't rulemaking, and I'm not
a fan of agencies putting out guidance, because it means that
it doesn't go through a public comment process.
Ms. Galante. Right. We did that in January of last year,
though, just to ensure that we could deal with the current
situation that we have with people who are already in current
defaults.
Senator Collins. Excuse me for interrupting. But if in
January of last year you had started the rulemaking on this,
you would be probably done now or close to it.
Ms. Galante. Yes. So, as I said, we are in that process of
getting ready to put out a rulemaking. We're in the rulemaking
process. We just haven't actually put out the proposed rule
yet.
Senator Collins. Well, I've got two other issues I want to
turn to. But I guess what I would say to you is it seems to me
you should have begun that rulemaking last January. It's now
June. That's 1\1/2\ years. You'd be done. And I just think,
even though it's faster if you get the mortgagee letter
approach approved by us, you know what the legislative
processes can be like. It's not pretty these days.
I just would encourage you that if you think you have the
answer to something, don't wait. Start the rulemaking. You
don't have to necessarily go--you may be able to short circuit
it through legislation, but don't wait. That was 1\1/2\ years
ago.
Ms. Galante. We are working on that.
Senator Collins. Let me turn to another question. You
informed us today that FHA has now used 75 percent of the
commitment authority for the general insurance and special risk
insurance fund, and current projections indicate that without
additional commitment authority this year, FHA will be required
to suspend insurance activity in mid August. This is very
troubling to me.
As you know, the chairman and I have been supportive of
increasing the commitment authority for this important program.
We would have liked to have gotten it in along with our bill,
into the continuing resolution that was passed. It's important
because it provides mortgage insurance for the construction of
multifamily housing, hospitals, healthcare facilities.
How will FHA manage the remaining commitment authority, and
what will the effect be if the fund is forced to suspend
activity because you've run out of commitment authority?
COMMITMENT AUTHORITY
Ms. Galante. Yes, thank you, and thank you for your support
for the additional authority. I would say a couple of things.
First and foremost, now that we have hit the 75 percent, any
commitments that are issued need to come into headquarters
before they're issued so that we can literally--the first and
foremost concern we have is to be sure that we're monitoring
daily each commitment that's issued and now allowing a
commitment to be issued if we don't have the authority. So,
particularly, as we get closer and closer to the end of the
fiscal year or to exhausting 100 percent of the authority, we
need to pay attention to that.
We have also had a number of conversations with industry
about how to prioritize if we don't get additional commitment
authority, you know, the best ways to prioritize the
remaining----
Senator Murray. If I could just--how many projects do you
have in the pipeline right now?
Ms. Galante. I don't know the exact number of projects, but
we have in the pipeline more than the amount of authority we
have left for the balance of the year. So if we need to stop
issuing commitments in mid August, really, what we're talking
about is new construction projects that were ready to close or
soon to be ready to close and get under construction. We'd lose
those jobs. We'd lose that economic activity.
For properties that are being refinanced, you know, and are
rehabilitating properties, they won't get their rehab done.
They might be refinancing to take advantage of lower interest
rates and, therefore, really be in a position to be as
financially sound as possible going forward and protect the
property. So those activities would need to be delayed. This
really is a problem of delay if we run out of authority between
now and the end of the year.
Senator Collins. Thank you, Madam Chairman. That is of
great concern.
Senator Murray. Senator Boozman.
Senator Boozman. Thank you, Madam Chair.
Ms. Galante, I have the same problems as the Senator from
Maine with the guidance issues, as far as not going forward and
going through the process, where you have guidance which
essentially has the same force of a rule, but the process isn't
done. You said that you hadn't done it yet. I guess my question
is when is yet? When do you expect a rule to be forthcoming?
Ms. Galante. We're in a position that we are driving as
hard as we can to get a proposed rule out by July or August of
this year, because, again, we really need to get it in place as
soon as possible so that we can continue to operate the
program.
Senator Boozman. So July or August is a reasonable
expectation of the----
Ms. Galante. That's the proposed rule, and then there's the
back and forth process, yes.
Senator Boozman. Let me ask you this. Last summer, the FHFA
released a public request for comment on proposals to use a
municipality's power of eminent domain to seize mortgage loans.
At that time, the FHFA expressed concerns with such proposals
and said that action may be necessary on its part to avoid a
risk to safe and sound operations at its regulated entities and
to avoid taxpayers' expense.
What is your view on the proposed use of eminent domain in
that regard?
EMINENT DOMAIN
Ms. Galante. Yes, thank you for the question. We certainly
think it's premature for FHA to issue any guidance on this.
There are a few places that have adopted the policy, but not
actually implemented it. We believe the eminent domain process
at its core is a local issue, and how localities use their
eminent domain is something that is subject to a lot of local
review.
We also believe that the idea of it being used on mortgages
is trying to get at an important issue of people's inability to
refinance their mortgages that are in private label securities,
and I think that's the primary driver behind that concept. And
we do think that there are other ways of working to get more
people refinanced who are under water, and we certainly look
forward to continuing to work with Congress on some of those
solutions.
Senator Boozman. So if they are refinanced under that
system, they are done into FHA-backed loans, potentially?
Ms. Galante. Again, you know, if a community gets to a
point where they are through all of the significant issues that
are still to go to work out whether this is a viable concept,
if all of that happens, then FHA will obviously need to be in a
position to look at its approach to those loans. We just think
it's premature in terms of how those proposals are being
implemented.
Senator Boozman. It seems like, though, that you would
weigh in, in the sense that if it is such, that you're going to
be in a position that they are FHA-backed, and that could
potentially affect the solvency of the insurance fund, it seems
like you would take a position.
Ms. Galante. Again, Senator, we think it's premature in
terms of even beginning to understand how they would operate in
an individual localized context at this point.
Senator Boozman. Do you have any comments about this?
Mr. Montoya. No, sir. We have not actually looked into the
matter. Certainly, it's an area that we're going to monitor and
have some concerns over, but I would echo what the Commissioner
said. I think these are very localized issues, and how those
would be addressed in the local areas is probably the biggest
question we would have.
Senator Boozman. Personally, I think it's a huge problem if
you're taking mortgages that are current in their payments from
individuals. I mean, that, to me, is a huge departure from
what's been done in the past. So are you starting to weigh in?
Are you looking into this?
Ms. Galante. Again, I would just say we think it's
premature at this point. Some of the concerns that you have
about how one values these mortgages is a big----
Senator Boozman. But you wouldn't do that through guidance.
You'd go forward somehow where somebody could weigh in in
regard to----
Ms. Galante. I'm sorry?
Senator Boozman. I said if that were to happen, we wouldn't
just have guidance in how to deal with that. You'd do some sort
of rulemaking process or something.
Ms. Galante. I think it's hard to say what kind of guidance
would be necessary until we understand the details of how these
programs might work in an individualized way.
Senator Boozman. Thank you.
Mr. Montoya, you acknowledge that FHA has been slow to
respond to many of the recommendations and has only recently
implemented some of them. Can you comment on what you see as
the primary cause for the delay?
Mr. Montoya. Well, going back to the earlier discussion on
the HECM program with regard to the taxes and insurance, a lot
of those changes or recommendations came out of an audit that
happened 3 years ago, and we're only now getting to the point
where something is being done. It's our feeling that FHA may be
resting too much on the reliance, if you will, on the granting
of legislative authority as opposed to beginning the proposed
rulemaking process early.
That kind of goes in line with what we've been saying. It's
just very slow to address a lot of these forces that in the
financial world, if you will, you've got to be able to address
pretty quickly. You know, 2 or 3 years down the road, you've
not only surpassed it, but you're into another problem. So,
again, to echo back to the taxes and insurance issue, that's
sort of a more recent example.
Senator Boozman. Can you comment on where you feel the
glitches are in not responding quicker to the Inspector
General's suggestions?
CHALLENGES TO FHA REFORM
Ms. Galante. Let me just say on a more global level, as
opposed to just the HECM program, there are several challenges
here. The first and foremost, I would say, is to think about
the crisis that we've been in for the past number of years. We
have had massive amounts of policy changes and rulemaking to
do, and we have needed to prioritize at some level our own
resources, our analytical resources, our process resources.
All of this goes through our risk management office of
evaluation, the Office of Management and Budget (OMB), and so
this, you know--we've had a lot on our plates. And when you
look at the forward mortgage, which is most of the trillion
dollars of portfolio, we certainly have been spending a lot of
effort there.
The second point I would make here goes to the resource
question of both staffing and also to the FHA transformation
project, the information technology. So one of the Inspector
General's recommendations to us about how we look at defaulted
loans or non-performing loans--they made some recommendations
that also took us a while to implement.
But through use of the FHA transformation project, we were
able to put in a very robust claims review process that is
meeting all of the Inspector General's recommendations and
more. But it took the time and the resources to get the
information technology in place in order to perform the
reviewing of all loans that went to claim in 2 years, all early
payment defaults, plus an algorithm to pick out other high risk
loans to review.
So, you know, I think it's very successful that we're doing
it. But it took that time to get the systems in place to be
able to do it.
Senator Boozman. Thank you.
Thank you, Madam Chair.
Senator Murray. Thank you. As everyone is so aware, many
families experience a sudden crisis--it could be a health
issue, a job loss, or some kind of unforeseeable situation--
that leaves them unable to make their mortgage payments, and
many of them are today desperately seeking a way to stay in
their homes. I've had a lot of constituents come to my office
to get help with some kind of loan modification.
We all know appropriate modifications can benefit everyone.
It can benefit the homeowner, who can stay in their home; the
lender, if they want to avoid some kind of lengthy, costly
foreclosure process; and for FHA, loan modifications can help
avoid or reduce claims, which is why FHA requires its lenders
to provide loss mitigation services to borrowers that fall
behind on their payments.
But it seems that lenders may not be adequately fulfilling
this requirement. One of the new reforms that FHA is proposing
to us would allow HUD to transfer the servicing of loans to a
different servicer who could better assist the borrower with
some kind of modification.
Ms. Galante, what problems have you seen or can you
describe for us in FHA's loss mitigation programs that led you
to request that new authority?
LOSS MITIGATION
Ms. Galante. Yes, thank you for the question. One of the
things we see is that while you may be able to see any
individual servicer looking at their overall record, they are--
I don't want to say checking the box--but they are meeting the
individual steps. But when you look at certain servicers and
you see that their particular portfolio has a much smaller rate
of successful loan modifications, you say to yourself,
``There's something deeper going on in that servicer's shop
that somehow our reviews just aren't able to pick up.''
So we really want to be able, particularly for those
servicers that we see that are not having good outcomes or not
having outcomes as good as some of the other servicers--we want
to be able, if we can't get them there through other means, to
ultimately say, ``Look, we've got to take this part of your
portfolio and require it to be transferred or require you to
subservice and really, you know, just require that you show
that you can perform at a different level or have someone else
perform for you.''
Senator Murray. Mr. Montoya, do you think this would
improve loss mitigation efforts, this proposal?
Mr. Montoya. Well, I think, on its face, we would certainly
be supportive of that. Anything that would keep any more losses
from the fund occurring would be certainly beneficial.
It's not something we've audited, although we are
contemplating doing that later this year because, like
anything, there will be risks, I'm sure, and we'll want to find
out what that might be to work with the Commissioner early on
in addressing them. But I would certainly support anything that
would keep any more losses from occurring as beneficial, not
only for the fund, but for the communities that they serve and
the individuals that are being impacted by these issues.
Senator Murray. Mr. Montoya, the work you're doing in
partnership with HUD, Department of Justice, and some State
attorneys is helping HUD recover money from claims that are
paid on mortgages that weren't properly underwritten. In your
testimony, you highlighted some of the egregious errors that
you uncovered in your review of loans from 2007 to 2009.
I understand that, to date, your office has helped recover
hundreds of millions of dollars from these settlements in
addition to the funding FHA received from the servicing
settlement. Can you explain the investigations you and your
partners are undertaking and what exactly you're finding?
OFFICE OF INSPECTOR GENERAL INVESTIGATIONS
Mr. Montoya. Sure. Yes, ma'am, absolutely. Thank you for
the question. I think all total, to date, my office has
recovered over $1 billion. It would probably pay for ourselves
a number of times over. But the types of reviews that we're
doing are not minor technical reviews. We are looking at
wholesale disregard for the FHA insurance program.
We're looking at material type violations that we call
incurable, things you can't fix, things like borrowers who
never had the income in the first place to afford the home
they're buying; no debt to income ratio analysis that would
tell us what other bills they have to pay that would impact
being able to make the mortgage; and, quite frankly, something
as basic as whether they have the funds to come to closing to
close on the loan. So these are the types of things that we're
seeing and that seem to be rampant in some lenders.
So, again, what I'd want to stress--because we've heard
from a lot of stakeholders, mortgage bankers and others, that
we're sort of nit-picking, that we're looking at technical
violations, and that couldn't be further from the truth. We've
got a number of other lenders we're currently looking at, and
we've got more in the pipeline. Quite frankly, I'd have to say
we have more than we can deal with, and we've actually had to
turn some United States attorneys' offices away that would like
to pursue some of these, because much like the Commissioner, we
have limited resources, and there's only so much I can do. So
we're trying to pick the worst of the worst, if you will.
But, again, just to reiterate, we're talking about
wholesale disregard of the program, something as fundamental as
whether they can afford the home in the first place, and
whether they have the resources to afford it.
Senator Murray. You've also recommended that HUD take some
steps to avoid paying unnecessary claims, including delaying
payments to lenders and reviewing early default loans. What are
the specific actions that you would like HUD to take to address
some of those recommendations?
Mr. Montoya. Well, to reiterate something the Commissioner
said, we certainly recognize that staffing is always an issue,
and limited resources. But some of the things that we've been
recommending are reviews of what we call high risk defaults.
These are defaults that have defaulted in the first 24 months
of the loan. Those are always red flags for us of how we got
there in the first place that early.
You know, reviewing these while they're in the foreclosure
process before they become claims, so that--because the
foreclosure process can take months and months, that's a very
good time to sort of look at these things to see if there was
fraud or some sort of mismanagement, if you will, of how they
underwrite these loans in the first place, so that HUD could
avoid paying these loans if at all possible.
These are the kinds of things that take staff resources,
but they're also the kinds of things that the private mortgage
insurance companies do. So in a perfect world, we'd like to see
more of that happen. Recognizing, too, that HUD has an
obligation to pay on these loans within a very short amount of
time--you know, the Prompt Payment Act requires them to pay
these claims within 30 days. That is insufficient time for them
to do really any kind of review of the loan to see if there was
any fraud or mismanagement in the underwriting of the loan.
One of the recommendations that we have shared with the
Commissioner and would like to talk to Congress and work with
this subcommittee on is certifications, an idea concerning
certifications by these lenders, where they're certifying that
the loan that they're providing to FHA for a claim has been
reviewed by them and it meets all the qualifications of a
properly underwritten loan. It puts the onus back on the
lender, if you will, and kind of keeps the exposure to FHA
down.
While there's a lot of discussion yet to be had on the
issue, these are the kinds of things that we are recommending.
Senator Murray. Commissioner Galante, do you want to
comment on whether that's doable and what you think of it?
Ms. Galante. Sure. I would say two things. First of all, we
really appreciate the partnerships we have with the Inspector
General on improving our quality assurance, our loan review
process. I think their recommendations on looking at early
payments defaults, for example, and looking at loans on an
ongoing basis, we are now doing in a robust way with the help
of our technology, which is from your help. Thank you.
We think we're on the right path now going forward for some
of those processes. We recently have talked about additional
legislative items we might need or administrative actions that
we could take, including looking at how good the certifications
we have are. We're certainly willing to work with the IG on
looking at that.
Senator Murray. My time has expired, so I'll turn to
Senator Collins.
Senator Collins. Thank you.
Commissioner, you have mentioned that the FHA's market
share is decreasing and beginning to return to more traditional
levels. Is a reduction in market share a goal of this
administration?
FHA'S MARKET SHARE
Ms. Galante. It is a goal of this administration that FHA
return to a more normalized, traditional role in the
marketplace. How one measures market share is an interesting
challenge, in that one of the things that we've seen through
this whole crisis is that the whole market has shrunk. So even
though FHA's absolute dollar amount could stay the same, you
need to have private capital come back in so that you're
growing the whole market in order for our market share to begin
to drop.
We are beginning to see that, and I think there's a couple
of reasons for that. One is that the premium increases that
we've made and some of our other policy changes are encouraging
private capital to come back. But I also think private capital
is starting to come back because they're seeing the--you know,
we've played a countercyclical role, the market is getting
better, and we're seeing that private capital is now willing to
put more financing available in the marketplace.
Senator Collins. Let me talk about the premium increases
that you mentioned and what strikes me as a possible unintended
consequence of some of the policy changes. FHA, as you
mentioned, has announced several premium increases in an effort
to improve the financial health of the fund.
I was surprised to read that one of the changes that was
also included was to not allow borrowers to cancel their annual
mortgage insurance premium when they reach the level where they
have sufficient equity in their homes. This strikes me as not
fair, but it also strikes me as leading to a perverse outcome
where that borrower who has clearly been paying on time and has
reached a certain level of equity is going to refinance out of
FHA and leave you with a pool of more risky borrowers.
So why would you want to implement that change?
Ms. Galante. Thank you, Senator Collins. This may be a bit
counterintuitive, but I think this is a hugely important policy
that FHA is doing, and let me explain why. First of all, the
policy of allowing cancellation of the premium did not come
into effect at FHA until about 2000, 2001. So for most of FHA's
history, the policy we're talking about reversing now was not
in place.
There's a bit of history that I don't really know, but I've
heard, about why FHA back in 2001 did this. It was because the
private mortgage insurers were going in this direction. But the
challenge here is--and this is why it's important to have a
good risk management office--the risk for the private mortgage
insurers is entirely different than the risk for FHA. They're
only insuring the top part of the loan. FHA is insuring the
entire part of the loan.
Even if you buy on an amortizing basis, have more equity,
theoretically, in your home, we still have risk that if home
prices go down, as they did during this crisis, we're still on
the hook for the risk for that loan. In fact, one of the things
we saw is that we were continuing to see claims, have defaulted
loans on loans after they had stopped paying on their MIP,
because it was an automatic cancellation.
So we lost during the crisis by having that old policy in
place. We lost, our risk manager believes, probably $10 billion
of revenue that we would have otherwise had, and as prices
declined, we would have had more revenue to deal with the
losses. So we think this is an important reversal of policy for
the future. As long as home prices are going up, up, up, maybe
you'll have some people refinance out of these loans. But in
the long term, ensuring that your premium matches the risk that
you're taking on was the most important thing here.
Senator Collins. Have you seen homeowners refinancing out
of FHA-insured loans in order to avoid that mortgage premium
insurance payment?
MORTGAGE INSURANCE PREMIUMS
Ms. Galante. This policy just went into effect, so we
haven't----
Senator Collins. It's too soon.
Ms. Galante. It's too soon to tell. But I would also just
say that, primarily, what's going to drive people to refinance
is our interest rates.
Senator Collins. Right.
Ms. Galante. So that's really going to be what drives
people to decide to refinance or not.
Senator Collins. Let me talk to you about the financial
health of the FHA single family mortgage mutual fund. We've all
mentioned the fact that the budget request shows that you
anticipate drawing on your authority with the Treasury during
this year to hold in reserve against expected future losses.
Obviously, $943 million is a lot of money and is of great
concern to us, or to me, because it would be the first time
that you have taken this step. We thought it was going to
happen last year, and then it didn't because of the settlement.
Have conditions changed since that budget request, or do
you still anticipate drawing that amount of money from the
Treasury? What's your current prediction?
Ms. Galante. Two things I do want to say. While we
projected that we might draw last year and we didn't, and we
certainly did get a number of settlements, we also made a
number of policy changes that impacted, and we had volume that
went up. So we would have ended up not drawing--even without
the settlement dollars, we ended up with $3 billion positive as
opposed to the draw of--I think it was $688 million that we
thought we might take.
And I say that because this year, the main thing that will
drive whether we draw or not draw is whether our--this year, we
have done all the premium increases and the policy changes
before this budget came out, so those are kind of baked in.
Those expectations of revenue are already baked into the
budget. So the one thing that will change is whether we have a
significant increase in volume. Then we would be less likely to
draw or to draw that amount of money.
And the other thing that I just would want to get out on
the table here is if we, through the policy changes that we've
been making, see significant improvements as a result of those
policy changes in our recoveries, you know, on defaulted loans,
on our real estate owned, that could, in consultation with OMB,
change the trajectory.
Senator Collins. What's your current estimate? You said
that your premium increases are already baked into the budget.
So, presumably, that's baked into the $943 million.
Ms. Galante. Yes. The premium increases are already baked
in. So, again, it will depend primarily on volume and whether
there is a significant credit given to the recovery efforts
that we've been taking on in terms of getting better on our
recovery of our loans.
Senator Collins. So do you have an estimate for us, a new
estimate?
Ms. Galante. We do not.
Senator Collins. Thank you, Madam Chair.
Senator Murray. Senator Boozman?
Senator Boozman. Thank you, Madam Chair.
Mr. Montoya, you mentioned that we have situations where
you have just wholesale disregard for the rules, the high risk
defaults, where you just know there's something going on based
on that. Is there adequate legislation in place to deal with
that right now? Do we have the safeguards to deal with the
individuals who everybody in the room would agree are blatantly
playing the system to their advantage?
FRAUDULENT LENDER SAFEGUARDS
Mr. Montoya. Well, I appreciate the question, sir. Thank
you. I think in one regard, the answer would be no. I think we
could strengthen some of that. Right now, the way the laws are
set up, a lender, i.e., being the company, that's found to be
in violation of FHA's underwriting standards and that we're, in
essence, going after, can simply shut their doors today. The
very individuals who were running that lending company could go
start up a new lending company tomorrow and be back in the
business.
So, unfortunately, we're not set up so that we can go after
an individual. Shy of proving that they, specifically, they,
themselves, have committed a fraud, which is very difficult to
do, there's no way to sort of tack onto them the effects of the
fact that they were running a poor company that poorly
underwrote loans. So, in other words, there's no way for us to
suspend them, specifically, individually, from being involved
in the FHA program.
So that's an area that we will be recommending some
legislative language on. That would probably be the biggest
thing. And I think until you can tag individual responsibility
onto individuals for this kind of stuff, I'm not sure that
we'll do much to change the culture of somebody who wants to
defraud us.
There's risk in any insurance program, as you well know,
and we're never going to be 100 percent risk free. To the
extent we can mitigate that, that would, to me, be one big
mitigating factor to consider.
Senator Boozman. Very good.
Ms. Galante, do you agree, or can you add to that?
Ms. Galante. Yes. I would just say I think this is an
important issue and a very tricky one, and we share the concern
with the Inspector General. What you're struggling with here is
basic corporate law, in terms of if you're a corporate officer
and you're doing things in the name of the corporate officer. I
think there are some ways that we could explore to address this
particular issue, but it is tricky.
The other thing I would say is there are other items, in
terms of help with enforcement, that we certainly legislatively
would like and some of which we have asked for and were passed
twice by the House. And we would very much like to work with
the Senate to get those particular authorities to be able to
terminate lenders based on their national work. Right now, if
they operate in different geographies, we have to go after them
in each of the geographies in which they're operating, which is
obviously a challenge.
And we don't have what's called indemnification authority
for every class of lenders that we have. We have it for most of
them, but not all of them. Those are two additional legislative
asks that we would have in terms of enforcement authority.
Senator Boozman. Very good.
Mr. Montoya, I guess the only other thing I'd ask is what
are the top couple--I read your testimony. What are the top
couple of things that you feel that we as a Congress--you know,
we're talking about this, and you said that you were prepared
to perhaps come forward with some suggested legislation that we
could look at and be more helpful. What other things are out
there? What are your top couple of things that you'd like to
see us maybe step forward on?
This is a huge issue, and it affects those in the housing
market, in the sense of trying to get in a home. All this stuff
does is increase costs, and then also the cost to the
taxpayers. Do you have any other things that you could dwell on
for a second?
Mr. Montoya. Yes, sir. Thank you for the question.
Certainly, FHA faces a difficult challenge in striking that
balance between protecting the fund, making the program
attractive to prospective homeowners, lenders, that sort of
thing.
I think one of the things we're concerned with is that FHA
is sort of too concerned, really, with regards to market share.
While I understand they're coming down from that market share,
I think, historically, we've seen too much of a concern on
market share. By that, you end up taking risks, you know, for
the simple reason of do you want to keep these lenders in the
program. So that's one concern.
INFORMATION TECHNOLOGY INFRASTRUCTURE
I think sort of the biggest concern for really what is a
financial institution is their aging IT infrastructure and
their ability to manage this high finance world, if you will,
on systems that are 15 and 30 years old. I think in the budget
request, if I remember correctly, that FHA submitted, they're
asking for over $100 million in one budget cycle just for
maintenance of these aging systems, and they're just going to
get older every year.
My major concern from an IT perspective when we come and do
the financial information security type reviews is could we end
up having a major, major issue with the IT portion of it, i.e.,
losing data, is it vulnerable to manipulation, these sorts of
things. So that would probably be my biggest concern, and as
appropriations go, that takes money. I recognize that.
But when you're spending $100-plus million a year on just
maintenance of old systems, at some point you've got to pull
the bandage and say, ``Okay, we've got to upgrade these
things.''
So those are probably my two biggest issues, you know, too
much emphasis on the lenders in the program and trying to keep
that market share, as opposed to just letting FHA do the
cyclical rule that it's always done; and the IT infrastructure.
STAFFING CONCERNS
I think the other thing I would add is the staffing
concerns that FHA and, quite frankly, their sister counterpart
in the Department, Government National Mortgage Association
(GNMA), has, and that's staffing. I think some of the critical
roles that both of these organizations have--I don't believe
the pay structure allows them to recruit and retain the best
that we could probably get because we're competing with the
private sector market.
And much like FHFA, as you mentioned earlier, the
Securities and Exchange Commission, these organizations have
additional budgetary salary authority to allow for that
increased salary for key positions. I would certainly support
something like that on behalf of FHA and GNMA to get the right
qualifications you need to deal with some of these issues. So
probably those three things.
Senator Boozman. Thank you.
Madam Chair, with your permission, could I ask if she
agrees?
Senator Murray. Absolutely.
Senator Boozman. I think he's trying to help you. Do you
agree with the aging infrastructure and the things like that
that Congress perhaps needs to help out with to help you do a
better job?
Ms. Galante. Absolutely, I do, and it's very difficult. You
can't retire the old systems until you build the new systems.
You still have to continue to function in an ongoing
environment--so the aging infrastructure. I agree with the
staffing issue, and I would disagree a little bit on market
share, but I think I would say it a little differently. We are
concerned about the balance between access to credit for folks
and the variety of controls we need to put on enforcement. So I
think we're in the same basic place.
Senator Boozman. Thank you, Madam Chair.
Senator Murray. For the record, would you give us what your
priorities are on the IT? We have invested quite a bit, and I'm
worried about that as well.
[The information follows:]
For the last 80 years, the Federal Housing Administration (FHA) has
played a critical role in support of the housing market. FHA has
provided sustainable affordable housing for millions of Americans while
also playing a critical countercyclical role during times of economic
stress.
FHA's capacity to deliver on this mission is increasingly at risk
due to operational constraints and technology challenges. FHA's
budgetary constraints, its uncompetitive compensation structure, and
outdated technology put its core mission at significant risk and expose
taxpayers to potential financial losses that can be avoided.
The outdated technology challenges start with the two, core FHA
information technology (IT) systems known as CHUMS and FHAC. These
systems, which manage hundreds of billions of dollars of transactions,
are between 30-40 years old. These core systems are surrounded by more
than 20 other fragmented systems, which handle ancillary, but critical
functions.
While the technology already at FHA's disposal is challenged, there
are also technology tools that FHA does not have, but desperately
needs. These include effectively risk-monitoring tools, portfolio
evaluation systems, and risk modeling technologies. These are all
standard systems in the mortgage markets, which FHA lacks.
These technology issues lead to a number of significant management
challenges, including:
--Lack of access to timely and useful data to inform risk management
and mitigation decisions;
--Reliance on volumes of paper and manual processes that lead to
significant errors and suboptimal allocation of resources;
--Persistent data integrity issue--different systems say different
things; and
--Challenging operational constraints which make it difficult for FHA
to implement new quality assurance and risk mitigation actions.
FHA generates more than $10 billion in receipts and pays out
billions in claims each year.
And while FHA Transformation--an initiative launched to address
these challenges--has clear and significant payback (e.g., estimated at
more than a billion dollars over the next several years), lack of
funding has put the program at risk.
fha transformation
FHA Transformation was launched several years ago to remedy the
exhaustive list of IT challenges. Specifically, the initiative aims to
address three main management challenges through better technology
infrastructure:
--Detect and prevent fraud, waste, and abuse:
--Automate the aggregation of lender, borrower, and asset
information of inbound data;
--Automate the aggregation of lender and appraiser past behavior
and violation history; and
--Synthesize high-risk profile information and past, actual fraud
data.
--Prudently manage credit risk at both the portfolio and loan level:
--Develop comprehensive portfolio, borrower, and collateral risk
analytics;
--Implement a portfolio evaluation tool to enable default,
prepayment, home price, and cash flow modeling and loan-to-
value (LTV) analysis;
--Support the Office of Risk Management by enhancing forecasting
capabilities and analytical;
--Run situation-specific ad hoc reports and scenarios on the Single
Family Housing (SFH) portfolio; and
--Provide monthly refreshed credit data at the loan level for
borrowers.
--Respond rapidly to changing market conditions:
--Provide a common, modern platform that supports rapid deployment
and continued modification of current and new FHA business
systems and processes;
--Deliver a single source of authoritative data from which to
perform risk analytics and other operational reporting;
--Following migration of functionality, decommission legacy systems
within SFH, Multi-Family Housing (MFH), and Healthcare; and
--Simplify process of making changes to underlying system business
rules.
At the time this initiative was launched, the estimated cost was
set at approximately $115 million. Given FHA generates more than $10
billion in receipts and billions in losses, this investment has clear
and immediate payback.
progress on fha transformation
Significant progress has been made on FHA Transformation to date.
This includes:
--Investment in basic infrastructure that will replace the core
systems;
--Launch of front-end system that accepts lender certification;
--Portfolio analytics that has identified billions of dollars of
improvement potential in how FHA disposes of assets; and
--Piloting and testing electronic application processing tools.
About half the investment FHA needs has been made to date to
achieve this progress.
appendix
IT challenges in the Single Family portfolio:
--Unclear picture of full credit risk on a loan and inconsistent
referral of higher-risk loans for manual underwriting;
--TOTAL system allows lenders an unlimited number of pre-
qualification submissions with only a limited audit trail;
--Reliance on multiple automated underwriting systems not owned by
FHA;
--Heavy reliance on manual processing and paper case binders sent in
by lenders;
--Manual application verification processes;
--Inability to automatically validate appraised value prior to loan
closing and endorsement and unable to receive appraisal
information through direct interface with lenders;
--Lack the capability to accept eSignatures;
--Post endorsement and appraisal reviews based on outdated algorithms
and thus unable to effectively target most risky loans;
--Lack ability to track lender activity and interactions with lenders
over time, increasing risk of fraud; and
--Data integrity and data reporting issues leading to manual data
entry, processing delays and limited accuracy.
IT challenges in the Multifamily and Healthcare portfolios:
--Inability to proactively identify and mitigate risk due to lack of
capability to share and analyze data (no central data, paper
based application processing);
--Processes are entirely manual, relying mostly on MS Word and Excel,
for credit analysis and write-ups;
--Difficult, and in many cases, impossible to implement new programs
in existing systems; and
--Limited management reporting.
Senator Murray. But I just had one final question, and that
is that you recently announced a significant reorganization of
the Office of Multifamily Housing. It's going to affect about
900 HUD employees over the next several years. The
administration has rightfully said this move will reduce costs,
create efficiencies, and improve program delivery.
But those changes are going to mean fewer staff available
to oversee and manage HUD's programs, and it means that HUD
staff will not be located in many areas of our country, a
concern that some multifamily housing providers in my State
have raised with me personally. Can you just tell us how you
can ensure that oversight will not be compromised under this
new structure and that customers will continue to see the same
level of service, particularly in places where HUD is no longer
going to have an office?
OFFICE OF MULTIFAMILY HOUSING
Ms. Galante. Yes, thank you. Clearly, it is challenging to
operate on a national platform with the demand on the
multifamily office. I just want to say that in terms of long
term, this is critical to get our workload balanced across the
country.
So just to give you a quick example of why I believe that
we will be able, long term, to operate in a more consolidated
fashion across the country is that we have severe imbalances in
all these 50 offices in the number of assets. We have some
offices where project managers are responsible for over 200
assets, and in other parts of the country, they're responsible
for 30 assets per project manager. So what you see is just a
vast imbalance of workload.
We're trying in a whole variety of ways to balance that
out. But one long-term way of doing it is consolidating the
personnel into larger geographic areas so that they can share
that work more evenly and stay within our very severe budget
constraints. At the same time, given how we are in an
electronic world, we believe that through technology and
through other means, including travel, we will ensure that
customers are served in all locations.
Senator Murray. And they know the areas that----
Ms. Galante. In local areas. And we'll have specialized
teams within these larger consolidated teams with local
knowledge and connections to the local community.
Senator Murray. I appreciate that very much.
ADDITIONAL COMMITTEE QUESTIONS
I do want to remind my colleagues that we're going to leave
the hearing record open for 1 week for additional questions.
I thank both of you for appearing before this subcommittee
today.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted to Hon. Carol Galante
Questions Submitted by Senator Barbara A. Mikulski
consolidation of the office of multifamily housing
Question. Federal agencies must always be frugal. And they must use
taxpayer dollars responsibly. But in the current budget environment,
it's even more important for agencies to think of reforms to make sure
that every dollar of the taxpayers' money is being used as wisely as
possible. This consolidation will have an impact on the employees at
field offices across the country, and the Americans who rely on the
work that they do. How did you determine that consolidating down to
five hubs and five satellite offices was the best way to achieve your
efficiency goals?
Answer. Please see the end of this response for several exhibits
that illustrate this explanation of the decision to consolidate to five
hubs and five satellite offices. The current field structure has 17
hubs and employees in over 50 field offices. This structure leads to
five key areas of concern:
--Unmanageable spans of control at the top of the organization.
Currently, the Multifamily deputy assistant secretary (DAS) has
nearly 25 direct reports, with 17 hubs and 6 headquarter (HQ)
functions (see Exhibit 1);
--Inconsistent operations across 50+ locations, leading to
inconsistent customer service across geographies (particularly
for our largest customers), and inhibiting effective risk
management (see Exhibit 2);
--Misalignment between Multifamily's structure and the established
Federal regions, leading to inconsistent coordination between
Multifamily and the rest of the Department of Housing and Urban
Development (HUD);
--Over 4x workload imbalance across hubs in Production, and 3x in
Asset Management (worse within individual offices), leading to
long queues in some markets and underused staff in others (see
Exhibit 3); and
--Low spans of control in many field offices (e.g., one manager over
two staff), creating unnecessary layers and stifling employee
engagement.
The proposed structure will directly address each of these failures
in the following ways:
--The new five-hub model significantly reduces the number of direct
reports to headquarters, making management of the field
organization simpler and more streamlined (see Exhibit 4):
--Consolidating to 10 locations enables greater consistency in
Multifamily's operations, enabling us to deliver more
consistent service to our customers while more consistently
managing the risk of the entire Multifamily portfolio;
--The new five-hub model is more in line with the established Federal
regions, which will allow for better coordination between
Multifamily and the rest of HUD (see Exhibit 5);
--Workload across each of the five regions will be more evenly
distributed; each region will handle a similar volume in both
Production and Asset Management (see Exhibit 6); and
--The reorganization will produce greater spans of control--in line
with HUD policies and Federal standards--ensuring all locations
operate at scale, allowing us to make the most of scarce
financial resources.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Question. How was the decision made to close the HUD Maryland
Office of Multifamily Housing and all the offices in Region 3?
Answer. Within this response are two exhibits that illustrate this
explanation, including a detailed breakdown of the comparison of
Boston, New York, Philadelphia, and Baltimore. First, it is worth
noting the Multifamily is not closing any HUD field offices; other HUD
staff will remain in the Baltimore field office. However, we do
understand the concern about consolidating Multifamily's field
structure, which means that Multifamily staff will relocate from the
Baltimore office. To determine which 10 offices would serve as the
future Multifamily hub and satellite offices, we first began by only
considering locations that were already hubs (see Exhibit 7).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
In order to then streamline the Multifamily leadership structure,
balance workload, and align with Field Policy and Management (FPM)
regions, we then organized the hub offices into five geographic
regions: the first covers Federal regions I, II, and III (the Boston,
New York, Philadelphia and Baltimore offices); the second covers
Federal region IV (the Atlanta, Jacksonville, and Greensboro offices);
the third covers Federal region V (the Chicago, Detroit, Columbus, and
Minneapolis offices); the fourth covers Federal regions VI and VII (the
Fort Worth and Kansas City offices); and the fifth covers Federal
regions VII, IX, and X (the San Francisco, Denver, Los Angeles, and
Seattle offices) (see again Exhibit 7).
Finally, we compared offices from within the proposed five regions
based on several factors: the full-time equivalent (FTE) count in each;
the Production workload (average annual firm commitments); the Asset
Management workload (total assets); and whether an FPM Regional
Administrator sat in that office (see again Exhibit 7).
In determining which two offices to select from Federal regions I,
II, and III, we ranked Boston, New York, Philadelphia, and Baltimore
against each other based on these criteria. Based on these criteria,
Baltimore and Philadelphia were ranked lower than other offices in the
new Multifamily region (see Exhibit 8).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Question. What will be the effect on HUD's processing of
multifamily loans and the review of projects during consolidation and
after it?
Answer. We believe that this transformation will improve the way we
do business by enhancing our efficiency, risk management, and
consistency--which will in turn improve our ability to deliver on our
mission of providing affordable housing.
Prior to the consolidation of field offices, we will roll out
workload sharing nationally across Multifamily offices. Once
consolidation begins, workload sharing will allow us to take work
``offline'' from impacted offices and move it to other areas of the
country in order to ensure continuity of operations and excellent
customer service.
As we complete the implementation of each wave, all Multifamily
loans will be reviewed through a formalized ``risk-based processing''
approach that segments incoming applications based on risk and
complexity. Staff will be assigned to applications based on the
particular expertise and experience that assessing those loans will
require. More experienced underwriters will process riskier, more
complex applications. These underwriters will oversee an end-to-end
review of each application, continuing to draw in technical experts
such as construction analysts and appraisers as needed. While our staff
already considers risk and complexity in their work, we believe that
formalizing this process will improve the consistency of our risk
management and service delivery. This process complements tools
introduced in the Breaking Ground initiative like the ``Early Warning
System,'' which allowed Production staff to rapidly identify
applications that required further review by the submitter before being
processed.
In addition to clarifying roles, we will also be identifying
opportunities to streamline the underwriting process to ensure that
simple applications are not being over-processed. We believe that this
approach to Production will improve risk management by focusing expert
attention on the most challenging applications, improve customer
service by providing a clearer point of contact and more streamlined
processing, and improve the overall efficiency of Multifamily's
Production operations. This model has already proven successful in the
Rental Assistance Demonstration and Low-Income Housing Tax Credit
pilot. Many field offices are already experimenting with variants of
this model, and through the Transformation we will formalize it and
make it more consistent.
A similar approach will also be adopted in Asset Management,
whereby complex and troubled assets will be assigned to Multifamily's
most expert staff. This approach is again consistent with the risk-
based approach introduced to Asset Management by Sustaining Our
Investments. We will continue conducting on-site inspections and
reviews as required by our policies and procedures. Today, we already
manage assets and review applications from around the country, even
when we have no nearby field office. We plan to continue this approach
in the future.
Question. How will this consolidation affect smaller banks and
lenders?
Answer. Like all Multifamily stakeholders, smaller banks and
lenders will continue to have the same level of access to dedicated
Multifamily staff that they have today. Due to shorter processing times
and improved consistency across sites, banks and lenders should expect
improved customer service from Multifamily.
Question. I understand that you have promised the employees
transparency and that you will keep them informed of changes; what
steps have you taken, and what will you do as the process continues, to
make sure that employees are kept up-to-date on the consolidation?
Answer. In order to maintain an open dialogue between leadership
and staff, the leadership at HUD and within Multifamily has conducted
an extensive series of in-person, on the phone, and Web casts with
staff. So far, this has included over two dozen different interactions,
including 10 visits to field offices across the country. Multifamily
leadership plans to continue these conversations into the foreseeable
future. After the initial announcement, FHA Commissioner Carol Galante
and Deputy Assistant Secretary Marie Head conducted a series of
conference calls with each hub, during which they answered questions
and collected feedback. Secretary Donovan, Deputy Secretary Jones,
Commissioner Galante, and Deputy Assistant Secretary Head are all
conducting site visits to field offices to meet with and take questions
from Multifamily staff in person. During several biweekly conversations
with the Deputy Secretary, which are broadcast every other Friday, the
Deputy Secretary has provided answers to frequently asked questions and
has hosted subject matter experts to describe employee options for
relocating, buyouts and early retirement.
Multifamily is committed to providing ``on demand'' resources to
staff. We have created dedicated Web sites on HUD.gov and on the
internal HUD@work site. We also continue to track incoming questions
from individual employees, and regularly update the Questions and
Answers found online\1\. Finally, we have set up a call center in the
Office of Housing that directs employees to the appropriate subject
matter experts.
---------------------------------------------------------------------------
\1\ http://portal.hud.gov/hudportal/documents/
huddoc?id=052813TrnsfrmMF_FAQs.pdf.
---------------------------------------------------------------------------
We are preparing local supervisors to hold conversations with
individual staff members regarding their relocation destination, so
that employees know, to the maximum extent possible, where we are
proposing to relocate them. Once union negotiations are complete, we
will launch a new series of communications with employees in order to
inform them of the outcomes of negotiations and to provide individuals
with the location of their directed reassignments and the timing of
buyout offers.
We expect that this regular cadence of communications will continue
throughout the multi-year implementation of the transformation, as we
remain committed to informing staff of the latest developments.
CONCLUSION OF HEARINGS
Senator Murray. This hearing is recessed until Thursday,
June 13, at 10 a.m. We'll have a hearing on our need to invest
in our Nation's transportation infrastructure.
So thank you again to both of you.
[Whereupon, at 3:55 p.m., Tuesday, June 4, the hearings
were concluded, and the subcommittee was recessed, to reconvene
at 10 a.m., Thursday, June 13.]
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
APPROPRIATIONS FOR FISCAL YEAR 2014
----------
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
NONDEPARTMENTAL WITNESSES
[Clerk's Note.--The following testimonies were received by
the Subcommittee on Transportation and Housing and Urban
Development, and Related Agencies for inclusion in the record.
The submitted materials relate to the fiscal year 2014 budget
request for programs within the subcommittee's jurisdiction.]
Congressional Witness
Prepared Statement of Representative Rick Larsen, U.S. Representative
From Washington, 2nd District
Thank you for the opportunity to submit testimony to the Senate
transportation appropriations subcommittee on the need for investment
in our country's infrastructure. Chairman Murray has been a leader on
this issue for many years, and I appreciate her continuing focus on
this issue.
The recent collapse of the I-5 bridge across the Skagit River
offers an example of the worst case scenario when we fail to adequately
invest in infrastructure. I am hopeful that Congress will learn from
this near-tragic incident.
A couple weeks ago, Dan and Sally Sligh packed up their camper and
headed out on Interstate 5 on the way to their favorite campsite in
northwest Washington State. While crossing a bridge over the Skagit
River they had safely crossed many times before, a large truck ahead of
them clipped the frame of the bridge above.
Without warning, and without time to react, the pavement under
Dan's pickup fell from under them. Next, Dan said, ``It was just a
white flash and cold water.'' Like thousands of constituents, I myself
have driven across that bridge hundreds of times. But today no cars are
crossing it.
Recovery workers have been working hard pulling pieces of that
bridge, along with Dan's pickup, from the flowing waters of the Skagit
River, and quickly building a replacement span. The fact that no one
died in this collapse is a blessing. But not all have been so lucky.
I'm sure the subcommittee will recall the 2007 bridge collapse in
Minneapolis that killed 13 people and injured another 145.
I would ask the subcommittee to consider a simple question: Should
Americans be able to drive across a highway bridge with the reasonable
expectation that it will not crumble away from underneath them?
While the National Transportation Safety Board is continuing its
investigation into all the facts of the bridge collapse, what we
already know about our aging infrastructure should be enough to make
this Congress act.
Sixty-seven thousand bridges in our country are rated structurally
deficient. When those bridges fall, it isn't just the unlucky few on
those bridges who suffer. Whole economies that rely on safe and
efficient transportation suffer.
The I-5 bridge over the Skagit River doesn't just connect
Burlington and Mount Vernon. It connects the entire West Coast and
carries millions of dollars' worth of trade between Canada and the
United States. Today that trade is in stop-and-go traffic on local
roads.
The good news is that we know how to build safe bridges. Thousands
of civil engineers devote their lives to building good structures that
don't fall down. But we need to pay for them. We need to maintain our
bridges until they are old, and then we need to replace them. We can't
keep waiting until they crumble into the water below.
But if we're really going to do something about our long-term
transportation needs, Congress needs to get to work on a long-term
transportation bill that doesn't just patch our aging roads, but
invests in an infrastructure that meets the needs of America's 21st
century economy.
It's time to put our money where our safety is. I look forward to
working with you to make sure that we do so.
Nondepartmental Witnesses
Letter From the Advocates for Highway and Auto Safety, et al.
June 17, 2013.
Hon. Patty Murray,
Chair, Subcommittee on Transportation, Housing and Urban Development,
and Related Agencies,
Washington, DC.
Hon. Susan Collins,
Ranking Member, Subcommittee on Transportation, Housing and Urban
Development, and Related Agencies,
Washington, DC.
Dear Madam Chairman: As families who have lost loved ones in large
truck crashes, victims who have survived large truck crashes, leading
national safety organizations and truck drivers, we want to express our
gratitude for your leadership in holding the Appropriations
Subcommittee on Transportation, Housing and Urban Development and
Related Agencies hearing, ``Crumbling Infrastructure: Examining the
Challenges of Our Outdated and Overburdened Highways and Bridges.'' We
respectfully request that this letter be submitted to the hearing
record.
The recent collapse of the Interstate 5 bridge in your home State
of Washington brought the need to address the declining condition of
our Nation's infrastructure to the forefront of the debate over
adequate care and investment in our roads and bridges. Initial reports
from the National Transportation Safety Board (NTSB) indicate the
collapse resulted from an oversized tractor-trailer striking an
overhead truss structure. This catastrophe highlights a growing safety
risk to the public and demonstrates the critical need for Congress to
strongly resist constant efforts to allow bigger, heavier and longer
trucks on our highways.
Truck crash fatalities are on the rise. In 2011, over 3,700 people
were killed and 88,000 were injured on U.S. highways in large truck
crashes. Additionally, in 2010, large truck crash fatalities increased
by 9 percent to 3,675 deaths, despite an overall decline in motor
vehicle deaths during the same year. Allowing larger, heavier trucks
will further burden our bridges and roads, endanger the motoring public
including truck drivers, as well as strain our wallets. The annual cost
to society from crashes involving large trucks is estimated to be
nearly $42 billion. This is an unnecessary and preventable loss of
lives and dollars.
By overwhelming margins in public opinion polls, the American
public has consistently opposed any increases in the size and weight of
large trucks. A May 2013 Lake Research Partners public opinion poll
reiterated this, showing that 68 percent oppose heavier trucks and 88
percent of Americans do not want to pay higher taxes for the damage
caused by heavier trucks. The consistent and broad opposition to
bigger, heavier trucks is based on the public's clear understanding
about the safety consequences that tragically are demonstrated in
preventable truck crash fatalities and injuries occurring every day on
our Nation's roadways. Sharing the road with overweight and oversized
trucks is dangerous to motorists involved in a crash as well as when
bridges fail. In 2007 the devastating collapse of the Interstate 35
bridge in Minneapolis tragically killed 13 people and injured 145 more
innocent motorists.
The well-financed lobbying efforts by special industry interests to
push for bigger and heavier trucks, regardless of the human and
economic consequences, are relentless as well as disingenuous. Claims
that allowing increases in truck size and weight limits will lead to
fewer trucks is wrong and has never occurred when Congress or States
have given in to industry pressure. The catastrophic annual toll of
deaths and injuries in large truck crashes and the threat to bridge and
roadway safety highlighted by the recent bridge collapse in Washington
State as well as the 2007 I-35 bridge collapse serve to validate
concerns that the public and truck crash victims have regarding truck
safety. History has demonstrated that every time truck weights
increase, more trucks occupy our roads. For example, after the 1982
Surface Transportation Assistance Act (STAA) pre-empted State size and
weight limits on federally funded interstate highways, and in 2010 when
the Federal weight limit on Maine and Vermont interstates was
increased, truck traffic grew significantly. Despite this reality,
Congress will again be asked to look the other way and legislate
increases in truck size and weight limits as the discussions begin on
the next surface transportation reauthorization bill.
The American Society of Civil Engineers (ASCE) currently rates the
Nation's bridges at a C+. Other studies have documented billions of
dollars needed to address the backlog of road and bridge repairs facing
our Nation. We cannot continue to wait for events like the bridge
collapses in Washington and Minnesota to bring attention and action to
the dire state of the Nation's infrastructure. Overweight trucks create
a disproportionate level of this damage, and as axle weight rises even
in small increments, the resulting damage increases disproportionately
at a rapid rate. In the case of the I-35 bridge in Minnesota, a leading
factor in that bridge's collapse was found to be loading. The loading
which contributed to that bridge collapse resulted from a combination
of construction materials and traffic, and can also result from
increases in truck weights.
If truck weights are increased from 80,000 to 97,000 pounds, the
overall weight on a bridge would be magnified substantially when
multiple trucks are on the bridge each carrying 17,000 more pounds.
Five trucks simultaneously traveling over a bridge would result in
85,000 additional pounds on the bridge. On one of our Nation's more
than 70,000 structurally deficient bridges, this may potentially exceed
the bridge's loading capacity. Our Nation's leaders must heed the
Washington and Minnesota bridge collapses as a wakeup call and act
swiftly to take the necessary legislative action to prevent further
tragedies of this nature from occurring.
In the interests of public safety, the protection of our
infrastructure, and the preservation of our dwindling tax revenues and
our environment, it is crucial for Congress to resist attempts to
ratchet up truck sizes and weights. According to the Federal Highway
Administration, there are 66,749 structurally deficient bridges and
84,748 functionally obsolete bridges throughout the United States. With
so many bridges requiring critical maintenance and repair, there are
simply not enough resources to address even a fraction of the problem,
let alone to shoulder the additional costs that bigger, heavier trucks
will impose.
Thank you for your continuing leadership in addressing highway
deaths and injuries. We look forward to continuing to work with you in
advancing safety.
Sincerely,
Jacqueline Gillan,
President, Advocates for
Highway and Auto Safety.
Fred McLuckie,
Legislative Director,
International
Brotherhood of
Teamsters.
Daphne Izer,
Founder, Parents Against
Tired Truckers, mother
of Jeff Izer who was
killed in a truck crash
10/10/93.
Joan Claybrook,
Co-Chair, Citizens for
Reliable and Safe
Highways.
John Lannen,
Executive Director, Truck
Safety Coalition.
Lawrence Liberatore,
Board Member, Parents
Against Tired Truckers,
father of Nick
Liberatore who was
killed in a truck crash
6/9/97.
Jennifer Tierney,
Board Member, Citizens for
Reliable and Safe
Highways, Member,
Federal Motor Carrier
Safety Administration's
(FMCSA's) Motor Carrier
Safety Advisory
Committee, daughter of
James Mooney who was
killed in a truck crash
9/20/83.
Jane Mathis,
Board Member, Parents
Against Tired Truckers,
Member, FMCSA's Motor
Carrier Safety Advisory
Committee, mother to
David Mathis and mother-
in-law to Mary Kathryn
who were killed in a
truck crash 3/25/04.
Wanda Lindsay,
Founder, The John Lindsay
Foundation, seriously
injured in a truck crash
5/7/10, wife of John
Lindsay who died on 5/9/
10 following a truck
crash.
Linda Wilburn,
Board Member, Parents
Against Tired Truckers,
mother of Orbie Wilburn
who was killed in a
truck crash 9/2/02.
Roy Crawford,
Underride Network, father of
Guy ``Champ'' Crawford
who was killed in a
truck crash 1/12/94.
Tami Friedrich Trakh,
Board Member, Citizens for
Reliable and Safe
Highways, Member,
FMCSA's Motor Carrier
Safety Advisory
Committee, sister to
Kris Mercurio, sister-
in-law to Alan Mercurio,
aunt to Brandie Rooker
and Anthony Mercurio who
were killed in a truck
crash 12/27/89.
Dawn King,
Board Member, Citizens for
Reliable and Safe
Highways, daughter of
Bill Badger who was
killed in a truck crash
12/23/04.
______
Prepared Statement of the American Indian Higher Education Consortium
This statement focuses on the Department of Housing and Urban
Development (HUD).
On behalf of the Nation's 37 Tribal Colleges and Universities
(TCUs), which collectively are the American Indian Higher Education
Consortium (AIHEC), thank you for the opportunity to express our views
and recommendations regarding the Department of Housing and Urban
Development Tribal Colleges and Universities' Program (TCUP) for fiscal
year 2014.
summary of requests
Department of Housing and Urban Development (HUD).--Beginning in
fiscal year 2001, a TCU initiative had been administered by the HUD--
Office of University Partnerships as part of the University Community
Fund. This competitive grants program enabled TCUs to build, expand,
renovate, and equip their facilities that are available to, and used
by, their respective reservation communities. We strongly urge the
subcommittee to reject the recommendation included in the President's
fiscal year 2014 budget request and to support the goal of Executive
Order 13592 to strengthen TCUs by funding the competitive HUD-TCU
Program at the fiscal year 2010 level of $5.435 million. Additionally,
we request that language be included to permit that a small portion of
the funds appropriated may be used to provide technical assistance to
institutions eligible to participate in this competitive grants
program.
tcu shoestring budgets: ``doing so much with so little''
Tribal Colleges and Universities are accredited by independent,
regional accreditation agencies and like all U.S. institutions of
higher education, must periodically undergo stringent performance
reviews to retain their accreditation status. TCUs fulfill additional
roles within their respective reservation communities functioning as
community centers, libraries, tribal archives, career and business
centers, economic development centers, public meeting places, and child
and elder care centers. Each TCU is committed to improving the lives of
its students through higher education and to moving American Indians
toward self-sufficiency.
TCUs have advanced American Indian and Alaska Native (AI/AN) higher
education significantly since we first began four decades ago, but many
challenges remain. Tribal Colleges and Universities are perennially
underfunded, and remain some of the most poorly funded institutions of
higher education in the country.
The tribal governments that have chartered TCUs are not among the
handful of wealthy gaming tribes located near major urban areas and
regularly highlighted in the mainstream media. Rather, they are some of
the poorest governments in the country and Tribal Colleges and
Universities are home to some of the most disadvantaged counties in
America. In fact, 7 of the Nation's 10 poorest counties are home to a
TCU. The U.S. Census Bureau, American Community Survey specifies the
annual per capita income of the U.S. population as $27,100. However,
the annual per capita income of AI/ANs is just $13,300, about half that
of the general population.
The Federal Government, despite its direct trust responsibility and
treaty obligations, has never fully funded the TCUs institutional
operating budgets, authorized under the Tribally Controlled Colleges
and Universities Assistance Act of 1978. Currently, the administration
requests and Congress appropriates over $200 million annually toward
the institutional operations of Howard University (exclusive of its
medical school), the only other Minority Serving Institution (MSI) that
receives institutional operations funding from the Federal Government.
Howard University's current Federal operating support exceeds $19,000
per student. In contrast, most TCUs are receiving $5,665 per Indian
Student (ISC) under the Tribal College Act, about 70 percent of the
authorized level. TCUs have proven that they need and deserve an
investment equal to--at the very least--the congressionally authorized
level of $8,000 per Indian student, which is only 42 percent of the
Federal amount now appropriated for operating Howard University. It is
important to note that although about 17 percent of the TCUs'
collective enrollments are non-Indian students living in the local
community, TCUs only receive Federal funding for operations based on
Indian students, which are defined as members of a federally recognized
tribe or a biological child of a tribal member. Please understand that
we are by no means suggesting that Howard University does not need or
deserve the funding it receives, only that the TCUs also need and
deserve adequate institutional operations funding; however, their
operating budgets remain grossly underfunded.
While TCUs do seek funding from their respective State legislatures
for their students that are non-Indian State residents (sometimes
referred to as ``non-beneficiary'' students) successes have been at
best inconsistent. TCUs are accredited by the same regional agencies
that accredit mainstream institutions, yet they have to continually
advocate for basic operating support for their non-Indian State
students within their respective State legislatures. If these non-
beneficiary students attended any other public institution in the
State, the State would provide that institution with ongoing funding
toward its day-to-day operations. Given their locations, often hundreds
of miles from another postsecondary institution, TCUs remain open to
all students, Indian and non-Indian, believing that education in
general, and postsecondary education in particular is the silver bullet
to a better economic future for their regions.
TCUs effectively blend traditional teachings with conventional
postsecondary curricula. They have developed innovative ways to address
the needs of tribal populations and are overcoming long-standing
barriers to success in higher education for American Indians. Since the
first TCU was established on the Navajo Nation in 1968, these vital
institutions have come to represent the most significant development in
the history of American Indian higher education, providing access to,
and promoting achievement among, students who might otherwise never
have known postsecondary education success.
Inadequate funding has left many TCUs with no choice but to
continue to operate under severely distressed conditions. The need for
HUD-TCUP funding remains urgent for construction, renovation,
improvement, and maintenance of key TCU facilities, such as basic and
advanced science laboratories, computer labs, and increasingly
important student housing, day care centers, and community services
facilities. Although the situation has greatly improved at many TCUs in
the past several years, some TCUs still operate--at least partially--in
donated and temporary buildings. Few have dormitories and even fewer
have student health centers. At Sitting Bull College in Fort Yates,
North Dakota, competitively awarded HUD grant funds have been leveraged
to expand the college's usable space from 12,000 square feet (sf) to
100,000 sf over 10 years. Additionally, HUD grant dollars have been
used to address three leaking roofs that created a mold problem in the
area referred to at the college as the ``Hall of Buckets.'' HUD grant
funds were also used to complete a renovation on its learning center,
correcting major deficiencies, including recurring sewer and water
problems, handicap accessibility issues, lack of effective safety/
security measures (surveillance and alarm systems), and outdated
washroom facilities.
justifications
Department of Housing and Urban Development.--Executive Order 13592
addressing American Indian education and strengthening of Tribal
Colleges and Universities holds Federal agencies accountable to develop
plans for integrating TCUs into their various programs. TCUs work with
tribes and tribal communities to address all aspects of reservation
life, including the continuum of education, housing, economic
development, health promotion, law enforcement training, and crime
prevention. Likewise, Federal agencies need to work with TCUs. To
achieve results, Congress needs to hold the administration accountable
for the strengthening of the TCUs, including their physical plants and
ensuring that they are routinely included as full partners in all
existing and potential Federal higher education programs. The HUD-TCU
competitive grants program, administered by the Office of University
Partnerships, is an excellent place to start. This competitive grants
program has enabled TCUs to expand their roles and efficacy in
addressing development and revitalization needs within their respective
communities. No academic or student support projects have been funded
through this program; rather, funding was available only for community-
based outreach and service programs and community facilities at TCUs.
Through this program, some TCUs have been able to build or enhance
child care centers, including Head Start facilities, and social
services offices; help revitalize tribal housing; establish and expand
small business development; and enhance vitally needed community
library services. Unfortunately, not all of the TCUs were able to
benefit from this small but very important program. The program staff
at the Department has no budget to provide technical assistance with
regard to this program. If a small portion of the appropriated funds
were to be available for program staff to conduct workshops and site
visits, more of the TCUs and their respective communities could benefit
from this vital opportunity. We strongly urge the subcommittee to
support the HUD-TCU competitive grants program at $5,435,000, and to
include language that will allow a small portion of these funds to be
used to provide technical assistance to TCUs, to help ensure that much-
needed community services and programs are expanded and continued in
the communities served by the Nation's TCUs.
president's fiscal year 2014 budget
The President's fiscal year 2014 budget request does not provide
funding for the University Community Fund, which housed the TCU program
and other Minority-Serving Institutions programs. We respectfully
request that the subcommittee reject the administration's
recommendation and continue to recognize the abundant need for
facilities construction and improvement funds for TCUs and appropriate
funding for the Tribal Colleges and Universities Program, and the other
MSI-HUD programs, namely: Historically Black Colleges and Universities;
Hispanic Serving Institutions Assisting Communities; and Alaska Native
and Native Hawaiian Serving Institutions Assisting Communities, to be
allocated competitively within their individual programs.
conclusion
We respectfully request that beginning in fiscal year 2014,
Congress illustrate its support for the goals of the new executive
order aimed at strengthening TCUs by restoring the HUD-TCU competitive
grants program and provide for technical assistance to help these
dynamic institutions improve and expand their facilities to better
serve their students and communities. Thank you for your continued
support of the Nation's TCUs and for your consideration of our fiscal
year 2014 HUD appropriations requests.
______
Prepared Statement of the American Public Transportation Association
Madam Chairman and members of the subcommittee, on behalf of the
American Public Transportation Association (APTA), I thank you for this
opportunity to submit written testimony on the fiscal year 2014
Transportation, Housing and Urban Development, and Related Agencies
appropriations bill, as it relates to Federal investment in public
transportation and high-speed and intercity passenger rail.
With the passage of a new, 2-year surface transportation
authorization bill--Moving Ahead for Progress in the 21st Century Act
(MAP-21)--APTA's focus shifted from reauthorization legislation to
ensuring the authorized programs are adequately funded. Federal
investment in infrastructure is necessary for a variety of reasons, all
of which lead back to supporting the economy and domestic job creation.
Funding from the Federal Government leverages State and local resources
and allows local governments and transit agencies to access capital
markets, providing the resources necessary to build, replace, and
repair infrastructure.
Americans took 10.5 billion trips in 2012, the second highest
ridership since 1957, and 154 million more trips than the prior year.
This was the seventh year in a row that more than 10 billion trips were
taken on public transportation systems nationwide. And these ridership
levels were achieved despite the impact that Superstorm Sandy had on
transit service in the Northeast. With demand for transit only growing,
investments will continue to be required to get people to school, work
and play, and in turn, provide jobs in construction, maintenance, and
all the related industries required to support public transportation.
about apta
APTA is a nonprofit international association of 1,500 public and
private member organizations, including transit systems and high-speed,
intercity and commuter rail operators; planning, design, construction,
and finance firms; product and service providers; academic
institutions; transit associations and State departments of
transportation.
overview of fiscal year 2014 funding requests
The Moving Ahead for Progress in the 21st Century Act (MAP-21)
authorizes $10.695 billion for the Federal Transit Administration's
(FTA's) programs and expenses, with $8.595 billion of that provided
from the Mass Transit Account of the Highway Trust Fund--which is
financed with public transportation's share of Federal motor fuel tax
revenues. The remaining $2.1 billion, used to fund New Starts,
Research, the Transit Cooperative Research Program (TCRP), Technical
Assistance, FTA Administration, and a handful of additional programs,
must be appropriated from General Fund revenues. Given the current
state of infrastructure and the upward trend in demand for public
transportation services, APTA urges Congress to appropriate full
funding to each program as authorized under MAP-21.
Beyond FTA appropriations, we again urge Congress to appropriate
funding for the Rail Safety Technology Grants program (section 105) of
the Rail Safety Improvement Act (RSIA), to assist with the
implementation of congressionally mandated positive train control
systems. The Federal deadline for implementation of positive train
control systems is rapidly approaching, and to date, Congress has not
provided the necessary funding to support implementation of this
important safety program for commuter railroads.
map-21 and the continuing need for federal transit investment
The new surface transportation law, MAP-21, provided a needed
respite from years of authorization extensions, combined with
appropriations continuing resolutions that resulted in significant
funding uncertainty among transit agencies. Public transportation
systems and projects require long-term funding certainty in order to
plan major capital projects and procure assets such as rail cars, buses
and facilities. While the 27 months of authority have helped to
stabilize the situation, MAP-21 provided for only modest growth after
years of essentially flat funding. The investment levels included in
the bill were far from what is required to bring our systems into a
state of good repair, much less to expand service to meet growing
demands. In previous testimony to this subcommittee, APTA has cited
U.S. Department of Transportation estimates that a one-time investment
of $78 billion is needed to bring currently operating transit
infrastructure up to a state of good repair, and this does not include
annual costs to maintain, expand or operate the existing system.
Research on transit needs shows that capital investment from all
sources--Federal, State, and local--should be doubled if we are to
prepare for future ridership demands. The administration's $50 billion
proposal would go a long way toward accomplishing our state of good
repair objectives.
In their 2013 Report Card for America's Infrastructure released
recently, the American Society of Civil Engineers (ASCE) gave the U.S.
public transportation infrastructure a ``D'' grade for the Nation's
lack of investment. This grade drives home a sense of urgency for our
Nation to focus on increased investment in public transportation. The
rating is virtually unchanged from 4 years ago, which was the last time
ASCE examined the state of America's infrastructure. The ``Failure to
Act'' report also emphasizes that the American economy lost $90 billion
in 2010 due to the lack of investment in public transportation. The
report also shows that, despite ridership gains and a clear and
increasing demand for public transportation service, 45 percent of
Americans still lack access to public transit in their communities.
It is important to stress that the demand for public transportation
and the need for Federal leadership will not diminish in the months and
years ahead. Public transportation is a vital component of the Nation's
total transportation infrastructure picture, and with ridership
projected to grow, dependable public transportation systems will be
vital to the transportation needs of millions of Americans. We must
make significant, long-term investments in public transportation or we
will leave Americans with limited transportation options, and in many
cases, stranded without travel options. While Congress continues to
consider how to proceed on a well-funded, multi-modal surface
transportation bill, it remains critically important that annual
appropriations bills address both current and growing needs.
federal transit administration programs
Capital Investment Grants (New Starts).--The New Starts program is
the primary source of Federal investment in the construction or
expansion of heavy rail, light rail, commuter rail, bus rapid transit
and ferryboat projects. Across the country, demand for Federal
assistance continues to outweigh currently authorized funding and
resources, and New Starts funding is more important than ever with the
expanded eligibility for Core Capacity projects. Unlike the core FTA
formula programs, the New Starts program is funded from the General
Fund, not the Mass Transit Account of the Federal Highway Trust Fund.
The program as reformed by MAP-21 includes a streamlined approval
process, but even with the reforms, projects will continue to face the
most robust Federal review process of any Federal infrastructure
investment program and authorized funding remains short of demand. APTA
asks Congress to appropriate funding for the New Starts program at or
above the MAP-21 authorized levels.
Transit Research/Transit Cooperative Research Program (TCRP)/
Technical Assistance and Standards Development.--APTA strongly urges
the committee to fully fund the Research, Development, Demonstration,
and Deployment Program, the Transit Cooperative Research Program
(TCRP), Technical Assistance and Standards Development, and Workforce
Development at the authorized levels, or at a minimum at the requested
levels in the administration's fiscal year 2014 budget.
In particular, APTA urges Congress to recognize the great value and
benefits represented in the TCRP. The TCRP is an applied research
program that provides solutions to practical problems faced by transit
operators. Over the TCRP's 20 years of existence, it has produced more
than 500 publications/products on a wide variety of issues of
importance to the transit community. TCRP research has produced a
variety of transit vehicle and infrastructure standards and
specifications, as well as a variety of handbooks addressing many
relevant subject areas of interest to the transit community. TCRP
generates significant benefits and large economic returns on
investment, and it does this with a budget that is 1/10,000 of the $57
billion governments spend annually on public transit services, and even
an even smaller ratio when compared with the total benefits that
transit service improvements provide to users, communities and the
economy. TCRP costs will be repaid many times over if the program
produces even small cost savings, service quality improvements,
ridership gains, increases in transport system efficiency, or
additional economic development.
federal railroad administration programs
As Congress begins to consider reauthorizations of the Rail Safety
Improvement Act (RSIA) and the Passenger Rail Investment and
Improvement Act (PRIIA), there are two important programs APTA wishes
to emphasize as priorities for the industry.
Positive Train Control.--A high priority for APTA within the
programs of the Federal Railroad Administration (FRA) is the adequate
funding for implementation of Positive Train Control (PTC) through the
Railroad Safety Technology Grants Program, section 105 of RSIA. The
RSIA requires that all passenger rail operators, as well as certain
freight railroads, implement positive train control PTC systems by
December 31, 2015. The cost of implementing PTC on public commuter
railroads alone is estimated to exceed well over $2 billion, not
including costs associated with acquiring the necessary radio spectrum
or the subsequent software and operating expenses. APTA urges Congress
to appropriate a minimum of $50 million, the annual authorization
included under RSIA. APTA urges the subcommittee to direct these funds
to commuter rail implementation of PTC, and to fund those systems that
plan to implement before the deadline.
As the installation of PTC on nearly 4,000 locomotives and
passenger cars with control cabs, and 8,000 track miles progresses,
costs are beginning to mount. The total cost of implementation on
commuter railroads is expected to far exceed initial estimates, with
estimates doubled in some cases. Meanwhile, Congress has appropriated
only $50 million of the $250 million that was authorized. A federally
mandated deadline, coupled with virtually no Federal funding is forcing
agencies to commit extremely limited capital budgets to implement PTC.
Commuter railroads that have begun to install PTC are facing difficult
choices as some will have to defer critical safety sensitive
infrastructure maintenance projects to pay for PTC. As a group, these
railroads have worked in good faith to comply with the act's
requirements. Additional funding provided by Congress for the Railroad
Safety Technology grants is fundamental to the industry's ability to
implement PTC.
High-Speed and Intercity Passenger Rail Investment.--APTA strongly
supports continued investment in high-speed and intercity rail projects
and services. The U.S. Census Bureau estimates that the U.S. population
of our Nation will grow by more than 100 million over the next 40
years. Such increases will overwhelm America's aviation, road and
existing rail transportation infrastructure. To accommodate the needs
of an ever-growing and highly mobile population, the United States must
develop and continually expand a fully integrated multimodal high-speed
and intercity passenger rail (HSIPR) system. Investing in
infrastructure ensures the efficient movement of people and goods that
is essential to continued economic growth and other national policy
goals. High-speed intercity passenger rail would ultimately serve both
densely populated mega-regions as well as rural and small urban
communities which will benefit from the increased transfer points and
feeder services connecting with new high-speed rail corridors.
Passenger rail projects are advancing in 32 States and the District
of Columbia, with each project supporting economic growth by creating
construction and manufacturing jobs for American workers and attracting
small businesses and new development that will generate domestic
business growth. High-speed rail will create a revitalized domestic
transportation industry supplying more products and services, with more
dollars retained in our economy.
conclusion
We thank the subcommittee for allowing us to share APTA's views on
fiscal year 2014 public transportation and high-speed and intercity
rail appropriations issues. APTA looks forward to working with the
subcommittee as it makes investment decisions about the public
transportation programs.
______
Prepared Statement of the American Public Works Association
Madam Chairman and members of the Senate transportation
appropriations subcommittee, thank you for the opportunity to submit
testimony for the hearing, Crumbling Infrastructure: Examining the
Challenges of Our Outdated and Overburdened Highways and Bridges.
My name is Elizabeth Treadway, president of the American Public
Works Association (APWA). I submit this statement today on behalf of
our members.
The American Public Works Association is an organization whose
members are dedicated to providing public works infrastructure and
services to millions of people in rural and urban communities, both
small and large. Working in the public interest, our 28,500 members and
nearly 2,000 public agencies plan, design, build, operate and maintain
our transportation, water supply, stormwater, wastewater treatment,
waste and refuse disposal systems, public buildings and grounds and
other structures and facilities essential to our economy and quality of
life.
Local governments own about 75 percent of the nearly 4-million-mile
roadway network and more than half of the Nation's bridges and manage
about 90 percent of the transit systems. With nearly every trip
beginning and ending on a local road, street or sidewalk, a strong
local-State-Federal partnership is key to ensuring a safe, seamless and
efficient multimodal transportation network.
We join others in expressing our deepest sympathy to everyone
affected by the collapse of the Skagit River Bridge on May 23. We were
saddened by this and offer our support to everyone working to recover
and rebuild.
Like other bridges throughout the Nation, the Skagit River Bridge
is a vital link in the transportation system. In the northwest, it is
part of the main travel route between Seattle, Washington and
Vancouver, British Columbia and averages 71,000 vehicles daily. The
tragic collapse of this functionally obsolete span is a stark reminder
of the aging and deteriorating condition of our Nation's public
infrastructure, increasingly over-burdened by growing system demands
and outdated infrastructure. It is suffering the effects of chronic
underinvestment and is in critical need of funding for maintenance,
repair and modernization.
The needs are clear and documented. The U.S. Department of
Transportation (USDOT) reports that the Nation (all levels of
government) invests roughly half of what is needed to improve the
current state of our roads and bridges. Nearly one in four bridges
nationwide is rated deficient and in need of repair, improvement or
replacement. Of the more than 607,300 publicly owned bridges on which
we depend for personal mobility and movement of freight, nearly 151,500
are rated deficient, with more than 66,740 classified as structurally
deficient and more than 84,740 as functionally obsolete.\1\ Neither
designation indicates a bridge is unsafe, but they do indicate a need
for repair, improvement or replacement. The age of the average bridge
is more than 40 years.
---------------------------------------------------------------------------
\1\ The Federal Highway Administration defines structurally
deficient bridges as those characterized by deteriorated conditions of
significant bridge elements and reduced load-carrying capacity and
typically require significant maintenance and repair to remain in
service. A bridge is functionally obsolete when it does not meet
current design standards either because the volume of traffic carried
by the bridge exceeds the level anticipated when the bridge was
constructed and/or the relevant design standards have changed.
Addressing functional deficiencies may require the widening or
replacement of the structure.
---------------------------------------------------------------------------
The importance of bridges cannot be ignored. Within the State of
Washington there are over 65 million bridge crossings a day with
approximately 10 million of these crossings occurring on locally owned
bridges. While bridges are a small part of the total road miles, they
provide vital links in the transportation system, not only spanning
rivers but also separating traffic at rail crossings and highway to
highway crossings. However, replacement and rehabilitation of these
links are of significantly higher cost on a per mile basis than other
aspects of the transportation system.
We can no longer afford to ignore the underinvestment in bridge
maintenance, rehabilitation and replacement. Additional traffic volumes
and heavier loads are placing ever greater stress on bridges often
designed for lighter loads. Underinvestment is a major contributing
factor undermining efforts to adequately address the deficiencies.
At the local level in particular, local governments' ability to
fund necessary bridge improvements has eroded significantly over the
years. Local governments have limited financial means to adequately
address bridge deficiencies and typically do not have the capacity to
do major repairs or capital work on the scale of bridge replacement
without funding support. Immediate action to increase investment at the
national level is crucial if we are to accelerate local bridge repair
and replacement programs.
The needs at the local level are especially significant. Twenty-
seven percent of local bridges are structurally deficient or
functionally obsolete. Of that, 15 percent are structurally deficient
as compared to 7 percent of State-owned bridges. Of the almost 67,000
structurally deficient bridges in our Nation, more than half of them
are the responsibility of local government.
Bridges on local roads typically were built to accommodate lower
traffic volumes and smaller, lighter vehicles or are so old and
deteriorated they are in urgent need of repair or replacement. In many
cases, they were not designed to take the pounding current traffic
volumes and loads demand. As congestion increases on the interstate
system and State highways, local roads become diversion routes,
supporting ever increasing levels of usage. Freight volumes, too, are
increasing, adding demands on all parts of the system.
Deficient local bridges are rated, prioritized and repaired or
replaced as funding is available. When funding is insufficient,
deferred maintenance, increased inspections, weight limits and closures
are often the only options. It is not uncommon for bridges to go years,
even decades, without the appropriate action to repair or replace them,
due to lack of funds. This is particularly true in more rural areas.
APWA has been and will continue to be an advocate for the
development of public policies which ensure the safe and efficient
management and operation of our public infrastructure. We support a
determined, comprehensive national effort to increase investment to
eliminate the bridge funding backlog needed to repair, rehabilitate and
replace all publicly owned bridges as part of a zero bridge
deficiencies goal.
Such an effort, however, should not stop there. It needs sustained
and sustainable funding to ensure ongoing system preservation and
maintenance at a level necessary to prevent future deficiencies of all
publicly owned bridges.
MAP-21, Moving Ahead for Progress in the 21st Century, provides a
short-term, 2-year investment in our transportation system. With the
Highway Trust Fund on the brink of insolvency, we urge the Congress to
begin work immediately on a long-term authorization that provides a
sustainable revenue source to avert a looming funding shortfall that
threatens not only the ability to adequately address bridge
deficiencies but also the many other pressing transportation needs. The
Congressional Budget Office reports that the Trust Fund will be unable
to meet all of its obligations beginning in fiscal year 2015. Inaction
to address this shortfall could result in Federal transportation
programs being cut by about 90 percent to bring the Trust Fund into
balance.
We support a well-funded, multi-year surface transportation
authorization that provides an increased and sustainable funding source
for road and bridge needs, strengthens local decisionmaking authority,
directs more resources to local priorities and does more to streamline
and accelerate the project delivery process.
In addition, we support a mix of revenue options to ensure
necessary funding sustainability, including: raising and indexing the
Federal motor fuel tax; exploring the transition to vehicle-mileage
fees; and expanding access to innovative financing tools.
MAP-21 eliminated the Highway Bridge Program. MAP-21's National
Highway Performance Program provides funding for bridges on the
National Highway System (NHS). Although the Surface Transportation
Program retains the 15 percent set-aside for off-system bridges
(bridges not on the Federal system), we need to ensure adequate funding
for local bridges on the Federal system but not on the NHS.
In conclusion, our transportation system is aging, deteriorating
and suffering the effects of decades of underinvestment. The result is
the unacceptably high levels of deficiencies we see today. We believe
that, working together in partnership with local, State, Federal, and
private sector partners, we must take immediate action to address our
crumbling infrastructure. But it will take funding and leadership.
Increased investment to repair or replace deficient bridges is vital to
achieve a safer and more efficient transportation network.
Madam Chairman, we thank you for holding this hearing and are
especially grateful to you and subcommittee members for the opportunity
to submit this statement. We stand ready to assist you and the
subcommittee as we move forward to address our Nation's infrastructure
needs.
______
Prepared Statement of the American Society of Civil Engineers
The American Society of Civil Engineers (ASCE) \1\ is pleased to
present to the subcommittee our views on the state of the Nation's
infrastructure, as well as the challenges ahead and investments needed.
---------------------------------------------------------------------------
\1\ ASCE was founded in 1852 and is the country's oldest national
civil engineering organization. It represents more than 146,000 civil
engineers individually in private practice, government, industry, and
academia who are dedicated to the advancement of the science and
profession of civil engineering. ASCE is a nonprofit educational and
professional society organized under part 1.50(c)(3) of the Internal
Revenue Code.
---------------------------------------------------------------------------
ASCE was relieved that there were no fatalities or serious injuries
due to the I-5 bridge collapse. While we await to hear from the
National Surface Transportation Safety Board as to the cause of the
collapse, there are reports that an oversized vehicle may have played a
significant role in the incident. What we do know is that the bridge is
one of 84,748 functionally obsolete bridges in this country and served
as a critical link to our economy and trade. Therefore, the ripple
effect of the bridge collapse will have significant economic
repercussions. In fact, the Director of the Washington State Department
of Commerce said that the I-5 bridge collapse could cost the State of
Washington at least $47 million in lost economic output, as well as
lost jobs and tax revenues.
2013 report card for america's infrastructure
ASCE's 2013 Report Card for America's Infrastructure graded the
Nation's infrastructure a ``D+'' based on 16 categories and found that
the Nation needs to invest approximately $3.6 trillion by 2020 to
maintain the national infrastructure in good condition. The following
are the grades and the investment needs by 2020 for the surface
transportation area:
--Bridges received a grade of C+;
--Transit received a D;
--Roads received a grade of D, and combined with bridges, and
transit, have an estimated investment need of $1.7 trillion;
and
--Rail received a grade of C+ and has an estimated investment need of
$100 billion.
While taken for granted by most Americans, our infrastructure is
the foundation on which the national economy depends. As the economy
grows, these infrastructure assets must be maintained and improved
accordingly. While the interstate highway system is a shining example
of a focused national vision for the Nation's infrastructure, an ever
expanding population and a growing economy requires these aging
infrastructure systems to keep pace. Deteriorating and aging
infrastructure is not only an inconvenience, it financially impacts our
families, local communities, and our entire country.
In an effort to see how significant investments are to the Nation's
infrastructure, ASCE released a series of economic studies that answer
a critical question--what does a ``D+'' mean for America's economy and
what is the return on investment we can expect to see. The Failure to
Act studies compare current and projected needs for infrastructure
investment against the current funding trends in surface transportation
(highways, bridges, rail, transit); water and wastewater; electricity;
and airport and waterborne transportation. The series concluded with a
final report, Failure to Act: The Impact of Current Infrastructure
Investment on America's Economic Future, which found improving the
condition of our Nation's aging roads, bridges, power lines, sewer
systems, ports and waterways is critical to protecting 3.5 million
jobs.
The final summary report found that between now and 2020,
investment needs across key infrastructure sectors total $2.75
trillion, while projected expenditures are about $1.66 trillion,
leaving a total investment gap of $1.1 trillion. This gap leads to
consequences like congestion, water main breaks, and blackouts and
brownouts that cost households and businesses money, creating a drag on
our economy. However, with an additional investment of $157 billion a
year between now and 2020, the U.S. can eliminate this drag on economic
growth and protect:
--$3.1 trillion in GDP;
--$1.1 trillion in U.S. trade value;
--3.5 million jobs;
--$2.4 trillion in consumer spending; and
--$3,100 in annual household income.
In order to avoid the severe economic impacts that would be caused
by failing to invest in our infrastructure at home, the Federal
Government is allowing other countries to make up where the United
States is failing. It is long established that money invested in
essential public works can create jobs, provide for economic growth,
and ensure public safety through a modern, well-engineered national
infrastructure. By improving the Nation's deteriorating infrastructure
system both economic and job creation opportunities will be provided,
while creating a multi-modal transportation system for the 21st
century.
highway and bridge conditions
The health of our Nation's highways and bridges serves as a
critical link moving people and goods throughout the country, therefore
they are directly tied to the Nation's ability to compete in a global
marketplace. For this reason, it is of growing concern that the bridges
in our Nation's metropolitan areas, which are an indispensable link for
both millions of commuters and freight on a daily basis, are decaying.
Meanwhile, 42 percent of America's major urban highways remain
congested, costing the economy an estimated $101 billion in wasted time
and fuel annually.
Over 200 million trips are taken daily across deficient bridges in
the Nation's 102 largest metropolitan regions. In total, one in nine of
the Nation's bridges are rated as structurally deficient, while the
average age of the Nation's 607,380 bridges is currently 42 years.
Overall, we are seeing a decline in the number of deficient bridges;
however, current funding levels are still not enough to fulfill all of
the repair and replacement needs.
The I-5 bridge over the Skagit River in Washington was not
structurally deficient; however, the bridge was 58 years old and
classified as functionally obsolete. A functionally obsolete bridge no
longer meets the current engineering and design standards that are used
today, with examples being narrow lanes or low load-carrying capacity.
While functionally obsolete bridges might not pose the same risks as
structurally deficient bridges, which require significant
rehabilitation or replacement due to deterioration, they still demand
consideration, maintenance, and proper postings. Therefore, even though
we are seeing a slow, but steady decline in the overall number of
deficient bridges, nationally we still have significant work to do.
Nationally, we must focus not just the number of structurally deficient
bridges, but functionally obsolete bridges as well.
Turning to our Nation's roads, 32 percent of America's major roads
are in poor or mediocre condition. While the Nation has seen some
improvements in pavement conditions due to a short surge of investment
from the American Recovery and Reinvestment Act, these were not
sustained, long-term investments. Of added concern are the vehicular
restrictions for some roadways due to poor pavement, which can create
longer routings for trucks in cases where detours are required.
Deficient pavements are more common in urban versus rural areas, with
47 percent of urban interstate vehicle miles traveled (VMT) over
deficient pavements compared to 15 percent of rural interstates. The
ultimate cost of poor road conditions is significantly more over time
than the cost to maintain those same roads in good condition. For
example, after 25 years the cost per lane mile for reconstruction can
be more than three times the cost of preservation treatments over the
same time period, which can lead to a longer overall life span for the
infrastructure.
highway and bridge investment needs
Federal, State, and local highway and bridge investments are not
keeping pace with the growing costs of the aging infrastructure.
Estimates state that to maintain all of the Nation's highways at
their current condition would cost $101 billion in annual capital
investment between 2008 and 2028. In order to improve the Nation's
highways, investment would need to rise to $170 billion annually, or an
additional $79 billion annually from current investments, during that
same time period. This investment would bring the number of Federal-aid
highway vehicle miles traveled on pavements with a good ride quality up
from 46 percent in 2008 to 74 percent by 2028. Unfortunately, Federal,
State, and local governments are only spending $91 billion annually on
capital investments, meaning that each year our roads deteriorate
further. If present trends continue, the unfunded gap in highway
funding, which is 48 percent of the total need in 2010, is expected to
increase to 54 percent by 2040.
When zeroing in on just the Nation's bridges, the Federal Highway
Administration (FHWA) estimates that the current cost to repair or
replace only the deficient bridges eligible under the Federal Highway
Bridge Program is almost $76 billion. This total is up from 2009, when
FHWA estimated that the total cost was $71 billion. If bridge
maintenance continues to be deferred over the next 25 years, these
backlog costs will rise. To put these numbers in perspective, over the
last 30 years Congress has provided approximately $77 billion to the
States through the Federal-aid bridge program. The Federal Highway
Administration estimates that to eliminate the bridge backlog by 2028,
the Nation would need to invest $20.5 billion annually; however, at
this time only $12.8 billion is being spent annually on the Nation's
bridges.
highway trust fund
With the current surface transportation authorization (MAP-21)
expiring next September, Congress will soon need to begin discussions
on how to fund a new multi-year surface transportation authorization
and more importantly how to make the Highway Trust Fund sustainable as
a long-term revenue source. Therefore, due to the Nation's growing
surface transportation needs, Congress must first appropriate the
funding levels that were authorized under MAP-21, while also tackling a
way to provide a long-term, reliable, and sustainable approach toward
fixing the Highway Trust Fund.
A key reason for the current decline in transportation spending is
the fact that Federal revenues supporting the Highway Trust Fund have
not been adjusted since 1993; however demands on the system have grown.
As a result, current levels of highway and public transportation
investment cannot be maintained solely with trust fund resources and
Congress has had to rely on the General Fund to shore up resources.
Currently, the Highway Trust Fund is allocating more than the
revenues it receives, with the trust fund allocating $15 billion more
in 2012 alone. The Congressional Budget Office (CBO) recently projected
that to prevent a massive shortfall for highway and transit spending in
2015, Congress will need to severely cut highway spending, transfer $14
billion to the Highway Trust Fund from the General Fund, raise the
Federal gas tax by about 10 cents per gallon, or implement some
combination of the three. The current solution provided by the Obama
administration is to once again transfer funds from the General Fund,
which is not a long-term solution for funding highway and transit
programs.
asce recommendations
While additional funding is critical to improving the Nation's
highways and bridges, it is not the only solution. ASCE recommends the
following solutions in order to begin bring the Nation's roads and
bridges into a state of good repair:
--Ensure the sustained sufficiency and reliability of the Highway
Trust Fund by identifying and incorporating necessary
additional revenue streams.
--Encourage the use of asset management programs to provide for the
most efficient use of maintenance and repair investment.
--Make the repair of structurally deficient urban bridges a top
national priority through the implementation of a risk-based
prioritization model.
--Increase annual investment levels for bridge repair,
reconstruction, and renovation by approximately $8 billion
annually from all levels of government, to a total annual
funding level of $20.5 billion.
--Develop a national strategic plan for addressing the Nation's
structurally deficient and functionally obsolete bridges in the
upcoming decades, including long-term transportation research
in order to develop more resilient bridges.
--Set a national goal to decrease the number of just structurally
deficient bridges to 8 percent by 2020 and decrease the
percentage of the population driving over all deficient bridges
by 75 percent by 2020.
conclusion
Continuing to maintain baseline levels of investment for the
Nation's roads and bridges only allows us to maintain the inadequate
conditions that our current surface transportation systems are under.
Without developing a long-term, reliable user fee approach for the
Highway Trust Fund, surface transportation programs will continue to
live under a cloud of uncertainty for the years to come and necessary
improvements cannot be full addressed. A transportation system cannot
run properly when it must rely on transfers from the General Fund in
order to remain solvent. Congress must take the lead in addressing this
problem to ensure continuity in the Nation's surface transportation
program. In the short term, ASCE is pleased to see that Congress is
fully appropriating the funding levels that have been authorized by
MAP-21 and that Senators continue to push the need to upgrade the
Nation's aging infrastructure. However, making a strong commitment to
the Nation's surface transportation system without the proper funding
does not solve our long term infrastructure needs.
The longer Congress waits to properly fund surface transportation
programs, the greater the problem will become. Inaction will lead to a
further deterioration of the Nation's surface transportation assets, a
continuation of high levels of traffic fatalities and more wasted time
and fuel due to increased congestion creating a further drag on the
economy. Therefore, ASCE stands ready to work with Congress as it works
to fund our Nation's vital transportation assets.
______
Prepared Statement of the California Association of Housing Authorities
Thank you for the opportunity to present written testimony
regarding the fiscal year 2014 Department of Housing and Urban
Development (HUD) budget. The California Association of Housing
Authorities (CAHA) represents the 113 housing authorities in the State
of California. Together, we administer approximately 320,000 section 8
housing choice vouchers for the elderly, disabled, and families with
children; partner with the Veterans Administration to provide housing
vouchers for 8,100 homeless veterans; and own approximately 39,100
public housing units. In addition, we provide housing and supportive
services to thousands of very low income households under an array of
other HUD and non-HUD programs, including the Low Income Housing Tax
Credit. Our testimony pertains to the Housing Choice Voucher (HCV)
Program and the Public Housing Program.
Housing Choice Voucher Program.--The fiscal year 2013 budget funded
us at a 92.5 percent proration for the HCV Program. This is the lowest
level in the 38-year life of the HCV Program. As a result, housing
authorities are drafting procedures to terminate existing tenants from
the HCV Program and HUD has estimated that 125,000 families nationwide
could lose their housing assistance, some 15,700 in California. These
are families who have already signed leases with their landlords--
landlords who, likewise, are dependent on the HCV Program subsidy
payments to make their mortgage payments. The mission of housing
authorities is to house people, not terminate their assistance
resulting in homelessness. We understand that increasing funding for
the HCV Program to serve all potentially eligible families is not
possible in these economic times. However, we ask that you provide
sufficient funding in the fiscal year 2014 budget to renew assistance
to all current participants so that no family loses its housing.
HCV Program Administrative Fees.--Housing authorities are paid
according to a formula to administer the HCV Program. The fiscal year
2013 budget funded us at a 69 percent proration which, like the HCV
rental subsidy, is the lowest in the 38-year history of the Program's
operation. While some may say that 100 percent of the formula is too
rich CAHA believes that no one can argue that 69 percent is sufficient.
The HCV Program Administrative Fee proration has been steadily
decreasing over the last 5 years as follows: 2009--88 percent; 2010--93
percent; 2011--85 percent; 2012--80 percent and 2013--69 percent. To
manage, housing authorities are doing lay-offs, mandating furloughs,
cutting salaries and benefits and reducing office hours. According to
the National Association of Housing and Redevelopment Officials
(NAHRO), since fiscal year 2003, the last time housing authorities
received 100 percent of their Administrative Fee, 213 housing
authorities have ``handed back'' their HCV Program to HUD or
transferred it to another housing authority.
CAHA believes that it takes people to help people. Housing
authority staff determine family eligibility and rent annually,
maintain the waiting list, inspect every unit every year per HUD's
Housing Quality Standards, outreach to landlords, conduct criminal
background checks, maintain program integrity and prevent fraud, and
counsel families to find appropriate housing. These activities are
labor intensive, particularly as the regulatory requirements are overly
burdensome and far in excess of what would be required to administer a
sound, integrity-based HCV Program. In addition to restoration of the
Administrative Fee funding to a 90 percent proration, CAHA respectfully
asks that you include five regulatory relief measures in your
deliberations:
1. Biennial Inspections.--The HCV Program requires annual
inspections of all subsidized units. Moving to a biennial schedule
would reduce inspection work by 50 percent. Most Moving to Work (MTW)
agencies have already successfully adopted initiatives that reduce unit
inspections to a biennial schedule with special monitoring/sanctions
for units that fail to meet standards.
2. Biennial or Triennial Income Recertifications for Fixed Income
Households.--The HCV Program requires annual recertification of all
participating households. However, approximately 50 percent of section
8 households are elderly and/or disabled and typically have fixed
incomes. Most MTW agencies have already successfully adopted
initiatives that permit biennial or triennial recertifications for
fixed income households.
3. Adoption of a National Waiver for Reduction of Payment
Standards.--The HCV Program requires subsidy levels, called ``payment
standards,'' pegged to 90-110 percent of local fair market rents
(FMRs). When funding is insufficient, regulations permit housing
authorities to apply to HUD for a waiver to reduce the payment standard
below 90 percent. Each request is handled individually by HUD and takes
a remarkable amount of time and resources to process. During this
section 8 funding crisis, CAHA requests that HUD process a nationwide
waiver for payment standards as low as 80 percent for housing
authorities with insufficient section 8 funding from HUD to meet the
subsidy requirements of their outstanding vouchers.
4. Reduced Payment Standard Waiver Implementable Immediately.--Per
HUD regulations, the waiver permitting a reduction in payment standards
cited in No. 3 above may only be implemented over the course of 1-2
years. CAHA requests that the proposed nationwide waiver be
implementable on an immediate basis.
5. Treasury Offset Program.--The Treasury Offset Program is a
centralized offset program, administered by the Financial Management
Service's Debt Management Services, to collect delinquent debts owed to
Federal agencies and States, typically through Internal Revenue Service
(IRS) refunds offset of another U.S. Government-issued payment.
Authorization for housing authorities to participate in the program
would assist in the collection of debts owed by current or former HCV
Program and Public Housing Program participants. Amounts recovered
would become available for current program expenses. The State of
California Employment Development Department (EDD) already permits this
activity at the State level.
Public Housing.--The Public Housing Operating Fund is supposed to
cover the difference between the rent paid by public housing residents
and the housing authorities' cost to manage the housing. The Operating
Fund was structured based on a cost study of well-managed multifamily
housing done by Harvard University. Despite the study, however, over
the last 10 years (except for American Recovery and Reinvestment Act of
2009 (ARRA) funds provided in 2010) the Operating Fund has not been
funded at 100 percent of the formula and in fiscal year 2013 was at
only 82 percent.
The President's fiscal year 2014 budget requests $4.6 billion for
the Operating Fund. According to HUD, this figure represents 90 percent
of estimated eligibility under the Operating Fund formula. CAHA
respectfully asks that the subcommittee appropriate operating funds at
the 90 percent proration level at a minimum; full funding would be at
$5.17 billion.
The President's fiscal year 2014 budget also requests $2 billion
for the Public Housing Capital Fund, which housing authorities use to
make major capital improvements to their public housing. For fiscal
year 2013, the Capital Fund received only $1.789 billion after
accounting for the impact of sequestration, the lowest level in the
history of the Public Housing Program. The President's budget
anticipates that, after set-asides, approximately $1.95 billion would
be applied toward formula Capital Fund grants for fiscal year 2014.
This request continues to fall far short of the $3.4 billion in
annually accruing capital needs estimated by the 2010 Abt Associates'
Capital Needs Assessment study commissioned by HUD. No funding to build
additional, new public housing has been provided in years, so it is
critical to preserve and sustain the public housing that exists. CAHA
respectfully asks that the subcommittee appropriate $3 billion for the
Capital Fund.
CAHA understands well our Nation's budget issues and is poised to
do its part. Other than full funding to protect all tenants currently
receiving HCV Program assistance, all of our funding requests are for
less than the formula amounts. The 5 percent cut imposed by
sequestration does not necessarily sound unreasonable--but it is not
just a 5 percent cut. It is 5 percent cut from the lowest amount
historically appropriated for our housing programs and will have
significant impacts on some of our country's poorest citizens.
Thank you for considering our requests.
______
Prepared Statement of the Coalition of Northeastern Governors
The Coalition of Northeastern Governors (CONEG) is pleased to share
with the subcommittee on Transportation, Housing and Urban Development,
and Related Agencies this testimony for the record on fiscal year 2014
appropriations for surface transportation, rail, and community
development programs. The CONEG Governors deeply appreciate the
subcommittee's longstanding support of funding for these programs.
Federal support is vital to maintaining the national transportation
system, enhancing its capacity to meet enormous and diverse needs, and
contributing to a balanced, integrated national transportation system
that supports the Nation's current and future economic growth. As the
Nation's population grows and the economy recovers, these needs
confront all of us--Federal, State and local governments and the
private sector.
The Governors recognize that the subcommittee, in crafting the
fiscal year 2014 appropriations measure, faces a very difficult set of
choices in an environment of severe fiscal constraints. Funding the
Nation's surface transportation programs in fiscal year 2013 at the
funding levels authorized in the Moving Ahead for Progress in the 21st
Century Act (MAP-21) (Public Law 112-141) was a significant
accomplishment. They thank the subcommittee for its support and urge
you to continue this strong Federal/State partnership so vital for a
national, integrated, multi-modal transportation system. This system
underpins the competitiveness of the Nation's economy; broadens
employment opportunities; and contributes to the efficient, safe,
environmentally sound, and energy efficient movement of people and
goods.
surface transportation
The CONEG Governors urge the subcommittee to fund the highway
obligation ceiling at the authorized levels, adequately fund safety and
innovative financing programs, and maintain at least the fiscal year
2013 levels for public transit programs. These levels of Federal
investment are the minimum needed to slow the decline in infrastructure
conditions and maintain the safety of the Nation's highways, bridges,
and transit systems.
Continued and substantial Federal investment in these
infrastructure improvements--in urban, suburban, exurban, and rural
areas--is necessary to safely and efficiently move people and products
and to support the substantial growth in freight movement projected in
the coming decades. The Federal Government has invested significant
resources in the Nation's transportation systems, and it has a
continuing responsibility to maintain and enhance the capacity of the
Nation's transportation infrastructure to keep America competitive in a
global economy.
Specifically, the CONEG Governors urge the subcommittee to:
--Fund the highway obligation ceiling at the authorized levels;
--Fund public transit programs at no less than the authorized levels,
with full funding for the current transit formula grants and
capital investment grants, preserving the historic funding
balance between these programs;
--Ensure that Federal transit funds are released to States and
designated recipients in a timely manner; and
--Expand the use of innovative financing and public-private
partnerships to supplement direct Federal funding, including
Federal loan guarantees and credit assistance, such as the
Transportation Infrastructure Finance and Innovation Act
program (TIFIA).
rail
The Governors deeply appreciate the subcommittee's continued
support for Amtrak and the funding in prior years for intercity
passenger rail capital assistance. Recognizing that Congress will
undertake a new authorization of the rail program to follow the
Passenger Rail Investment and Improvement Act of 2008 (PRIIA) (Public
Law 110-432), they urge the subcommittee to provide fiscal year 2014
funding for intercity passenger rail capital assistance. Significant
funding for intercity passenger rail, in addition to the Amtrak
funding, will allow efficient intercity passenger rail corridors to be
developed as part of a national, multi-modal transportation system. In
the Northeast, continued, adequate Federal investment is critical to
bring the current system to a state of good repair; help expand its
capacity to meet the growing ridership; provide improved service to
communities; attract State, local and private sector investments in the
intercity passenger rail system; and develop a coordinated,
comprehensive vision and plan for future services. These investments
are essential for the accessible, reliable, frequent and on-time
service that attracts and retains ridership and grows revenues.
The Northeast has one of the oldest and most extensive multi-modal
transportation systems in the world. This system faces major congestion
and capacity constraints which, if not addressed, have the potential to
curtail future commerce and mobility in a region that is densely
populated and serves as an economic engine for the Nation. To begin to
address these capacity constraints, the Northeast States have already
invested significantly in the passenger rail corridors of the region--
the Northeast Corridor (NEC), the Empire Corridor, the Northern New
England Corridor, and the Keystone Corridor. They have leveraged
Federal funds appropriated for intercity passenger rail projects
eligible under the framework created by PRIIA. The intense efforts of
the States, Amtrak and freight railroads in recent years are now
showing positive results in the Nation's busiest rail corridor.
However, continued significant investments in this corridor network are
needed to meet the growing intercity passenger travel market. The joint
planning and funding initiatives over the past years are part of an on-
going coordinated effort to improve service by reducing travel times,
increasing speed, increasing service reliability and on-time
performance, and eliminating choke points; while improving
infrastructure through station upgrades, replacing aging bridges and
electrical systems, installing track and ties, replacing catenary
wires, and purchasing new locomotives. Among the active collaborative
projects that are employing thousands of workers using American-made
supplies are the following:
--Maine's Northern New England Passenger Rail Authority (NNEPRA) is
managing a project to add double track and replace rail in
Massachusetts on the portion of the Downeaster line owned by
the Massachusetts Bay Transportation Authority (MBTA). These
improvements will enhance Downeaster reliability/on-time
performance and set the stage for more Downeaster frequencies.
NNEPRA received a Federal Railroad Administration (FRA) grant
and the MBTA provided a match.
--The Delaware Department of Transportation, the University of
Delaware, and the City of Newark are designing and building a
regional transportation center, on former industrial property
acquired by the University of Delaware, to serve Amtrak,
Southeastern Pennsylvania Transportation Authority, and
Delaware public transit. Preliminary engineering is anticipated
for the summer of 2013.
--In Massachusetts, work currently is underway to re-route Amtrak's
Vermonter will expand service to new communities, connecting
Vermont, western Massachusetts and central Connecticut to the
Northeast Corridor and Washington, DC. Upgrades to this
``Massachusetts Knowledge Corridor'' include installing 50
miles of new rail (made in Steelton, Pennsylvania) and
replacing approximately 75,000 ties. This project builds upon
work completed in Vermont that has reduced travel time by
almost 1 half-hour.
Amtrak.--The Amtrak fiscal year 2014 budget request contains
specific funding levels provided for operations, capital and debt
service. These funding levels will enable Amtrak to continue a balanced
program of adequate, sustained capital investment in infrastructure and
fleet modernization programs that are vital for an efficient intercity
passenger rail system that can meet the rising demand for reliable,
safe, quality services.
The Amtrak capital request encompasses investments urgently needed
to maintain the Northeast Corridor and other Amtrak-owned or maintained
infrastructure and equipment; advance the Gateway Program to expand
track, tunnel and station capacity between Newark, New Jersey, and New
York Penn Station; acquire new equipment; and improve accessibility for
passengers with disabilities.
The Governors also strongly urge the subcommittee to provide Amtrak
the requested levels of funding that will allow improved intercity
service on the NEC--the backbone of a passenger rail network that
connects the entire Northeast and extends rail service to communities
in the South, West, and Canada. These projects are initial steps
required to address the backlog of deferred investments, and to make
investments in near-term improvements in track, bridges, tunnels, and
equipment that will increase the capacity of the NEC to offer more
reliable and frequent intercity service that can deliver more riders to
their destination in less travel time. Improvements on the NEC can also
help address the congested highway corridors and crowded Northeast
airports that are a major source of travel delays nationwide.
Intercity Passenger Rail Corridors.--To advance the initial
investments made by the Federal Government and the States, the
Governors urge the subcommittee in fiscal year 2014 to fund a
competitive Intercity Passenger Rail Corridor Capital Assistance
Program, and to provide provisions that fund the planning activities
for the development of passenger rail corridors, including multi-state
corridors. The multi-state planning funds are the source of the monies
that support the continuation of the work being led by the FRA, working
cooperatively with the Northeast States, to develop an updated service
development plan and environmental analysis that reflect the current
and projected demand for passenger rail service on the NEC. A funding
level of $25 million is needed in fiscal year 2014 for the completion
of these analyses which are required for any future major improvements
for higher-speed intercity passenger rail service on the NEC.
Since these corridors serve diverse travel markets, the Governors
urge that these grant funds be available to States to advance plans for
reliable, travel-time competitive service, regardless of maximum speed
requirements. In light of the stringent FRA requirements for intercity
passenger rail grants, they request the subcommittee waive the current
statutory requirement that projects be part of an approved State rail
plan, since this requirement might curtail thoughtful and well-advanced
efforts already underway by the States.
Northeast Corridor Infrastructure and Operations Advisory
Commission.--The Governors thank the subcommittee for providing funding
for the Northeast Corridor Infrastructure and Operations Advisory
Commission (Commission). Consistent with its responsibilities defined
under PRIIA, the Commission is working actively to facilitate mutual
cooperation and planning among the States, Amtrak, freight railroads,
and the FRA for intercity, commuter and freight use of the Corridor--
and to also maximize the economic growth and the energy and
environmental benefits of the larger regional NEC network.
The Commission has extensive responsibilities to set corridor-wide
policy goals and recommendations that encompass passenger rail
mobility, intermodal connections to highways and airports, reduced
energy consumption, air quality improvements, and local and regional
economic development of the entire Northeast region. It is also tasked
with developing a standardized formula to determine and allocate the
costs, revenues and contributions among NEC commuter railroads and
Amtrak which use each other's facilities and services. The Commission's
work will also guide the vision and service development plans that are
a pre-requisite to fund projects that can improve the capacity of the
NEC. To conduct the assessments required by Congress in a timely
manner, the Commission needs resources, data and expert analysis that
exceed that which is currently available through the staff of the
States, Amtrak and FRA. Continued funding in fiscal year 2014 will
ensure the Commission's ability to secure all essential resources for
conducting these assessments.
Other Programs.--A number of other national rail and intermodal
programs are important components of the evolving Federal-State-private
sector partnerships to enhance passenger and freight rail across the
country.
The Railroad Rehabilitation and Improvement Financing Program
(RRIF) can be an important tool for railroads (particularly regional
and short-line railroads) and public agencies to access the financing
needed for critical infrastructure and intermodal projects. The
Governors also encourage the subcommittee to provide funding for the
Rail Line Relocation program, the Next Generation Corridor Train
Equipment Pool, and critical rail safety programs.
The Governors support the continuation of the Transportation
Investment Generating Economic Recovery, or TIGER Discretionary Grant
program, at $500 million to encourage investment in multi-modal, multi-
jurisdictional or other road, rail, transit and port projects that help
achieve critical national objectives.
Adequate funding is needed for the Surface Transportation Board to
carry out its expanded responsibilities for intercity passenger rail
corridor service, including its specific responsibilities under PRIIA
regarding equitable cost-sharing formulas among States, Amtrak and
commuter railroads.
community development block grant
The CONEG Governors urge the subcommittee to provide $3.3 billion
in formula funding for the Community Development Block Grant (CDBG)
program. This program, which enables States to invest in improved local
infrastructure, rehabilitated affordable housing, and local economic
development and jobs, has a proven track record of contributing to
neighborhood and community redevelopment and improvement nationwide.
Every $1 invested in CDBG leverages an additional $3.55 in non-CDBG
funding.
conclusion
In conclusion, the CONEG Governors urge the subcommittee to:
--Fund the highway obligation ceiling at the authorized levels;
--Expand the TIFIA program;
--Fund Federal public transit programs at the authorized levels, with
full funding for the transit formula grants and capital
investment grant programs, and preserving the historic funding
balance between these programs;
--Fund Amtrak at levels that will support sound operations and a
balanced capital investment program, including the NEC capacity
improvements;
--Maintain provisions to fund the Northeast Corridor Infrastructure
and Operations Advisory Commission;
--Provide funding for the Intercity Passenger Rail Service Corridor
Assistance Program for corridor planning and capital
investment, including provisions for multi-state corridor
planning;
--Provide funding for such national rail programs as the Next
Generation Corridor Train Equipment Pool, the Rail Line
Relocation program and the RRIF program;
--Provide $500 million for the TIGER program;
--Provide adequate funding for the Surface Transportation Board; and
--Provide formula funding for the Community Development Block Grant
at the $3.3 billion level.
The CONEG Governors thank the entire subcommittee for the
opportunity to share these priorities and appreciate your consideration
of these requests.
______
Prepared Statement of Easter Seals
Thank you for this opportunity to submit testimony on behalf of
Easter Seals about two collaborative partnerships we administer with
the Federal Transit Administration. We appreciate the strong support of
the subcommittee over the years and look forward to continuing to work
to increase the mobility of people with disabilities and older adults.
Easter Seals respectfully requests that the subcommittee include
report language in the fiscal year 2014 transportation appropriations
bill providing no less than $3 million for Project ACTION and no less
than $1 million for the National Center on Senior Transportation within
the Standards Setting and Technical Assistance account at the Federal
Transit Administration.
about project action
People with disabilities rely on public transportation to travel to
work and to access services, supports and entertainment in their
communities. Recognizing the need to improve access to public
transportation for people with disabilities, Congress in 1988
established a national technical assistance center called Project
ACTION to partner with transportation providers, the disability
community and others to promote universal access to transportation for
people with disabilities. Congress recently reauthorized Project ACTION
through the Moving Ahead for Progress in the 21st Century Act (MAP-21).
Project ACTION is funded by the U.S. Department of Transportation's
Federal Transit Administration (FTA) out of the standards development
and technical assistance account. Easter Seals, Inc. won the
competitive bid to manage Project ACTION for FTA.
collaborating with public transit operators to increase accessibility
and improve services
Project ACTION is the preeminent resource in the country for
helping increase the mobility of people with disabilities. The project
does an exemplary job of gathering and sharing best practices;
providing technical assistance and training; facilitating strategic
partnerships and community engagement to support the development and
coordination of transportation options; developing and disseminating
information, including the use of web-based and social media vehicles;
and administering demonstration grants.
Project ACTION's accomplishments include:
--Creating a strong collaborative environment between the disability
and transit community;
--Creating hundreds of useful guides, resources, tools and other
resources on critical issues affecting mobility for people with
disabilities and older adults that are available to transit
providers, disabilities and the general public for free;
--Providing direct technical assistance to transit providers, people
with disabilities and others through in-person, phone, online
and other consultation;
--Creating and delivering direct training on critical mobility issues
affecting people with disabilities, transit providers and
community planners; and
--Working with communities to help them plan and implement strategies
to increase mobility.
easter seals project action appropriations priorities
Easter Seals urges Congress to support the mobility needs of people
with disabilities and older adults (through the National Center on
Senior Transportation) to address significant unmet needs, such as
addressing the coming increase in the need for accessible
transportation options as baby boomers age and integrating
transportation technology advances to increase transportation mobility
and access.
about the national center on senior transportation
Older adults rely on public transportation to travel to work and to
access services, supports and entertainment in their communities.
Recognizing the need to improve access to public transportation for
older adults, Congress authorized the National Center on Senior
Transportation (NCST) in 2005 as part of the Safe, Accountable,
Flexible, Efficient Transportation Equity Act: A Legacy for Users
(SAFETEA-LU). Congress reauthorized the program in 2012 as part of the
Moving Ahead for Progress in the 21st Century Act (MAP-21) in the
standards development and technical assistance account.
With funding from the U.S. Department of Transportation, Federal
Transit Administration, NCST was launched in 2006 and has been
administered by Easter Seals, Inc. in partnership with the National
Association of Area Agencies on Aging (n4a) ever since. In April 2012,
the Federal Transit Administration once again selected Easter Seals,
Inc. and n4a to administer. From the Center's inception, a national
steering committee of experts in senior transportation issues has
advised NCST on issues in aging and transportation and ways to achieve
NCST's goals.
collaborating with communities to increase independence and improve
services
The National Center on Senior Transportation's mission is to
increase transportation options for older adults and enhance their
ability to live more independently within their communities throughout
the United States. NCST achieves this mission by gathering and sharing
best practices; providing technical assistance and training;
facilitating strategic partnerships and community engagement to support
the development and coordination of senior transportation options;
developing and disseminating information; and administering
demonstration grants.
The Center has a strong commitment to promoting innovations at the
community level and has provided funding and technical assistance to
support a number of specific projects across the United States. Working
with individual communities, the NCST identifies effective and creative
approaches for addressing the challenges that impact transportation
services for older Americans. The NCST strives to bring together the
aging, human service, and transportation providers to create solutions.
Our work supports the full ``family'' of older adult transportation
services, including programs using volunteers both to driver and to
accompany older adults to their destinations, travel training and
orientation promoting increased use of public transit, older driver
safety, education for caregivers, coordinated planning efforts and much
more.
national center on senior transportation appropriations priorities
Easter Seals urges Congress to support the mobility needs of older
adults and people with disabilities (through Easter Seals Project
ACTION) to address significant unmet needs, such as addressing the
coming increase in need for accessible transportation options as baby
boomers age and integrating transportation technology advances to
increase transportation mobility and access.
______
Prepared Statement of Habitat for Humanity International
Thank you for the opportunity to provide testimony in support of
the Self-Help and Assisted Homeownership Opportunity Program (SHAHOP)
account, which funds the Self-Help Homeownership Opportunity Program
(SHOP), the Section 4 Capacity Building for Community Development and
Affordable Housing Program (Section 4), and the Department of Housing
and Urban Development's (HUD's) rural capacity building program.
Habitat for Humanity International (Habitat) urges the subcommittee to
appropriate $60 million for the SHAHOP account for fiscal year 2014,
funding SHOP at $20 million, Section 4 at $35 million, and rural
capacity building at $5 million.
self-help homeownership opportunity program
HUD's SHOP program has been a uniquely effective tool for enabling
successful low-income homeownership by providing resources to Habitat
affiliates and other nonprofits implementing self-help housing models
to acquire property, including foreclosed or abandoned homes, and to
develop infrastructure for future Habitat homes, activities that are
among the most difficult to underwrite through private fundraising.
With many communities around the country still struggling to overcome
the effects of the Great Recession and the foreclosure crisis, enabling
families to become successful homeowners has never been more important
to local economies. With the support of SHOP funds, Habitat affiliates
have completed more than 15,000 homes and housed nearly 54,000 people
and counting, while leveraging over $1 billion in private investment in
neighborhoods and communities throughout the Nation.
Since fiscal year 2011, SHOP funding has been cut by 50 percent to
the current funding level of $13.5 million, drastically reducing the
impact of one of the most effective Federal tools for enabling low-
income families to become homeowners. In spite of the program's proven
effectiveness, the administration's fiscal year 2014 budget request
proposes eliminating SHOP as a stand-alone program, guaranteeing $0 in
future funding through a so-called HOME Investment Partnerships Program
(HOME) ``set-aside'' of ``up to'' $10 million.
Even if funding were ultimately provided through a HOME set-aside,
it is unlikely that Habitat affiliates could access or administer such
a program, as Habitat for Humanity International (HFHI) currently
applies for and administers SHOP funding and supports critical
monitoring and evaluation requirements on behalf of its affiliates.
HFHI would be unable to continue serving in this role if it were
required to apply separately to every participating jurisdiction for
funding, and the vast majority of Habitat affiliates would be unable to
add the necessary staff capacity to do so on their own behalf.
Additionally, current administrative processes would become even
more burdensome under the administration's legislative proposal, which
would expand HUD's regulation of SHOP. This is in stark opposition to
the clearly expressed statutory intent of Congress to constrain SHOP
regulatory burdens, maximizing the local impact of the program. In
light of the Office of Management and Budget's (OMB's) having rated
SHOP as of the most effective programs at HUD, it makes little sense to
reform or reauthorize it as a HOME set-aside. Under the program's
current structure, SHOP grantees have completed more homes at a lower
cost than HUD requires and have generated levels of private investment
in local communities rarely achieved through HUD programs.
In addition to maximizing the impact of scarce appropriations,
SHOP's traditional structure also ensures quality by enabling grantees
to select the best local nonprofit developers to implement funding.
Ultimately the President's proposal would eviscerate SHOP, shifting
limited funding from serving families to meeting regulations and
undermining Habitat and other proven grantees' ability to ensure
program quality. In light of current budgetary constraints, ongoing
weakness in the housing market, and SHOP's long history of
effectiveness and efficiency, Habitat urges the subcommittee to
maintain SHOP's current structure and to restore funding to $20 million
for fiscal year 2014.
section 4 capacity building program
Complementing SHOP is the Section 4 Capacity Building Program
(Section 4), the sole HUD program designed specifically to enhance the
capacity of local nonprofit community developers. Like SHOP, Section 4
has endured significant cuts since fiscal year 2011, and the
President's fiscal year 2014 budget request proposes reducing the
funding level to $20 million, an additional 43 percent cut from the
current level of $35 million. Such a reduction would inevitably result
in the diminished ability of community development organizations to
meet the critical needs of local communities still struggling to
achieve economic recovery.
Habitat uses Section 4 funding to provide training, technical
assistance, and organizational development grants to local Habitat
affiliates to assist them with building staff capacity and expertise,
organizational skills, and technical systems required to maximize
impact on local communities. Affiliates receiving Section 4 funds have
increased their housing production levels by 48 percent during their 3
year grant periods and have sustained or increased these gains in
subsequent years. Habitat urges the subcommittee to maintain Section 4
at $35 million for fiscal year 2014.
Together, SHOP and Section 4 serve as impact multipliers for
Habitat affiliates nationwide in both rural and urban communities. With
local economies still suffering effects from the Great Recession,
Congress should maintain proven programs like SHOP and Section 4 that
leverage tens of millions of dollars of private investment into
communities, enabling hundreds of additional qualified families to
become Habitat homeowners each year.
Please support Habitat's mission and work by funding SHAHOP at $60
million in the fiscal year 2014 Transportation, Housing and Urban
Development, and Related Agencies appropriations bill. Thank you for
your consideration and for your support of Habitat for Humanity.
______
Prepared Statement of HUD Council 222, American Federation of
Government Employees, AFL-CIO
Madam Chairman Murray, Ranking Member Collins, and members of the
subcommittee, my name is Carolyn Federoff. I am the executive vice
president of HUD Council 222, American Federation of Government
Employees, AFL-CIO. On behalf of the 1,547 Federal employees who work
in the Office of Multifamily Housing (MFH) of the U.S. Department of
Housing and Urban Development, I want to thank you for the opportunity
to submit our written statement for the hearing record on the important
issue of the HUD proposal to reorganize the HUD Office of Multifamily
Housing.
summary
HUD's proposed reorganization of the Office of Multifamily Housing
is irresponsible. It would be very costly to implement, would generate
little or no savings, would not resolve the problems identified by HUD
in its Federal Register notice (78 FR 25293), and would generate
additional problems--many of which could increase risk to the Federal
Housing Administration (FHA) Insurance Fund.
The Office of Multifamily Housing employees have been remarkably
successful. Between 2009 and 2012, Multifamily Housing increased its
customer base from 48 lenders to 89 lenders, more than doubled the
value of initial endorsements--from $5.1 billion to $13.1 billion, and
nearly doubled the numbers of loans processed, from 661 to 1,286. The
Office of Multifamily Housing can be made more effective and efficient.
But we believe alternative, more responsible, proposals are faster,
cheaper, and smarter.
discussion
Proposed Multifamily Housing Reorganization Would Be Very Costly To
Implement
HUD is proposing to physically consolidate into 10 locations;
employees and work currently located in 61 offices nationwide. The
Agency projects a minimum cost of $57.3 million based on various one-
time costs, including:
--Buyout cost--approximately $13.9 million-$20.8 million;
--Personnel relocation cost--approximately $16.8 million-$33.6
million;
--Net office closure costs--$6.1 million;
--Space alteration costs in the 10 remaining offices--$20 million;
and
--Training costs--$500,000.
However, the Agency has failed to present other costs, including:
--Minimum loss of 25 percent of skilled and experienced employees;
--Unknown costs for recruiting and rehiring employees with necessary
skills to replace employees choosing not to relocate;
--Unknown costs for training new employees;
--Unassessed cost of severance pay for employees choosing not to
relocate or take a buyout;
--Unknown cost to national and local economies due to lost
productively during relocation chaos;
--Unknown cost to FHA insurance funds due to increased risk resulting
from relocation chaos; and
--Unknown long-term cost to FHA insurance funds due to reduced
staffing and oversight.
In addition, the Agency has presented no reoccurring costs. This is
not supportable, however. Unless the Agency intends to eliminate all
site visits or use contractors, the cost of travel will increase as
Multifamily Housing field staff will be required to travel further
distances. Further, there will be increased annual office costs in the
10 remaining offices. Moreover, the per square foot cost for office
space in the 10 remaining offices will be generally more expensive than
the cost of current office space.
Proposed Multifamily Housing Reorganization Would Generate Little to No
Savings
HUD projects long term savings of approximately $47 million
annually: ``The savings is directly related to a reduction in salary
and benefit costs due to reducing overall MFH staffing from 1,547 in
fiscal year 2012 to 1,173 by the end of fiscal year 2016.'' These
savings were calculated based upon an average cost per full-time
employee (FTE), or approximately $125,000 per FTE.
However, not all FTEs are the same. The cost of an FTE in New York
City is more than the cost of an FTE in Des Moines, Iowa. Through
collective bargaining, the Agency has provided us with a ``from-to''
list identifying the current duty stations of bargaining unit employees
and the offices to which they will be reassigned. There are 617
employees on this list. (The remaining approximately 173 employees to
be reassigned are not in the AFGE Council 222 bargaining unit.) The
employees are predominantly GS-12 and GS-13. For ease of calculation,
we conservatively assumed that all affected employees are GS-12 Step 5.
We then calculated the cost of their salaries in their current location
versus in the location to which they will be reassigned. The result is
an increase in salary costs of more than $2.1 million annually.
Recognizing that the Agency intends to reduce costs by reducing
FTEs, we recalculated. The Agency intends to relocate or buyout 790
employees, with a net loss of 374 FTEs. Our calculations are based on
617 FTEs, therefore accommodating 191 of the projected loss. The
remaining 185 of the projected loss represents an additional 30 percent
reduction in staff. Reducing our salary estimates by 30 percent results
in a final estimate of almost $1.5 million in additional salary costs
annually.
We will be spending more to get less.
Proposed Multifamily Housing Reorganization Would Not Resolve the
Problems Identified by HUD but Alternative, More Responsible,
Methods Would and They Would Be Faster, Cheaper and Smarter
``Fragmented and Unwieldy Organizational Structure''/Need
for ``Better Spans of Control''
Many of the problems identified by HUD as the reasons for the
reorganization are real. But the proposed consolidation into 10 offices
does not resolve the problems identified. For example, the Federal
Register Notice presents as a problem a ``fragmented and unwieldy
organizational structure'' and states that Multifamily Housing needs
``better spans of control and [to] establish clear reporting lines in
the field.'' An organizational structure, however, is not the same as
an office structure. Organization charts are not written in bricks and
mortar. Similarly, spans of control and lines of authority are not
resolved by the configuration of office space. Physically consolidating
staff will not instantly eliminate fragmentation or an unwieldy
organizational structure. Physically consolidating Multifamily Housing
employees will not eliminate multiple layers of review or bottlenecks
through which all decisions must flow.
A cheaper, faster and smarter solution is to change the
organizational reporting relationships and lines of authority. This can
help resolve fragmentation and create a more ``wieldy'' or controllable
organizational structure. It can be used to create better spans of
control. If articulated well, it can establish clear reporting lines in
the field and headquarters.
We recommend that the Agency use HUD's established regional
structure to consolidate hubs and tame unwieldy spans of control,
assuring access to HUD's core programs (Multifamily Housing, public
housing, community planning and development (CPD), and fair housing and
equal opportunity (FHEO)) in offices across the country. To maintain
customer service at reasonable cost, we recommend that remaining field
offices be established as satellites. If workload does not support the
designation of a field office as a satellite, existing Multifamily
Housing employees can be ``out stationed'' from and report remotely to
the hub.
``Antiquated Systems and Processes''/Need To ``Increase the
Consistency of MFH Processing Across the Country''
The Agency has identified as problems ``antiquated systems and
processes'' and the need to ``increase the consistency of MFH
processing across the country.'' Again, however, these are not problems
that are necessarily resolved through relocation. Antiquated systems
and processes are location neutral. ``Reducing the field footprint''
does not automatically result in more consistent customer service. It
takes better systems and processes, and trained employees and managers
to achieve consistent customer service.
Cheaper, faster and smarter solutions are available. The Breaking
Ground and Sustaining Our Investments initiatives directly address the
processes our Development and Asset Management divisions use daily. The
cost of their initial implementation has already been expended. In 2009
and 2010, the Administration introduced Loan Committees that review
applications for FHA mortgage insurance before the issuance of a firm
commitment. This has increased the consistency of Multifamily Housing
development processing.
Need for ``More Active Workload Balancing''
The Agency has identified a need for ``more active workload
balancing.'' FHA Commissioner Carol Galante testified before this
subcommittee about wide disparities in the workload of employees from
office to office. As union representatives, we are acutely aware of
these inequities. We are also aware, however, that the Agency lacks a
willingness to actively manage the workload. Physically consolidating
Multifamily Housing employees in and of itself does not actively
balance workloads. This takes active management.
A cheaper, faster and smarter solution is available. The
administration has recently started a workload sharing pilot program
that is location neutral. If, as contemplated by this reorganization,
work from Seattle, Washington, can be done in San Francisco, then the
work from an overburdened asset manager in Portland, Oregon, can be
done by an employee with a lighter portfolio in another office. The
workload sharing pilot should be fully implemented.
Proposed Multifamily Housing Reorganization Would Generate Additional
Problems, Many of Which Could Increase Risk to the FHA
Insurance Fund
Aside from failing to solve the problems identified, the proposed
reorganization would create additional problems. Some of the problems
created will be irreversible. Many will increase risk to the FHA
Insurance Fund.
For example, the Agency anticipates losing 395-592 Multifamily
Housing employees in the field, currently estimated at 1,247. This
would be a loss of 32 percent to 47 percent of Multifamily Housing
employees engaged in direct customer service. The overwhelming majority
of these losses will likely be employees with 20 or more years of
experience and training. The Agency is unlikely to be able to replace
lost skills in a timely fashion, except at great cost: in almost every
instance, the location of the proposed hub or satellite is an area with
below-average unemployment rates and financial centers competing for
the same talent pool.
We are particularly concerned that the proposed reorganization
would permanently reduce by 30 percent Multifamily Housing employees in
the field, despite the fact that reductions in staff are made before
any process improvements are implemented or assessed for efficiency or
effectiveness, and Government Accountability Office (GAO) reported in
March that HUD lacks a credible method of determining its staffing
needs. (``HUD--Strategic Human Capital and Workforce Planning Should be
an Ongoing Priority,'' GAO March 2013)
Request for Government Accountability Office (GAO) Report
We request that the Transportation, Housing and Urban Development,
and Related Agencies appropriations subcommittee seek a GAO review of
the process utilized by the Office of Multifamily Housing for
determining its staffing needs after reorganization, and report on
whether and how Multifamily Housing overcame the problems identified in
the March 2013 GAO report.
We further suggest that the subcommittee prohibit any expenditure
of funds to implement the proposed reorganization until after Congress
has an opportunity to review the new GAO report.
This concludes my written statement. I thank you for including it
in the hearing record.
______
Prepared Statement of the Institute of Makers of Explosives
fiscal year 2014 federal motor carrier safety administration budget
request
interest of the institute of makers of explosives
The Institute of Makers of Explosives (IME) is the safety and
security association of the commercial explosives industry. Commercial
explosives underpin the economy. They are essential to energy
production, construction, demolition, and the manufacture of any metal/
mineral product. Explosives are transported and used in every State.
The ability to transport and distribute these products safely and
securely is critical to this industry. At some point, virtually all
explosives are transported by truck. Among these explosives are
products classed as Division 1.1, 1.2, 1.3, and 1.5 materials, which
with other select hazardous materials, may only be transported by motor
carriers holding a ``hazardous materials safety permit'' (HMSP) issued
by the Federal Motor Carrier Safety Administration (FMCSA). According
to program data, carriers of explosives make up the largest segment,
roughly half, of the universe of HMSP holders.
Our industry has maintained an exceptional safety record for
decades. According to the Hazardous Materials Information System
(HMIS), no deaths have been attributed to commercial explosives since
the Department of Transportation began collecting data in the 1970s.
Despite the safety record of our industry, we have members who struggle
when it comes to maintaining their HMSP qualification.
implementation issues
HMSP holders failed to appreciate the full impact of the
disqualifying out-of-service (OOS) thresholds when FMCSA finalized the
HMSP rule in 2004. First, the preamble and the regulatory text set
forth in the 2003 proposal, as well as the preamble to the HMSP final
rule, describes the agency's intent to issue HMSPs to motor carriers
with a ``satisfactory'' safety rating.\1\ Those without a satisfactory
safety rating would be eligible for a temporary HMSP if they have ``a
crash rate in the top 30 percent of the national average, or a driver,
vehicle, hazardous materials, or total [OOS] rate in the top 30 percent
of the national average.'' (Emphasis added.) Second, the ``or total''
OOS rate suggested that the 30 percent national average
disqualification would, in the aggregate, disqualify only 30 percent of
carriers. As FMCSA has implemented this program, however, these were
not the standards that a carrier could rely on to obtain a permit.
Instead, all carriers must perform to the OOS standard, irrespective of
their safety rating.
---------------------------------------------------------------------------
\1\ 68 Federal Register (FR) 49737, 49752 and 49753 (August 19,
2003); 69 FR 39367, 39352 (June 30, 2004).
---------------------------------------------------------------------------
Since the HMSP program's inception in 2005, we have urged FMCSA, in
meetings, letters, and petitions, to relook at this program and make
needed reforms. Over these 8 years, the HMSP program has been plagued
by administrative missteps including double counting OOS inspections
and thousands of erroneous denials of applications. Last year, FMCSA
provided ``interim'' relief by ``fixing'' the OOS disqualification
rates. Prior to the ``fix,'' disqualification rates were recalculated
every 2 years, thereby exposing carriers to the risk of losing their
permits simply because they were being judged against a different
universe of carriers at a particular point in time. Still, questions
remain unanswered about the statistical basis used by FMCSA to
calculate the program's most critical criterion, the hazardous material
(hazmat) OOS rate. We have documented the inherent unfairness of a
system that relies on OOS rates. Selection criteria for roadside
inspections is not random (nor should it be given limited resources),
which is to say that carriers do not have equal opportunity to amass
``clean'' inspections. Not all OOS violations are crash-causal, and
some are inherently biased by personal judgment. Further, the
methodology used to determine ``significance'' of the inspection data
lacks statistical confidence. We do not object to a public policy
requiring that motor carriers transporting hazmats be held to higher
safety standards. However, we do object to the bias and uncertainty
that the current HMSP program breeds, especially when the program has
shown no nexus to safety enhancement.
safety benefits of the hmsp unproven
FMCSA estimated that implementing the HMSP program would prevent
seven hazmat truck-related crashes per year. The agency stated that the
safety benefits derived from the projected crash reductions would be
``large because of the number of conventional crashes that may be
prevented.'' This has not proved to be the case. The data generated
after the 8 years of the HMSP and during the 8 years immediately
preceding the implementation of the HMSP shows that HMSP holders are
historically among the safest carriers on the road and that the program
has had little impact on safety:
--------------------------------------------------------------------------------------------------------------------------------------------------------
1997-2004 2005-2012 All hazmat highway incidents
-------------------------------------------------------------------------------------------------------
HMSP material 1998-2004 2005-2011
Crashes Fatalities Crashes Fatalities ---------------------------------------------------
Crashes Fatalities Crashes Fatalities
--------------------------------------------------------------------------------------------------------------------------------------------------------
Explosives (25 kg. 1.1, 1.2, 1.3, and placarded 36 ........... 29 ........... ........... ........... ........... ...........
1.5)...........................................
RAM (HRCQ\1\)................................... 16 ........... 19 ........... ........... ........... ........... ...........
TIH............................................. 55 ........... 61 \2\ 1 ........... ........... ........... ...........
Methane......................................... 4 ........... 3 ........... ........... ........... ........... ...........
Total..................................... 111 ........... 112 1 2,461 85 2,448 81
--------------------------------------------------------------------------------------------------------------------------------------------------------
Data from the Hazardous Materials Information System (HMIS), 3/11/2013.
\1\ It may be that none of these crashes are highway route controlled quantities (HRCQ). From the data in HMIS, it was possible to eliminate some
incidents that were clearly not HRCQ. Where there was doubt the incident was counted.
\2\Anhydrous ammonia (AA) intended for agricultural use.
For HMSP holders, this safety record highlights the need for an
immediate reconsideration of the disqualifying standards that are
threatening their livelihoods. Keep in mind that the vast majority of
carriers subject to the HMSP are not long-haul, freight-all-kinds
carriers. They serve niche markets that rely on local, often rural
delivery, and require specialized equipment. As such, these carriers do
not frequent routes with inspection stations. Once these carriers get
into trouble based on the non-random, often subjective OOS calls by
inspectors, it is virtually impossible for these carriers to accrue
sufficient ``good'' inspections to overcome the ``bad.'' For example,
it is not uncommon for an HMSP holder to average 15 or fewer
inspections in a year, but only inspection data from the 12 months
prior to the expiration of the holder's permit is counted, and only
holders with at least three inspections are considered ``statistically
significant'' for purposes of the OOS disqualifications. If two of the
inspections in this timeframe result in an OOS \2\, the carrier would
need 28 ``clean'' inspections to requalify. The later into the 12-month
qualification period that the second OOS occurs, the more unlikely it
is that a carrier could recover. Consider that two similarly situated
carriers each receive two OOS inspections, then one of the two obtains
a third ``clean'' inspection. The carrier that received the clean
inspection would lose its permit, the other would continue operating.
Or consider that on any given day two similarly situated carriers could
be ``underwater'' \3\ because of their current mix of OOS and clean
inspections. However, because one carrier's HMSP expires that day, that
carrier loses its permit, while the other continues to operate.
---------------------------------------------------------------------------
\2\ This assumes that the OOS citation was correctly issued. CSA
experience shows that FMCSA's ``Data Q'' process is overwhelmed and
State ability and/or willingness to expend resources on these
challenges is a growing concern.
\3\ Below the OOS disqualification threshold.
---------------------------------------------------------------------------
These specialized carriers do not have the option to carry non-HMSP
freight while working to requalify for a permit. The irony is that,
when these carriers get into jeopardy, FMCSA does not routinely suspend
or revoke the HMSP; rather carriers are allowed to operate until it is
time to apply for renewal. The regulations allow for appeals when
permits are suspended or revoked, but not if the carrier is applying
for renewal. Under no circumstance may holders apply for a waiver of
the OOS disqualification irrespective of their overall operational
safety records.
request for expedited relief
FMCSA accepted a petition for rulemaking from IME and other
affected industry associations to reform the HMSP disqualification
standards. While we are pleased that FMCSA has accepted our petition,
we are disappointed that ``the agency has determined that this
rulemaking should not be initiated until the CSA Safety Fitness
Determination (SFD) final rule is published, as it will be used as the
basis for initiating this rule.'' \4\ We would like to strongly suggest
that the HMSP reform should take precedence over finalization of the
SFD rulemaking, a rulemaking that has yet to be proposed. First, the
HMSP program is being used now as the SFD standard for covered
materials. Covered carriers that do not meet the contested HMSP
standards may be shutdown. Non-HMSP carriers do not yet face this
outcome. Second, the problematic HMSP disqualification standards are
based on inspections and OOS determinations. These same metrics are
expected to be the basis of the standards to be proposed in the SFD
rulemaking. Third, the HMSP regulated community is very small relative
to the universe of carriers that will be subject to the SFD. For these
reasons, we believe FMCSA should immediately act to fix the HMSP
disqualification standards and export that refined SDF model to the
larger commercial trucking universe under CSA.
---------------------------------------------------------------------------
\4\ Letter to IME from FMCSA, November 14, 2011, page 1. (Emphasis
added.)
---------------------------------------------------------------------------
The agency's reluctance to immediately address the shortcomings of
the HMSP is particularly troubling because implicit in FMCSA's plan to
address by rulemaking many of the issues raised by industry is an
acknowledgment of deficiencies with the current program. These
deficiencies will persist over the intervening years between now and
the time that they are resolved through the promised HMSP rulemaking.
Meanwhile, the controversy over the evolving SFD standards adds to the
uncertainty and almost certainly means that it will be years until this
``precursor'' rule is finalized. The continuing adverse impacts to the
HMSP community are undeserved.
While Congress tried to spur agency action by requiring that the
agency consult with stakeholders and initiate rulemaking,\5\ we are
concerned that the agency will not move fast enough to prevent
relatively good carriers from losing their HMSP and, as explained,
being put out of business based on limited data anomalies. Safety is
not enhanced when new and inexperienced carriers with no OOS history
fill the void. We have asked FMCSA to immediately address these
pressing concerns by issuing an interim final rule (IFR) to at least
provide for an additional level of fitness review (ALFR) prior to the
denial, revocation, or suspension of a safety permit until such time
that the agency proceeds with the full rulemaking based on our
petition. The ALFR would consider the safety management controls of the
applicant or holder not just OOS violations rates, and it would provide
the applicant or holder an opportunity to file a corrective action plan
to address identified concerns.\6\ An ALFR would not overly burden the
agency, as it would involve an examination of less than 100 HMSP
holders annually. Further, this approach is consistent with the
direction the agency is pursuing under the CSA initiative to focus
compliance oversight on carriers needing the most improvement compared
to their peers.
---------------------------------------------------------------------------
\5\ ``MAP-21'' (Public Law 112-141), section 33014.
\6\ This opportunity should not be available to applicants or
holders that present an imminent hazard or evidence of a pattern
willful and knowing non-compliance with safety regulations.
---------------------------------------------------------------------------
FMCSA told us in January that the agency was not willing to pursue
a regulatory option as we have described because of resource
limitations. Justice will not be served by inattention to these
pressing concerns. The uncertainty of when FMCSA will be able to carry
out the HMSP rulemaking coupled with the urgency for some action based
on acknowledged program deficiencies compel us to ask the subcommittee
to deny funds to administer this program until FMCSA provides interim
measures to ensure that HMSP holders are not denied permits based
solely on the flawed disqualification standards in place now.
conclusion
Congress envisioned a risk-based safety program for hazmat
carriers. It gave FMCSA wide latitude to name the types and quantities
of hazardous materials that should be covered by a HMSP. But, the
agency has chosen to apply this authority only to the narrow list of
statutorily mandated materials. History shows that carriers of these
materials are not presenting the crash risk that the agency claims the
HMSP will address. Neither IME nor its members object to public policy
that holds hazmat carriers to a higher safety standard, which is the
premise for the HMSP. We do object, however, to the current standards
for disqualification. They are not risk-based and deny holders
meaningful due process protection. Inspection frequency and outcome do
not seem to correlate to crashes or fatalities. Thank you for your
attention to these concerns.
______
Prepared Statement of the Institute of Makers of Explosives
fiscal year 2014 pipeline and hazardous materials safety administration
budget request for the office of hazardous materials safety
interest of the institute of makers of explosives
The IME is the safety and security association of the commercial
explosives industry. Commercial explosives underpin the economy. They
are essential to energy production, construction, demolition, and the
manufacture of any metal/mineral product. Explosives are transported
and used in every State. Additionally, our products are distributed
worldwide, while some explosives must be imported because they are not
manufactured in the United States. The ability to transport and
distribute these products and to receive precursor chemicals safely and
securely is critical to this industry.
background
The production and distribution of hazardous materials is a
trillion-dollar industry that employs millions of Americans. These
materials contribute to America's quality of life, but if handled
improperly, adverse consequences can result. The threat of intentional
misuse of these materials also factors into public concern. To protect
against these outcomes, the Secretary of Transportation (Secretary) is
charged under the Hazardous Materials Transportation Act (HMTA) to
``provide adequate protection'' against these risks through regulation
and enforcement.\1\ The Secretary has delegated the HMTA authorities to
various modal administrations, with primary regulatory authority
resting in the Pipeline and Hazardous Materials Safety Administration
(PHMSA).
---------------------------------------------------------------------------
\1\ 49 U.S.C. Chapter 51.
---------------------------------------------------------------------------
PHMSA regulates hazmat transportation so closely that such
materials may not be moved any distance, via any mode of transportation
unless a DOT regulation, permit or approval authorizes the movement.
Such close regulation makes efficient consideration of such
authorizations critical to the industries and workers involved, as well
as to the national defense, the security of our homeland, and the
economy at large.
budget uncertainty
In the absence of the Administration's fiscal year 2014 budget
request, we are in uncharted territory in terms of our analysis of the
President's budgetary priorities.\2\ As of the date of this comment,
Congress has provided a fiscal year 2013 appropriation to PHMSA equal
to its fiscal year 2012 rate for operations, less the 0.612 percent
increase provided by Public Law 112-175. Under this scenario, PHMSA is
looking at $42.3 million for its hazmat program in fiscal year 2013.
This funding rate is consistent with the amount authorized for fiscal
year 2013 by MAP-21.\3\ As we look forward to fiscal year 2014, MAP-21
provides a $42.8 million authorization for PHMSA's hazmat programs.
However, the Government's budget situation does not improve. The
agency's fiscal year 2013 appropriations is still subject to a 5-
percent decrease under a sequestration order if the President fails to
reach agreement with Congress on an alternative, and we understand that
the cap on non-emergency appropriations for fiscal year 2014 will drop
to $966 billion, down from the cap of $984 billion in fiscal year 2013.
---------------------------------------------------------------------------
\2\ The Budget Act requires that submission of the President's
budget request by the first Monday in February. The current expectation
is that the President's fiscal year 2014 request will be released in
April.
\3\ Public Law 112-141.
---------------------------------------------------------------------------
While there is uncertainty about the specifics of the
administration's hazmat priorities for fiscal year 2014, it should be a
given that additional program growth is unlikely in the near future,
and certainly for the coming fiscal year.\4\ Rather, we should be
focusing the realignment of program priorities to ensure that the
agency's core mission is sustained. With this perspective, we offer the
following comments.
---------------------------------------------------------------------------
\4\ PHMSA's hazmat budget has increased by about $10 million, a 30-
percent rate of growth, in the last 3 fiscal years.
---------------------------------------------------------------------------
phmsa's fiscal year 2013 ``user fee'' budget request
In these tight budgetary times, PHMSA may be tempted to repropose a
``user fee'' on certain agency activities as it did last fiscal year.
We commend both the authorizing and appropriating committees of
Congress for rejecting this request last year, and urge similar
restraint, if user fees are again proposed.
phmsa's hazmat program is a success: rulemaking and data collection
priorities
As noted above, the HMTA requires that PHMSA's regulations be risk-
based. The agency, in turn, measures the success of its hazmat safety
program by the number of transportation-related deaths and ``serious
injuries'' (i.e., hospitalizations) attributed to the hazardous
materials. The agency acknowledges that these numbers ``have declined
an average of 4 percent every 3 years over the long term.'' \5\ This
decline continued last year. Only 10 deaths, all due to human error,
not a failure of a regulatory standard, were attributed to hazardous
materials. None, since the early 1970s, have been attributed to
commercial explosives. This contrasts with thousands of deaths annually
that result from crashes involving large trucks, for example.
---------------------------------------------------------------------------
\5\ Fiscal year 2013 PHMSA Budget Justification, page 3.
---------------------------------------------------------------------------
This safety outcome suggests that PHMSA needs to focus on two core
missions: rulemaking, including the timely issuance of approvals and
permits, to keep commerce moving, and data collection and public access
to the data. For example, we were very concerned that no new resources
above baseline were requested last year to support rulemaking activity.
MAP-21 makes clear that rulemaking, including accelerating the
incorporation of special permits into the HMR, is a priority. PHMSA
needs to maintain resources to remain active in international standard-
setting forums to ensure that U.S. rules are consistent to keep
American goods moving in the global marketplace. PHMSA's ability to
collect incident data is critical to stakeholder's ability to
understand and learn from incidents. Additionally, the agency's efforts
to enhance the online availability of incident data, rulemakings, and
the timeliness of processing applications for special permits and
approvals should be commended and encouraged. Finally, we welcome the
agency's efforts to improve communication and outreach with the
regulated community.
budgetary issues to consider
Staffing and Workload.--The biggest expense in PHMSA's budget is
manpower. The agency's output is the work product of its employees.
Yet, PHMSA's budget requests have not provided baseline empirical
workload metrics to judge agency performance or the merit of staffing
requests. When information about program output is provided, it is
prospective, not retrospective. Of additional concern, retirements and
departures of seasoned staff have led to a loss of institutional
knowledge. While there is a need for qualified chemists, engineers, and
economists to fill this void, it appears that the agency is using scare
resources to build a ``senior advisor'' cadre for agency
administrators.\6\ According to the Office of Personnel Management's
2012 Federal Employee Viewpoint Survey Results Hazmat, PHMSA ranked
near the bottom of all government agencies, and the lowest of all DOT's
safety administrations. Such results to not bode well for attracting
and retaining the kind of expert staff that are needed to keep up with
the agency's rulemaking and analytical needs.
---------------------------------------------------------------------------
\6\ https://www.usajobs.gov/GetJob/ViewDetails/339410400 and
https://www.usajobs.gov/GetJob/ViewDetails/339410600 (March 15, 2013).
These positions are in addition to other front office staffing added
during the agency's 2010 reorganization. Approximately 25 percent of
staff are now senior level grades (GS-14, GS-15, and SES); yet, few are
for professional series positions. Despite the new positions, hazmat
safety has not seen statistically significant improvement.
---------------------------------------------------------------------------
Research and Development.--Congress provides 3-year monies to
support a hazmat research and development (R&D) function within PHMSA,
with a mission to study and evaluate emerging hazardous materials
safety issues and technologies. So far, no fiscal year 2011, 2012, or
2013 funds have been obligated. It does appear that PHMSA may be using
some of these funds to create a Risk Management Framework (RMF).\7\ The
RMF is supposed to establish incident probabilities through a set of
fault and event trees of various hazmat shipping scenarios. The need to
use scarce funds for such a framework is questionable given that four
times as many deaths in the United States are caused by lightning
strikes than hazmat incidents. There is concern that the RMF may lead
to unnecessary over-regulation of hazmat that would threaten U.S. jobs
while attaining no measurable safety benefit. At the same time, there
is a pressing need to develop uniform performance standards for
training hazardous materials inspectors. Congress agrees and directed
PHMSA to produce these standards by April 2014. This initiative is
deserving of support.
---------------------------------------------------------------------------
\7\ In fiscal year 2010, $447, 000 was awarded to BayFirst, LLC for
this purpose, about 30 percent of the year's R&D budget, and there is a
placeholder for BayFirst to receive additional fiscal year 2011 funds.
---------------------------------------------------------------------------
Grants Programs (GP).--PHMSA operates three GPs--HMEP, HMIT, and
SPST--funded by fees assessed on the hazardous materials community. We
have long looked for evidence of program accomplishment and question
the agency's claims about achievements ascribed to these programs. In
2005, Congress directed the agency to annually provide a detailed
accounting of all grant expenditures.\8\ In the intervening 7 years,
the agency has released only one such report, and that report did not
provide the retrospective accounting necessary to determine if grant
recipients were using funds appropriately.\9\ This year, PHMSA proposed
that Congress eliminate this report saying that staff time used to
prepare this report outweighs its benefit.\10\ The lack of GP
transparency and accountability prompted an audit by the Office of
Inspector General last year. The audit found systemic mismanagement and
misuse of grant funds.\11\ PHMSA has still not made its fiscal year
2012 grant awards to applicants under the HMIT and SPST programs. We
believe the funds for the SPST program are forfeit because this program
is not protected by the HMTA provision that funds remain available
``without further appropriation.'' \12\ Whether or not PHMSA can
release these fiscal year 2012 funds, grantees now have 6 months or
less, rather than a year, to spend the funds, which does not bode well
for effective use of these monies. These programs warrant increased
oversight by the subcommittee.
---------------------------------------------------------------------------
\8\ 49 U.S.C. 5116(k).
\9\ http://phmsa.dot.gov/staticfiles/PHMSA/DownloadableFiles/Files/
Report_to_Congress_
HMEP_Grants_Program_2005_2006.pdf
\10\ The Government Performance and Results Act (GPRA)
Modernization Act of 2010 invites Federal agencies to identify for
elimination or consolidation. http://www.performance.gov/sites/default/
files/tmp/_List_of_Reports_Required_by_P_L%20_111-352.xls.
\11\ OIG, DOT, AV-2012-040, January 12, 2012.
\12\ 49 U.S.C. 5116(i).
---------------------------------------------------------------------------
conclusion
The subcommittee needs to make difficult decisions about where to
save scarce Federal resources. We recommend that the subcommittee
review new front office staff allocations, and ensure that the agency
has a plan to replace lost expertise in its rank and file. Additional
oversight of PHMSA's hazmat R&D and grants programs also is warranted.
PHMSA should redirect resources to enhance its information technology
and rulemaking capacities. These services are needed by the hazmat
community, given PHMSA's close regulatory scheme, to enable the safe,
secure, and efficient movement of hazardous materials critical to the
economy.
______
Letter From Interested Parties for Hazardous Materials Transportation
April 26, 2013.
Hon. Patty Murray,
Chairman, Subcommittee on Transportation, Housing and Urban
Development, and Related Agencies,
Washington, DC.
Hon. Susan Collins,
Ranking Member, Subcommittee on Transportation, Housing and Urban
Development, and Related Agencies,
Washington, DC.
RE: Fiscal Year 2014 PHMSA Budget Request
Dear Chairman Murray and Ranking Member Collins: The undersigned
industry associations represent all sectors of the economy engaged in
the transportation of hazardous materials which are essential to
Americans' quality of life. We are writing to alert you to our concerns
with the administration's proposed $12 million user fees to be paid by
applicants for special permits and approvals (SP/A) issued by the
Pipeline and Hazardous Materials Safety Administration (PHMSA). This
fee proposal, with charges ranging from $700 to $3,000 per application,
is identical to the user fee the administration proposed in fiscal year
2013. Congress wisely rejected this proposal last year, and we urge you
to once again reject this initiative in order to protect American jobs
and promote innovation.
PHMSA states that it needs the user fees to support its oversight
of the new conditions it has imposed on SP/A applicants. However, the
user fee proposal is without merit:
--Currently, about 35 full-time equivalents (FTEs) are dedicated to
the SP/A program. $12 million would support a staff of 66 FTEs.
PHMSA has inflated the costs of this program by about 50
percent.
--The SP/A workload is decreasing. For example, applicants for
classification approvals are no longer scrutinized for
``fitness'' and special permits in effect over 10 years are
being incorporated into the Hazardous Materials Regulations
(HMR).
--The excess user fee revenue would be used to underwrite the
agency's general fund, although only a fraction of the
regulated community are holders of special permits and
approvals.
--No death has been attributed to special permits or approvals since
1971 when agency records began to be kept.\1\
---------------------------------------------------------------------------
\1\ PHMSA claims that a maritime incident in 2008 which resulted in
three deaths was caused by the violation of a special permit. However,
the deaths were not the proximate result of a special permit violation.
Testimony in the resultant litigation showed the deaths were due to
negligence of a number of parties involved in the shipment.
---------------------------------------------------------------------------
--The Government, not private companies, is the largest holder of
approvals and special permits. The Government will pay no fees.
--Historically, fees have not been imposed on foreign entities for
fear of retaliatory fees on U.S. exports giving foreign
shippers a competitive advantage in the United States.
--Part of the revenue will have to be used to hire additional Federal
workers to administer and collect the fees.
--It is the business activity, not the size, of a company that
determines how many applications may be filed. Many payers will
be small businesses.
--Despite statements that PHMSA is accelerating incorporation of
special permits into the HMR, no new resources are requested to
support this rulemaking activity.
--The fees would be payable per application, meaning that any
application returned for corrections and re-filing would result
in unfair redundant fee payments.
--Other Department of Transportation (DOT) modal administrations
issue approvals or what amount to special permits; none assess
fees.
This program, which provides safety benefits to the public and
facilitates technical innovations important to our economy, has been
successfully run for decades without user fees. PHMSA's proposal could
be the start of a trend for user fees for other regulatory actions
including letters of interpretation or petitions for rulemaking
necessary for compliance and good government.
PHMSA'S user fees are not fair or equitable but are a hidden tax on
companies that innovate and produce goods needed to strengthen and
rebuild the U.S. economy. Congress should again reject this initiative.
Respectfully,
Agricultural Retailers Association
American Chemistry Council
American Coatings Association
American Petroleum Institute
American Pyrotechnics Association
American Trucking Associations
Association of Hazmat Shippers, Inc.
The Chlorine Institute, Inc.
Compressed Gas Association
Council on Safe Transportation of Hazardous Articles
Dangerous Goods Advisory Council
The Fertilizer Institute
Gases and Welding Distributors Association
Industrial Packaging Alliance of North America
Institute of Makers of Explosives
International Vessel Operators Dangerous Goods Association, Inc.
National Association of Chemical Distributors
National Association of Shell Marketers
The National Industrial Transportation League
National Private Truck Council
National Propane Gas Association
National Tank Truck Carriers, Inc.
New England Fuel Institute
Petroleum Marketers Association of America
Radiopharmaceutical Shippers & Carriers Conference
Railway Supply Institute, Inc.
PRBA--The Rechargeable Battery Association
Reusable Industrial Packaging Association
Sporting Arms & Ammunition Manufacturers' Institute
Steel Shipping Container Institute
Transportation Intermediaries Association
Truckload Carriers Association
Utility Solid Waste Activities Group
______
Prepared Statement of the National Affordable Housing Management
Association
Thank you, Chairman Murray and Ranking Member Collins for the
opportunity to submit this testimony on behalf of the National
Affordable Housing Management Association (NAHMA). My testimony will
focus on the importance of providing full funding for the 12-month
contract terms under project-based section 8 and other key Department
of Housing and Urban Development (HUD) rental assistance programs.
about nahma
NAHMA members manage and provide quality affordable housing to more
than 2 million Americans with very low to moderate incomes. Presidents
and executives of property management companies, owners of affordable
rental housing, public agencies and national organizations involved in
affordable housing, and providers of supplies and services to the
affordable housing industry make up the membership of NAHMA. In
addition, NAHMA serves as the national voice in Washington for 19
regional, State, and local affordable housing management associations
(AHMAs) nationwide.
project-based section 8
In the project-based section 8 program (PBS8), HUD contracts with
private apartment owners to pay the difference between the rent for the
unit and 30 percent of a qualified tenant's income. The rental subsidy
in the PBS8 program is tied to the property.
This program provides housing to 1.2 million low-income households,
over half of which are elderly or disabled. According to HUD, the
program supports 100,000 jobs, and PBS8 properties generate $460
million in tax receipts to local and State governments.
It is essential for Congress to provide HUD with the necessary
appropriations to make full and timely contract payments to property
owners. When HUD does not have sufficient appropriations to obligate
funding for the entire 12-month contract terms at the time of the
renewals, it ``short-funds'' the contracts. Prior to 2009, HUD ``short-
funded'' its PBS8 contracts with owners so that payments would only be
promised from the date of renewal through September 30 (the end of the
Federal fiscal year). In other words, on a 12-month contract with a
January 1 renewal date, HUD would only obligate funding through
September 30. Funding for the remaining 3 months on the contract would
have to be re-processed in the new fiscal year. This practice was
disruptive to properties' operations, wasted HUD's staff time, and
undermined public confidence in the project-based section 8 program.
Unfortunately, HUD will resume this practice, at least temporarily, to
manage the cuts required under sequestration.
The President's budget proposal for fiscal year 2014 requests
approximately $10.3 billion for the project-based section 8 program.
Unfortunately, the fiscal year 2014 request is impacted by the $1.2
billion shortfall in the program due to sequester funding levels in the
fiscal year 2013 continuing resolution. As a result, HUD will not be
able to fund contracts for the full 12-month terms during the remainder
of fiscal year 2013 and into fiscal year 2014. If sequestration were
repealed, the budget request would be sufficient to fully fund contract
renewals; however, a repeal of sequestration seems increasingly
unlikely. Therefore, an estimated $11.5 billion will be necessary to
fully fund the fiscal year 2014 contract renewals and to close the
shortfall caused in the fiscal year 2013 appropriations.
In fiscal year 2014, NAHMA strongly urges the subcommittee to
provide $11.5 billion for full funding of the 12-month contract terms
of project-based section 8 contracts. This level of funding is
necessary because:
--The Federal Government must honor its contracts with property
owners.
--Short-funding jeopardizes the efficient management, financial
solvency, and physical health of PBS8 properties.
--Federal Housing Administration (FHA)-insured properties could
default without the contract funds to pay their mortgages.
--Properties accumulate numerous late fees to lenders and service
providers as a result of having insufficient funds to make
mortgage and utility bill payments.
--Property staff suffer lay-offs as a result of insufficient contract
funding.
--Rehabilitation and renovation plans are put on hold when funding is
erratic.
--Short-funding is a budget gimmick that does not save the Government
money.
--Appropriations for 11,000 contracts that will be underfunded in
fiscal year 2013 due to sequestration will have to be provided
in fiscal year 2014--in addition to the funds necessary for
fiscal year 2014 contract renewals.
--Short-funding wastes administrative time at HUD because staff must
process funding multiple times for the same property over the
course of the year.
--Short-funding jeopardizes investor and owner confidence in the PBS8
program.
other critical hud multifamily housing programs
NAHMA strongly urges the subcommittee to prevent draconian cuts to
affordable multifamily housing programs administered by the Department
of Housing and Urban Development (HUD). In fiscal year 2014, NAHMA
strongly urges that the subcommittee provide the necessary
appropriations to ensure that all of HUD's rental assistance programs
receive full funding for their 12-month contract terms in fiscal year
2014, and that no shortfalls result from the sequester funding levels
in the fiscal year 2013 continuing resolution.
In addition to project-based section 8, NAHMA is concerned about
funding levels for the following programs:
--NAHMA urges the subcommittee to provide the $20 billion requested
by HUD for the Housing Choice Voucher (HCV, or tenant-based
section 8) program plus any additional funding necessary to
ensure there are no program or contract shortfalls due to the
fiscal year 2013 sequestration.
--For Section 202 Housing for the Elderly, NAHMA requests at least
$400 million plus any additional funding necessary to ensure
there are no contract shortfalls due to the fiscal year 2013
sequestration. HUD's request for this program also includes
$310 million for the renewal and amendments of Project Rental
Assistance Contracts (PRACs) and $70 million for the service
coordinator program. NAHMA also requests at least $20 million
for new construction of apartments to serve the elderly.
--For Section 811 Housing for the Disabled, NAHMA requests at least
$126 million plus any additional funding necessary to ensure
there are no contract shortfalls due to the fiscal year 2013
sequestration. HUD's request includes $106 million for section
811 PRACs. NAHMA also requests at least $20 million for new
construction of apartments to serve disabled persons.
--The General and Special Risk Insurance Fund programs provide
mortgage insurance for financing the development or
rehabilitation of multifamily housing, nursing homes and
hospitals. NAHMA supports HUD's request of $30 billion in
commitment authority.
--The HOME Investment Partnerships (HOME) program is the largest
Federal block grant to State and local governments designed
exclusively to produce affordable housing for low-income
families. NAHMA requests funding at a level as close to $1.6
billion as possible.
--The Community Development Block Grant (CDBG) offers block grants to
local communities for community development purposes, including
the development of affordable housing. NAHMA urges the
subcommittee to provide $3.3 billion for the CDBG.
--Both HOME and CDBG provide essential gap financing for
development of Low Income Housing Tax Credit (LIHTC)
properties.
passing comprehensive, pragmatic rental assistance reform legislation
NAHMA joins a broad coalition of private housing providers, public
housing agencies, low-income housing advocates and other stakeholders
in urging Congress to pass comprehensive rental assistance and section
8 Housing Choice Voucher (HCV) reform legislation in 2013. The most
recent proposal was the Affordable Housing and Self-Sufficiency
Improvement Act (AHSSIA) developed by the House Financial Services
Committee in 2012. Savings and efficiencies achieved through these
reforms would help stretch limited funds and minimize the risk of harsh
cuts in assistance to needy families. If these reforms are enacted, it
is essential to ensure the savings achieved are used to continue
funding affordable multifamily housing programs. NAHMA strongly
supports measures which would:
--Streamline inspections of HCV housing units by permitting owners to
make minor repairs within 30 days and permitting public housing
authorities to allow occupancy prior to the inspection in
buildings which passed an alternative inspection (HOME, LIHTC
or other inspections with equally stringent standards) within
the last 12 months. These changes will help voucher-holders in
tight rental markets with low vacancy.
--Expand income targeting for the public housing, HCV and project-
based section 8 programs. These changes will help house more
working poor families, particularly in rural areas.
--Simplify the rules for determining a family's rent and income, for
example, by allowing families on fixed incomes to recertify
their incomes once every 3 years instead of annually. This will
reduce the administrative burdens on tenants, property owners,
and management agents.
--Stabilize HCV funding by basing it on the previous year's leasing
and cost data.
--Encourage self-sufficiency for residents.
--Streamline the use of HCVs with other Federal housing programs,
like the LIHTC, by extending the permitted contract period for
project-based vouchers from 15 to 20 years.
--Authorize HUD's Rental Assistance Demonstration (RAD) program. RAD
is intended to test strategies to leverage private funds for
public housing capital needs, preserve units assisted through
the section 8 Moderate Rehabilitation program and allow
properties assisted under the Rental Assistance Payment (RAP)
and Rent Supplement (Rent Supp) programs to convert to project-
based section 8 contracts.
--Authorize HUD to provide Limited English Proficiency (LEP)
technical assistance to recipients of Federal funds. This
program would create a stakeholder working group to identify
vital documents for translations, require HUD to translate
identified documents within 6 months and create a HUD-
administered 1-800 hotline to assist with oral interpretation
needs. This program is necessary because it will offer a
higher-level of quality control over the services provided to
LEP persons and ensure meaningful access to HUD's housing
programs for persons with LEP. It will also relieve housing
operators of an unfunded obligation to provide language
services that could divert funds from repairs and maintenance
of the properties.
conclusion
Thank you again for the opportunity to submit this testimony. I
look forward to working with the subcommittee to ensure essential HUD
rental assistance programs are fully funded and properly administered.
______
Prepared Statement of the National AIDS Housing Coalition
The National AIDS Housing Coalition (NAHC) is a national housing
policy and advocacy organization working to end the HIV/AIDS epidemic
by ensuring that persons living with HIV/AIDS have quality, affordable
and appropriate housing. NAHC's network of members includes hundreds of
low-income people living with HIV/AIDS, relying on Federal housing
assistance to improve their ability to access and remain in care. On
their behalf, we ask that you fund the highly successful and cost
effective Housing Opportunities for Persons With AIDS Program (HOPWA)
at a level of $365.2 million for fiscal year 2014. While this amount
would provide assistance to far fewer than the actual number of people
with HIV/AIDS that are eligible for and in need of housing assistance,
it would permit housing help for an additional 4,250 households beyond
the 61,614 unduplicated households currently served. HUD's own data
indicates 146,986 households are currently eligible for HOPWA but
unserved. In fact, HIV/AIDS housing providers project that half of the
1.2 million people with HIV/AIDS require some form of housing
assistance during the course of their illness. This request represents
the HIV/AIDS housing community's recognition of the considerable
challenges of the current economic climate yet still provides for some
of the most vulnerable whose access to care and health outcomes are
inextricably linked to housing status.
NAHC is the only national housing organization that focuses
specifically on the housing and housing-related service needs of low-
income people with HIV/AIDS. A core tenet of our mission is to see
housing acknowledged and funded as a component of HIV prevention and
healthcare. As more people are living longer with the virus and require
housing assistance, unmet need is significant across the country. We
understand that as many as three new jurisdictions may become eligible
for funding during 2014, requiring that providers stretch already
scarce existing resources to serve more people.
Anecdotal reports from the NAHC membership and supporters reveal
more than 45,000 people waiting for housing assistance in just 14
reporting jurisdictions. In the southern part of United States, where
the epidemic is growing the fastest, resources continue to be
unavailable. In Dallas, Texas, for example, more than 4,375 people are
awaiting housing assistance, not counting those who have given up,
resigned to life doubled and tripled up in unsuitable dwellings, moving
from shelter to shelter, or simply are navigating the streets. In
places where the epidemic is most mature, the numbers waiting are even
larger. In Los Angeles, for example, more than 11,000 are waiting for
housing.
Research shows that homelessness increases HIV risk. In a New York
City (NYC) study, for example, new diagnoses among NYC shelter users
were 16 times higher than among general population. Conversely, HIV
increases risk of homelessness. Research demonstrates that up to 70
percent of people with HIV/AIDS report a lifetime experience of
homelessness or housing instability. In some communities as many as 70
percent of people with HIV/AIDS are literally homeless, living in
shelters on the streets or in places not intended for human habitation.
For vulnerable populations the risk is even greater. For example,
among a study involving HIV-positive women, research demonstrated if
homeless or unstably housed at time of diagnosis, that women were at an
increased risk for delayed entry into care and receipt of housing
assistance was associated with access to care and reentry into care
after dropping out. Unmet subsistence needs, including housing, had the
strongest overall effect on physical and mental health of homeless
women, with a greater effect on overall health as antiretroviral
therapy.
Research, much of which has been presented through NAHC's Housing
and HIV/AIDS Research Summit Series, confirms housing as a strategic
healthcare intervention to reduce health disparities by addressing both
HIV/AIDS and those contexts that most expose people to HIV risk,
including gender, extreme poverty, mental illness, chronic drug use,
incarceration, and histories of exposure to trauma and violence, as
well as homelessness. In addition, housing coupled with related
services reduces overall public expense and more wisely deploys limited
public resources. Research presented through NAHC's Housing and HIV/
AIDS Research Summit Series, including a searchable data base of more
than 300 articles on housing and HIV/AIDS, can be found at the Summit
Series permanent Web site, www.hivhousingsummit.org.
HOPWA's track record for helping people with HIV/AIDS achieve
housing stability is sterling. During program year 2011-2012, more than
95 percent of people receiving tenant-based rental assistance through
HOPWA achieved housing stability. Among those receiving any form of
HOPWA housing assistance, over 93 percent developed a housing plan for
continued on-going housing and nearly 89 percent had on-going contact
with a primary care provider as specified in their service plans.
Moreover, housing is a proven cost-saving and cost-effective
healthcare and housing intervention. Housing sharply reduces avoidable
emergency and inpatient health services, criminal justice involvement
and other crises that are costly for both individuals and communities.
One of the two seminal studies in this area, the Chicago Housing for
Health Partnership (CHHP) found that homeless people with AIDS who
received housing consumed $6,620 less in publicly funded housing,
medical and crisis care than a comparison group that continued in
``usual care,'' not receiving a housing voucher.
The public cost ``savings'' generated by providing housing supports
can fully offset the cost of the housing for people with AIDS, even
before taking into account that each new HIV infection prevented
through housing stability saves $400,000 in lifetime medical costs.
There has been some national progress on evidence-based action on
housing and HIV/AIDS. The July 2010 National HIV/AIDS Housing Strategy
recognizes that housing is healthcare for people with HIV/AIDS and
calls for increased resources and calls on Federal agencies to consider
additional efforts to support housing assistance and other services to
enhance adherence. In addition, in July 2012, the Department of Health
and Human Services (HHS) included housing as one of seven common core
indicators to monitor HHS-funded prevention, treatment and care
services. Despite these advances, no additional resources have been
made available for housing.
NAHC's geographically diverse board fully supports and anxiously
awaits the revision of the HOPWA formula as directed in the National
HIV/AIDS Strategy to yield a fairer allocation of resources more
directly tied to the current geographic distribution of the epidemic.
Rural settings, the southeast and other regions . . . Until the
formula is modernized, we ask that the subcommittee continue to support
levels of funding for the program in its current formulation that will
permit some of those waiting to be served.
In addition, HIV/AIDS providers urge adequate funding for Homeless
Assistance Grants, Section 8 Housing Choice Vouchers, public housing,
the 811 program for people with disabilities, and the range of housing
programs relied upon by people coping with HIV/AIDS.
We respectfully request the subcommittee to consider protecting and
expanding resources in the Housing Opportunities for Persons with AIDS
Program, a proven, effective HIV prevention and healthcare
intervention.
______
Letter From the National Association of Counties, et al.
April 19, 2013.
Hon. Patty Murray,
Chairman, Subcommittee on Transportation, Housing and Urban
Development, and Related Agencies,
Washington, DC.
Hon. Susan Collins,
Ranking Member, Subcommittee on Transportation, Housing and Urban
Development, and Related Agencies,
Washington, DC.
Dear Chairman Murray and Ranking Member Collins: As you near
consideration of the fiscal year 2014 Transportation, Housing and Urban
Development, and Related Agencies Appropriations bill, the undersigned
organizations representing local elected officials, State and local
community development practitioners, planners, development
organizations, and nonprofit organizations, urge you to support $3.3
billion in formula funding for the Community Development Block Grant
(CDBG) Program.
CDBG provides vital funding and flexibility to address local needs
in the areas of community and economic development, housing,
infrastructure and vital public services. Over 1,200 communities rely
on CDBG as a direct source of annual funding. Moreover, each year, an
estimated 7,250 local governments nationally have access to CDBG funds;
reaching rural, urban, and suburban areas. CDBG helps create jobs
through the expansion and retention of businesses.
Since fiscal year 2010, funding for CDBG has been cut by over $1
billion, yet the need for these important resources at the local level
has continued to grow. While we understand the need to address the
Federal budget, we also understand the value of the local investments
made by CDBG. We are deeply concerned that these investments are in
jeopardy due to the Obama administration's fiscal year 2014 proposed
budget cuts to CDBG, funding the formula program at $2.8 billion.
The CDBG program generates additional resources, and adds to the
local economy. For example, for every $1 of CDBG funding invested in a
project another $3.55 is leveraged from other sources. Since its
inception in 1974, CDBG has leveraged nearly $400 billion in other
resources for community development and affordable housing.
What has CDBG accomplished?
economic opportunities
Between fiscal year 2005 and fiscal year 2012 CDBG created or
retained 302,622 local jobs.
decent housing
Between fiscal year 2005 and fiscal year 2012 CDBG has assisted
over 1 million low- and moderate-income homeowners to rehabilitate
their homes, provided down payment and closing cost assistance to
qualified home buyers, and assisted homeowners through lead-based paint
abatement.
suitable living environment
Between fiscal year 2005 and fiscal year 2012 CDBG-funded
infrastructure projects have benefited over 30 million Americans
nationwide, by providing a suitable living environment that includes
sanitary water and sewer systems, safe streets and transit-ways,
improved drainage systems, and other improvements that support our
communities and help grow local economies.
Between fiscal year 2005 and fiscal year 2012, CDBG has provided
public services to over 95 million low- and moderate-income households
nationwide. These services included employment training, meals and
other services to the elderly, services to help abused and neglected
children, assistance to local food banks, among others.
We urge you to support our recommendation of $3.3 billion for CDBG
formula grants in fiscal year 2014 to help communities nationwide
continue to provide vital programs and services to low-income persons.
Respectfully,
American Planning Association
Council of State Community Development Agencies
Habitat for Humanity International
Housing Assistance Council
International Economic Development Council
Local Initiatives Support Corporation
National Alliance of Community and Economic Development Associations
National Association of Counties
National Association for County Community and Economic Development
National Association of Development Organizations
National Association of Local Housing Finance Agencies
National Association of Housing and Redevelopment Officials
National Community Development Association
National Housing Conference
National League of Cities
National Rural Housing Coalition
Rebuilding Together
U.S. Conference of Mayors
U.S. Soccer Foundation
______
Prepared Statement of the National Association of Housing and
Redevelopment Officials
Chairman Murray, Ranking Member Collins, members of the
Transportation, Housing and Urban Development, and Related Agencies
Subcommittee, thank you for providing an opportunity for outside
witnesses to testify with respect to the fiscal year 2014 Department of
Housing and Urban Development (HUD) budget. The National Association of
Housing and Redevelopment Officials (NAHRO) is one of the Nation's
oldest housing advocacy organizations. It represents over 3,100 housing
and redevelopment authorities nationwide who provide decent, safe and
affordable housing in neighborhoods of quality for well over 2 million
families--including senior citizens, the disabled and our Nation's
veterans. Our members are on the front lines every day to assist
vulnerable families and the homeless in both urban and rural America.
They know what works, what does not and why; they are mission-driven
and they remain, following decades of service to the community, an
essential component of the Nation's housing delivery system.
Our national network of housing and community development (HCD)
professionals stands ready to use taxpayers' dollars wisely and with
integrity to move us closer to a Nation in which all people have
decent, safe, affordable housing and economic opportunity in viable,
sustainable communities. NAHRO calls upon the administration and the
Congress to provide responsible funding levels for the core Federal HCD
programs that serve low- and moderate-income families at the local
level. Recognizing the fiscal realities you face, NAHRO also
aggressively seeks a more rational, less administratively burdensome
regulatory environment. NAHRO supports reforms, including essential
statutory reforms under the purview of the Banking, Housing and Urban
Affairs Committee, which will allow local agencies to stretch Federal
investments further, house more families, and pursue targeted community
and economic development activities with the potential to transform
neighborhoods and communities.
tipping point
Our efforts as a Nation to reduce the current Federal deficit are
important and well-intended. Unfortunately, their serious (though
unintended) consequences are now affecting vulnerable families who
would be homeless without the assistance they now receive through
programs managed by NAHRO members. Limited 302B allocations to this
subcommittee over many years, coupled with spending caps implemented as
a result of the Budget Control Act of 2011, disproportionate reductions
in domestic discretionary dollars and the March 1 sequester, have
resulted in historically low funding prorations for such things as
voucher program administration and the public housing operating fund.
Underfunding, coupled with a lack of regulatory relief, has finally
brought us to a tipping point. Increasing numbers of housing
authorities have advised or must soon advise vulnerable families
currently receiving housing assistance payments that they can no longer
assist them. More and more housing authorities are returning vouchers--
including Veterans Affairs Supportive Housing (VASH) vouchers--to HUD
because they can no longer afford to administer the program (see the
following chart).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
In addition, structural decisions impacting housing programs, such
as the ill-timed reduction in public housing authority reserves in
fiscal year 2012, have put many housing authorities in a vulnerable
position. Under current funding scenarios, some housing and
redevelopment agencies--notably smaller entities in rural areas--will
in time be forced to close their doors. They will no longer be able to
assist those who currently rely on them, much less families who have
been on public housing and section 8 waiting lists for many years.
Building on the valiant efforts of this subcommittee to provide
necessary dollars within the context of reduced allocations coupled
with larger budget pressures, housing and redevelopment authorities
have done more with less for years. The 2014 Transportation, Housing
and Urban Development, and Related Agencies (THUD) appropriation
provides us with an opportunity and a real challenge to deal with the
current set of facts on the ground in far too many communities across
the Nation. A return to ``regular order'' in the Congress must be
coupled with a return to fiscal policies that recognize our Nation's
core values--notably our decades-long commitment to a decent home and
suitable living environment for all Americans. In this spirit we
respectfully urge your consideration and ultimate adoption of following
principles:
--Preserve and revitalize the public housing inventory;
--Reform, strengthen and adequately fund the section 8 program;
--Fully fund community and economic development programs;
--Enact small housing authority reforms;
--Expand the supply of affordable housing;
--Fully fund homeless assistance grant programs; and
--Improve the regulatory environment for HCD agencies.
program-specific recommendations
We hope this subcommittee, in conjunction with your colleagues on
the Banking Committee, will let these recommendations guide your work
in the formulation of funding decisions and necessary reforms for core
HUD programs managed by our members. Our own fiscal year 2014 funding
recommendations can be found in our testimony. For more detail, NAHRO's
2013 Legislative and Regulatory Agenda is available online at:
www.nahro.org/sites/default/files/searchable/2013Agenda.pdf.
public housing
Provide full funding for the operating costs and annual capital
accrual needs of public housing through direct appropriations.
Enable greater flexibility to direct available resources toward
their highest priority needs, regardless of funding source.
Seek dedicated resources for the revitalization of severely
distressed public housing properties.
Unlock the value of public housing assets by providing public
housing authorities (PHAs) with a variety of tools to leverage and
invest in the preservation of their properties.
Provide in statute for the establishment of protected capital
reserve accounts to allow PHAs to plan responsibly for future needs.
Improve tools designed to allow PHAs to steward their portfolios as
true asset managers, including HUD's demolition and disposition
regulations.
Provide enhanced incentives for energy efficiency upgrades.
section 8
Provide appropriations sufficient to renew vouchers at actual
rental assistance costs for all participating households and full
funding for ongoing and special administrative fees as provided in
section 8(q) of the U.S. Housing Act as amended by the Quality Housing
and Work Responsibility Act of 1998.
Provide for a voucher funding formula that is based on the number
of families served and voucher costs for the most recent calendar year
for which data are available.
Restore a responsible level of administrative fee funding under
voucher programs.
Provide for new authority to allow PHAs to utilize a portion of
their Housing Assistance Payment Reserves to cover unmet administrative
expenses related to leasing and retaining leased households.
Enact meaningful voucher program reform legislation.
Enable the immediate implementation of long-overdue regulatory and
administrative reforms that will allow for the more efficient use of
resources in voucher programs.
Provide for a responsible level of funding for the renewal of
section 8 multi-family project-based rental assistance (PBRA)
contracts.
Maintain a level playing field in the competition for contracts
under the Section 8 Performance-Based Contract Administrators
initiative.
community and economic development
Restore funding for CDBG to ensure the success of State and local
efforts to spur job creation and retention, provide vital public
services, and expand affordable housing opportunities for low- and
moderate-income families and individuals.
Provide funding for the Sustainable Housing and Communities
Initiative separate from and not as a set-aside under the CDBG program.
Cover the credit subsidy for HUD's section 108 loan guarantee
program, and increase the loan guarantee limit to $500 million as
previously proposed by the administration.
Restore dedicated funding for HUD's Brownfields Economic
Development Initiative.
Restore a responsible level of funding for the HOME Investment
Partnerships Program (HOME).
Enact a budget neutral mandatory funding source for the Housing
Trust Fund.
Thank you again for the opportunity to testify. We look forward to
discussing our funding recommendations with this subcommittee in
greater detail.
NAHRO--RECOMMENDED FISCAL YEAR 2014 FUNDING LEVELS FOR SELECTED HUD PROGRAMS
[Brackets in text indicate set-asides, and indented text indicates sub-accounts.]
----------------------------------------------------------------------------------------------------------------
Fiscal year 2013 ($ millions) Fiscal year 2014 ($ millions)
Program ------------------------------------------------------------------
Enacted \1\ Sequestration \2\ Proposed \3\ NAHRO \4\
----------------------------------------------------------------------------------------------------------------
Public Housing Operating Fund................ $4,253 $4,054 \5\ $4,600 \6\ $5,168
Public Housing Capital Fund.................. 1,871 1,777 2,000 3,750
ROSS Program............................. [50] [47] .............. 50
Emergency Capital Needs.................. [20] [19] \7\ [20] 20
Choice Neighborhoods Initiative.............. 120 114 400 \8\400
Rental Assistance Demonstration.............. .............. ................. 10 ..............
Tenant-Based Rental Assistance............... 18,901 17,964 19,989 ..............
Section 8 HAP Renewals................... \9\ [17,207] [16,349] \11\ [17,968] \11\ 18,540
Ongoing Administrative Fees.............. [1,322] [1,258] [1,635] 1,994
Additional Administrative Fees........... [50] [48] [50] 50
Tenant Protection Vouchers............... [75] [71] [150] 150
Incremental HUD-VASH Vouchers............ [75] [75] [75] 75
Family Self-Sufficiency (FSS) [60] [57] \11\ 75 87
Coordinators............................
Sec. 8 Project-Based Rental Assistance....... \12\ 9,321 8,852 10,272 Fully Fund
\13\
Community Development Fund................... 3,301 3,135 3,143 ..............
Community Development Block Grant Program [3,242] [3,078] [2,798] 3,300
Neighborhood Stabilization Initiative.... .............. ................. [200] ..............
Integrated Planning and Investment Grants .............. ................. [75] ..............
Section 108 Loan Guarantees.................. 5.94 5.64 \14\ 12
HOME Investment Partnerships Program......... 998 948 950 1,600
Housing Opportunities for Persons with AIDS.. 331 315 332 365
Homeless Assistance Grants................... 2,029 1,933 2,381 2,381
----------------------------------------------------------------------------------------------------------------
\1\ Enacted levels from Consolidated and Further Continuing Appropriations Act, 2013, as signed by the President
on March 22, 2013. Figures reflect application of 0.2 percent across-the-board cut as required by the
legislation.
\2\ Figures reflect 5 percent across-the-board sequestration reductions as calculated by the Office of
Management and Budget on March 1, 2013.
\3\ Obama administration's proposed budget for FY 2014. Figures do not reflect proposed Transformation
Initiative set-asides.
\4\ NAHRO recommendations are for standalone/line-item funding. Blank indicates no position.
\5\ The budget proposes to reduce eligibility by a total of $63 million through changes to flat rent and the
medical expense deduction threshold.
\6\ NAHRO's recommendation assumes that eligibility is determined according to current statutes and regulations
governing such calculations.
\7\ Proposes the elimination of safety and security measures as an eligible use of funding.
\8\ NAHRO's support for this funding level is contingent upon responsible funding levels for the Operating and
Capital Funds and the enactment of authorizing legislation requiring that two-thirds of each year's funding be
awarded to projects where PHAs are the lead or co-applicants.
\9\ The act authorizes the use of the housing assistance payments (HAP) adjustment fund ``for PHAs, that despite
taking reasonable cost savings measures, as determined by the Secretary, would otherwise be required to
terminate participating families from the program due to insufficient funds.''
\10\ Assumes $235 million in savings from proposed changes to income targeting, minimum rents, the medical
expense deduction threshold, and the determination of utility allowances. Also assumes an unspecified amount
of indirect funding through offsets of ``excess'' HAP Reserves from non-Moving to Work (MtW) PHAs and MtW
PHAs.
\11\ The Administration proposes eliminating the section 8 family self-sufficiency (FSS) set-aside in favor of a
standalone consolidated program to serve Public Housing and section 8 housing choice voucher (HCV) residents.
\12\ The act authorizes the use of ``unobligated balances, including recaptures and carryover, remaining from
funds appropriated'' for fiscal year 2013 and prior years under the headings of ``Housing Certificate Fund,''
``Annual Contributions for Assisted Housing,'' and ``Project-Based Rental Assistance'' for ``renewal of or
amendments to section 8 project-based contracts and for performance-based contract administrators.''
\13\ NAHRO supports a stable, reliable subsidy stream in the form of full 12-month contract renewal funding.
\14\ In lieu of appropriations, the Administration proposes collecting a fee from borrowers to cover the
program's credit subsidy costs.
______
Letter From the National Association of Local Housing Finance Agencies,
the U.S. Conference of Mayors, and the National Community Development
Association
April 19, 2013.
Hon. Patty Murray,
Chairman, Subcommittee on Transportation, Housing and Urban
Development, and Related Agencies,
Washington, DC.
Hon. Susan Collins,
Ranking Member, Subcommittee on Transportation, Housing and Urban
Development, and Related Agencies,
Washington, DC.
Dear Chairman Murray and Ranking Member Collins: The undersigned
organizations of local elected officials and local and State housing
and community development practitioners write to you concerning fiscal
year 2014 appropriations for the Community Development Block and HOME
Investment Partnerships (HOME) programs. Specifically, we wish to urge
the Transportation and Housing and Urban Development Appropriations
subcommittee to reject recommendations contained within the
administration's fiscal year 2014 budget recommending set-asides and
other ``reforms'' of these programs.
Like other national organizations we urge you to support $3.3
billion in formula funding for the Community Development Block Grant
(CDBG) Program.
However, we do not support the administration's proposal to reduce
overall CDBG formula funds by $275 million, for a $200 million
Neighborhood Stabilization Program Initiative and $75 million for
Integrated Planning Grants (formerly known as the Sustainable
Communities Initiative). This has the effect of transferring formula
funds which benefit the many into two categorical grant programs that
would benefit the few. Similarly, the HOME budget request contains an
up to $10 million set-aside for the Self-Help Homeownership Opportunity
Program (SHOP). These set-asides are for activities that could be
funded under the CDBG or HOME programs respectively.
We also want to advise that we do not support the establishment of
a minimum funding threshold for CDBG entitlement grants. This would
adversely affect an estimated 340 smaller communities who are currently
implementing programs that are responsive to their needs. This would
force them to compete for limited State funds without any positive
benefit to either them or the State. We also oppose the
administration's proposal to repeal the grandfathering provisions in
CDBG for metropolitan cities and urban counties. Again, this would
seriously disrupt on-going programs.
Based on fiscal year 2012 allocations (the Department of Housing
and Urban Development (HUD) has not released the fiscal year 2013
allocations) in Washington State the following communities would lose
direct funding because they fall below the $350,000 threshold:
Anacortes, East Wenatchee City, Longview, Marysville, Mount Vernon,
Olympia, Redmond, Richland, Shoreline, and Wenatchee.
CDBG provides vital funding and flexibility to address local needs
in the areas of community and economic development, housing,
infrastructure and vital public services. Over 1,200 communities rely
on CDBG as a direct source of annual funding. Moreover, each year, an
estimated 7,250 local governments nationally have access to CDBG funds
reaching rural, urban, and suburban areas. CDBG helps create jobs
through the expansion and retention of businesses.
Since fiscal year 2010, funding for CDBG has been cut by over $1
billion, yet the need for these important resources has continued to
grow. While we understand the need to address the Federal budget
deficit, we also understand the value of the local investments made by
CDBG. We are deeply concerned that these investments are in jeopardy
due to the Obama administration's fiscal year 2014 proposed budget cuts
to CDBG, funding the program at $2.8 billion.
The CDBG program generates additional resources, and adds to the
local economy. For example, for every $1 of CDBG funding invested in a
project another $3.55 is leveraged from other sources. Since its
inception in 1974, CDBG has leveraged nearly $400 billion in other
resources for community development and affordable housing.
As a companion to CDBG, the HOME Investment Partnerships program
has suffered severe cuts since fiscal year 2010, from $1.8 billion then
to $950 million in fiscal year 2013, following sequestration. We urge
that its funding level be restored to $1.6 billion in fiscal year 2014.
HOME serves as a critical source of funding for the expansion of
affordable ownership and rental housing for low- and moderate-income
households. The types of activities HOME assists are the construction
and preservation of affordable rental housing usually as gap
assistance, the construction and rehabilitation or affordable ownership
housing as well as for homeownership assistance and tenant-based rental
assistance. Since HOME was enacted in 1990 it has produced over 1
million affordable homes, including 612,792 homeownership new
construction and rehabilitation units and 423,154 new construction or
preservation of rental units. Every $1 of HOME funds leverages an
additional $4 in non-HOME funds.
The administration's fiscal year 2014 budget proposes funding for
HOME at the $950 million finally approved for fiscal year 2013. It is
estimated that this will decrease production of HOME units by 34,000
units and result in the loss of an estimated 8,935 jobs.
Thus, we urge you to support our recommendation of $3.3 billion for
CDBG formula grants and $1.6 billion for HOME in fiscal year 2014 to
help communities nationwide continue to provide vital affordable
housing and neighborhood revitalization programs and services to low-
income persons.
Respectfully,
U.S. Conference of Mayors, National Association of
Local Housing Finance Agencies, and the
National Community Development Association.
______
Letter From the National Council of State Housing Agencies
April 19, 2013.
Hon. Patty Murray,
Chairman, Subcommittee on Transportation, Housing and Urban
Development, and Related Agencies,
Washington, DC.
Hon. Susan Collins,
Ranking Member, Subcommittee on Transportation, Housing and Urban
Development, and Related Agencies,
Washington, DC.
Dear Chairman Murray and Ranking Member Collins: We appreciate this
opportunity to provide testimony in support of the HOME Investment
Partnerships (HOME) program. HOME program funding is vital to the
production and provision of housing affordable to low-income families.
Yet HOME has received devastating cuts--cut almost in half in just the
past few years. Just since fiscal year 2011, HOME has been cut by 41
percent from $1.6 billion to an estimated post-sequester level of $948
million in fiscal year 2013. Cuts to the HOME program are being felt
deeply across the country. For example, the HOME funding allocation to
the State of Washington has decreased by 43 percent, from $34.5 million
in fiscal year 2010 to $19.8 million in fiscal year 2012, and the
allocation to the State of Maine has fallen 44 percent, from $8.5
million in fiscal year 2010 to $4.7 million in fiscal year 2012.
To begin restoring funds for HOME, we implore you to fund HOME in
fiscal year 2014 at $1.6 billion, equal to its fiscal year 2011 funding
level. We ask that you resist additional, disproportionate cuts to HOME
and recognize both the successful track record of the program and the
need for its continued funding at a time when our housing market, and
broader economy, continues to struggle and the need for affordable
housing continues to grow.
Authorized in 1990, the HOME program provides grants to State and
local governments to produce affordable housing for low-income
families. HOME funds are a vital and unique source of financing for
numerous affordable housing developments--many of which would not be
possible without HOME assistance. States and localities use HOME for
affordable housing production and rehabilitation, preservation, and
rental and homeownership assistance.
By flexibly working with and supporting many critical Federal
housing programs, including the Low Income Housing Tax Credit and rural
housing programs, HOME uniquely empowers States and localities to
respond to the housing needs they judge most pressing. States and
localities use HOME to serve the whole spectrum of housing need, from
homeless to ownership to disaster recovery, from urban to rural areas,
and all low-income populations, including families with children, the
elderly, veterans, and persons with special needs. HOME also enables
for-profit and nonprofit developers to provide affordable housing in
their communities.
In its 20 years of existence, the HOME program has successfully
produced more than 1 million affordable homes, in addition to making
homes affordable for hundreds of thousands of families with rental
assistance. From 1992 to 2012, States and localities have used HOME
funds to produce 460,692 home buyer homes, 423,154 rental homes, and
212,100 rehabilitated home buyer homes. Another 264,715 families have
received rental assistance through the HOME program. States and
localities leverage HOME funding by generating more than $4 in other
private and public resources for every $1 of HOME. Over the program's
lifetime, HOME funds have been used to leverage $100.2 billion in funds
for affordable housing.
HOME funding is used exclusively to create affordable housing for
low-income households, those earning incomes of 80 percent or less of
area median income (AMI). While the statute requires that at least 90
percent of families receiving rental assistance through HOME have
incomes at 60 percent of AMI or less, almost 100 percent of those
receiving tenant-based rental assistance and 97 percent of families
living in HOME-assisted rental units have incomes of 60 percent of AMI
or less. One out of four families helped with HOME are extremely low-
income, with incomes of 30 percent of AMI or less.
In addition to providing needed affordable housing, HOME funds
contribute to job creation, especially in the hard-hit construction
sector. Every $1 billion in HOME creates or protects approximately
18,000 jobs. Restoring funding to $1.6 billion in fiscal year 2014
would create 11,736 more jobs than created by HOME's fiscal year 2013
funding level.
Based on projected production levels included in HUD's fiscal year
2014 budget request, if HOME is funded in fiscal year 2014 at the
administration's proposed level of $950 million, we expect almost
34,000 fewer affordable homes will be produced in fiscal year 2014 than
were produced in fiscal year 2011. This means fewer home buyer and
rental units, fewer homeowner rehabilitation projects, and fewer
tenants assisted.
As we face decreased investment in the production of affordable
housing, we face a continued growing need for it. According to HUD's
latest Worst Case Housing Needs report, in 2011 nearly 8.5 million very
low-income families--who received no government housing assistance--
paid more than half their monthly income for rent, lived in severely
substandard housing, or both. This number is up 2.6 million, or 43.5
percent, since 2007.
Today, there are only 57 affordable rental homes available for
every 100 very low-income renter households, those earning 50 percent
of AMI or less. For the 10.1 million households with extremely low
incomes, there are only 30 affordable homes available for every 100
households. Only one in four households eligible for Federal rental
housing assistance receives it.
As a capital program, HOME is a vital resource for addressing this
growing housing need. HOME funds produce new units of affordable
housing and thus are necessary to increasing the overall supply of
affordable housing. The Bipartisan Policy Center's Housing Commission
in its recent report entitled Housing America's Future: New Directions
for National Policy, called for an increase in HOME appropriations to
serve as the gap financing needed to support new developments that
would expand the supply of affordable rental housing.
A HOME program appropriation of $1.6 billion in fiscal year 2014
would only go partway towards restoring HOME program funding, but it
would provide States and local communities with the critical resources
needed to help address the spectrum of affordable housing needs they
face. Therefore, we urge you to support the proven outcomes of the HOME
program by providing a fiscal year 2014 appropriation of $1.6 billion.
Thank you for this opportunity to testify on the need for HOME funding.
Please do not hesitate to contact us with any questions.
Sincerely,
Council for Affordable and Rural Housing
Council of State Community Development Agencies
CSH
Enterprise Community Partners
Habitat for Humanity International
Housing Assistance Council
Housing Partnership Network
Mercy Housing
National Alliance of Community Economic Development Associations
National Association for County Community and Economic Development
National Association of Home Builders
National Association of Housing and Redevelopment Officials
National Association of Local Housing Finance Agencies
National Community Development Association
National Council of State Housing Agencies
National Housing Conference
National Leased Housing Association
National Low Income Housing Coalition
National Rural Housing Coalition
Stewards of Affordable Housing for the Future
The Community Builders, Inc.
______
Prepared Statement of the National Council of State Housing Agencies
Thank you for the opportunity to provide testimony on behalf of our
Housing Finance Agency (HFA) members regarding fiscal year 2014
appropriations for housing programs. As you consider your fiscal year
2014 Department of Housing and Urban Development (HUD) appropriations
bill, we urge you to restore HOME Investment Partnerships Program
(HOME) formula grant funding to $1.6 billion, equal to its fiscal year
2011 funding level, and provide section 8 funding adequate to renew all
expiring project-based contracts for a full year, fully fund all
authorized Housing Choice Vouchers (vouchers), provide new incremental
vouchers in fiscal year 2014, allocate new flexible rental assistance
to State HFAs, and ensure that successful HFA voucher and project-based
contract administrators continue in and are adequately compensated for
these roles. We also ask you to provide authority for Ginnie Mae to
securitize Federal Housing Administration (FHA)-HFA Multifamily Risk-
Sharing program loans.
The National Council of State Housing Agencies' (NCSHA's) members
are the HFAs of the 50 States, the District of Columbia, New York City,
Puerto Rico, and the U.S. Virgin Islands. HFAs administer a wide range
of affordable housing and community development programs, including
HOME, section 8, homelessness assistance, down payment assistance,
State housing trust funds, tax-exempt Housing Bonds, and the Low Income
Housing Tax Credit (Housing Credit). HFAs effectively employ these
resources to advance their common public-purpose mission of providing
affordable housing to the people of their jurisdictions who need it.
home investment partnerships program
HOME program funding is vital to the production and provision of
housing affordable to low-income families and has a long record of
tremendous success in doing so. Yet HOME has received devastating cuts
in recent years. HOME has been cut almost in half since fiscal year
2010. Just since fiscal year 2011, HOME funding has been cut by 41
percent--from $1.6 billion to an estimated post-sequester level of $948
million in fiscal year 2013. This is the lowest funding level in the
program's 20-year history. We appeal to you to spare the HOME program
from further cuts and to fund HOME at an amount as close to its fiscal
year 2011 funding level of $1.6 billion as possible. The need for HOME
funding vastly exceeds the amount available.
We also request that the subcommittee resist further reducing the
amount of this flexible funding source going directly to States and
localities by not including any set-asides within the HOME program
account.
In these tight budgetary times, the HOME formula grant is one of
the best housing investments Congress can make. HOME's flexibility
allows States and localities to determine how to put limited HOME funds
to their best use. HFAs use HOME to serve the whole spectrum of housing
need, from homeless to ownership to disaster recovery, from urban to
rural areas, and all low-income populations, including families with
children, the elderly, veterans, and persons with special needs. HOME
funding is necessary to help States and localities respond to urgent
housing needs.
HOME funds must be used to assist families with low incomes, those
earning 80 percent of area median income (AMI) or less. State HFAs
report using more than half of their HOME funds in 2011 to assist very
low-income families, those earning 50 percent of AMI or less, and more
than a quarter of the funds to assist extremely low-income families,
those earning 30 percent of AMI or less.
HOME has an outstanding track record of success. States and
localities have used HOME funding to produce more than 1 million
affordable homes, in addition to making homes affordable for hundreds
of thousands of families with direct rental assistance.
Further, every Federal HOME $1 generates more than $4 in additional
public and private investment. HOME funds have leveraged more than $100
billion in additional funds for affordable housing. HOME funding is a
vital piece in financing numerous affordable housing developments--many
of which would not be able to move forward without its assistance. HOME
complements and supports many critical Federal housing programs, such
as the Low Income Housing Tax Credit, making developments financially
feasible and achieving deeper income targeting than would otherwise be
possible.
NCSHA also supports the State-administered Housing Trust Fund and
seeks a dedicated and sustainable funding source for it. However, the
Housing Trust Fund is needed as a new resource for developing housing
affordable to those with very low and extremely low incomes. It is not
a replacement for appropriations to HOME and other HUD programs and
should not be funded at their expense.
rental assistance
We recommend Congress provide adequate funding for vouchers and
project-based section 8 contracts. These two programs serve some of our
lowest income, most vulnerable people. We urge the subcommittee to
ensure the section 8 accounts are funded such that all vouchers already
in use are renewed and all contract renewals are funded for a full 12
months in order to maintain owner confidence in the program.
We also ask that you provide the funding necessary for public
housing agencies (PHAs) to effectively administer the voucher program.
PHAs have experienced year-over-year proration of administrative fees,
which has negatively impacted PHAs' ability to administer the voucher
program. HFA voucher and project-based contract administrators play
critical roles in providing rental assistance and we ask that you
ensure that they are adequately compensated for them.
Thank you for funding new incremental Veterans Affairs Supportive
Housing (VASH) vouchers in fiscal year 2013. However, additional new
unrestricted incremental vouchers are needed so we can help some of the
millions of families who qualify for rental assistance but do not
receive it. According to HUD's most recent report on Worst Case Housing
Needs, there was a 43.5 percent increase from 2007 to 2011 in
households with worst case housing needs--defined as very low-income
renters not receiving government housing assistance who either pay more
than half of their monthly income for rent, live in severely inadequate
conditions, or both.
We urge you also to provide flexible rental assistance to State
HFAs that they can use for either project-based or tenant-based rental
assistance. Such funding would allow States to address their production
and affordability needs most effectively and to serve more extremely
low-income families by combining it with State-administered Housing
Credit, Housing Bond, HOME, and other production resources.
States consistently target their Housing Credit, Housing Bond, and
HOME resources to households with incomes below the programs' statutory
income limits. Yet it is difficult--and sometimes impossible--to reach
these households at a rent level they can afford without rental
assistance.
ginnie mae securitization of multifamily risk-sharing loans
We request that you provide authority for Ginnie Mae to securitize
FHA-HFA Multifamily Risk-Sharing loans. Providing this authority will
allow HFAs to reduce the cost of financing rental housing developments,
making it possible to achieve lower rents and reach even lower income
tenants.
Under the FHA-HFA Risk-Sharing program, HFAs meeting rigorous
financial standards are able to underwrite FHA multifamily loans in
return for sharing the risk of any losses on those loans. This program
has been very successful, with 26 HFAs financing nearly 1,000 loans,
totaling more than $5 billion in principal and supporting more than
101,000 affordable rental homes.
If Ginnie Mae were to securitize FHA-HFA Risk-Sharing loans, HFAs
predict the interest rate on the underlying mortgages could be reduced
by as much as 200 basis points, or 2 percent. This rate reduction would
lower rents and potentially reduce the need for and cost of other
Federal housing subsidies. This authority would not increase Government
spending. In fact, it would generate revenue for the Federal Government
according to the Congressional Budget Office (CBO), which estimates
that allowing Ginnie Mae to securitize FHA-HFA Risk-Sharing loans would
result in $20 million in mandatory savings over 10 years, or $2 million
annually.
We recognize the continued constrained fiscal environment in which
you must craft your fiscal year 2014 appropriations legislation. We
urge you to consider the proven effectiveness of HOME and section 8
rental assistance and the great unmet need for them, which has been
further exacerbated in these difficult economic times, as you make your
funding decisions. NCSHA appreciates this opportunity to offer a
statement on behalf of these programs and we are ready to assist you in
any way we can as you move forward with the fiscal year 2014
appropriations process.
LIST OF WITNESSES, COMMUNICATIONS, AND PREPARED STATEMENTS
----------
Page
Advocates for Highway and Auto Safety, et al., Letter From the... 187
American:
Indian Higher Education Consortium, Prepared Statement of the 189
Public Transportation Association, Prepared Statement of the. 191
Public Works Association, Prepared Statement of the.......... 194
Society of Civil Engineers, Prepared Statement of the........ 196
Blunt, Senator Roy, U.S. Senator From Missouri, Statement of..... 10
Boozman, Senator John, U.S. Senator From Arkansas, Questions
Submitted by................................................... 119
California Association of Housing Authorities, Prepared Statement
of the......................................................... 199
Coalition of Northeastern Governors, Prepared Statement of the... 201
Coats, Senator Daniel, U.S. Senator From Indiana:
Questions Submitted by....................................... 44
Statement of................................................. 9
Collins, Senator Susan M., U.S. Senator From Maine:
Prepared Statements of...................................8, 56, 132
Statements of............................................6, 54, 131
Donovan, Hon. Shaun, Secretary, Office of the Secretary,
Department of Housing and Urban Development.................... 1
Prepared Statement of........................................ 13
Questions Submitted to...................................41, 42, 44
Summary Statement of......................................... 10
Easter Seals, Prepared Statement of.............................. 204
Feinstein, Senator Dianne, U.S. Senator From California,
Questions Submitted by......................................... 109
Galante, Hon. Carol, Commissioner and Assistant Secretary for
Housing, Federal Housing Administration, Department of Housing
and Urban Development.......................................... 125
Prepared Statement of........................................ 134
Questions Submitted to....................................... 178
Statement of................................................. 133
Habitat for Humanity International, Prepared Statement of........ 206
HUD Council 222, American Federation of Government Employees,
AFL-CIO, Prepared Statement of................................. 207
Huerta, Hon. Michael P., Administrator, Federal Aviation
Administration, Department of Transportation................... 51
Prepared Statement of........................................ 59
Questions Submitted to......................103, 109, 115, 117, 119
Summary Statement of......................................... 58
Institute of Makers of Explosives, Prepared Statements of the..210, 214
Interested Parties for Hazardous Materials Transportation, Letter
From........................................................... 217
Kirk, Senator Mark, U.S. Senator From Illinois, Questions
Submitted by................................................... 117
Larsen, Representative Rick, U.S. Representative From Washington,
2nd District, Prepared Statement of............................ 185
Lautenberg, Senator Frank R., U.S. Senator From New Jersey,
Questions Submitted by........................................42, 115
Mikulski, Senator Barbara A., U.S. Senator From Maryland,
Questions Submitted by........................................41, 178
Montoya, Hon. David A., Inspector General, Office of Inspector
General, Department of Housing and Urban Development........... 125
Prepared Statement of........................................ 149
Summary Statement of......................................... 147
Murray, Senator Patty, U.S. Senator From Washington:
Opening Statements of....................................1, 51, 125
Prepared Statements of...................................4, 53, 128
Questions Submitted by....................................... 103
National:
Affordable Housing Management Association, Prepared Statement
of
the........................................................ 218
AIDS Housing Coalition, Prepared Statement of the............ 221
Association of:
Counties, et al., Letter From the........................ 222
Housing and Redevelopment Officials, Prepared Statement
of the................................................. 223
Local Housing Finance Agencies, the U.S. Conference of
Mayors, and the National Community Development
Association, Letter From the........................... 227
Council of State Housing Agencies:
Letter From the.......................................... 228
Prepared Statement of the................................ 230
Scovel, Hon. Calvin L., III, Inspector General, Office of
Inspector General, Department of Transportation................ 51
Prepared Statement of........................................ 66
Summary Statement of......................................... 65
SUBJECT INDEX
----------
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Federal Housing Administration
Page
Additional Committee Questions................................... 178
Appendix......................................................... 177
Commitment Authority............................................. 165
Eminent Domain................................................... 166
Federal Housing Administration (FHA):
Insurance Fund............................................... 126
Market Share................................................. 171
Operations................................................... 130
Reform, Challenges to........................................ 168
Shortfall.................................................... 133
Transformation............................................... 176
Progress on.............................................. 177
Fraudulent Lender Safeguards..................................... 173
Goal:
1: Strengthen the Nation's Housing Market To Bolster the
Economy and Protect Consumers.............................. 135
2: Meet the Need for Quality, Affordable Rental Homes and
Healthcare Facilities...................................... 142
3: Transform the Way HUD Does Business....................... 145
Home Equity Conversion Mortgage (HECM)........................... 127
Counseling................................................... 162
Escrow Accounts.............................................. 164
High Default Rate............................................ 161
Loans........................................................ 130
Information Technology (IT) Infrastructure....................... 175
Lautenberg Remembrance........................................... 128
Loss Mitigation.................................................. 169
Mortgage Insurance Premiums...................................... 172
Mutual Mortgage Insurance (MMI) Fund............................. 160
Losses to the................................................ 129
OIG Efforts To Recover Losses and Address Fraud Against the.. 156
Office of Multifamily Housing.................................... 178
Consolidation of the......................................... 178
Other Areas of Risk.............................................. 130
Sequestration..................................................128, 130
Staffing Concerns................................................ 175
Office of Inspector General
Financial:
Health of the FHA Mutual Mortgage Insurance Fund............. 151
Management Systems........................................... 158
Home Equity Conversion Mortgage (HECM) Program................... 155
Inventory of Foreclosed-Upon Single-Family Properties............ 157
Office of Inspector General (OIG):
Concerns and FHA's Slow Response, a History of............... 149
Efforts To Recover Losses and Address Fraud Against the MMI
Fund....................................................... 156
Investigations............................................... 169
Investigative and Audit Results, Recent...................... 159
Proposed Rulemaking Requirements................................. 147
Real Estate-Owned (REO) Properties............................... 148
Office of the Secretary
Additional Committee Questions................................... 41
Assisted Housing................................................. 11
Better Stewards of Taxpayer Dollars.............................. 44
Choice Neighborhoods.............................................12, 38
Community Development Block Grant (CDBG) Disaster Recovery Action
Plan........................................................... 42
Funding...................................................... 42
Department of Housing and Urban Development (HUD):
Grant Criteria............................................... 47
Memorandum--Auditee Response to OIG's Audit of FHA's
Preforeclosure Sale Program................................ 49
Existing Partnership............................................. 11
Federal Housing Administration (FHA)............................. 11
Preforeclosure Sales Program................................. 48
General and Special Risk Insurance Commitment Authority.......... 33
Goal:
1: Strengthen the Nation's Housing Market To Bolster the
Economy and Protect Consumers.............................. 16
2: Meet the Need for Quality, Affordable Rental Homes........ 18
3: Utilize Housing as a Platform for Improving Quality of
Life....................................................... 22
4: Build Inclusive Sustainable Communities Free from
Discrimination............................................. 23
5: Transform the Way HUD Does Business....................... 27
Home Equity Conversion Mortgage (HECM) Reform.................... 32
Housing:
And Communities.............................................. 10
Assistance Programs.......................................... 46
Improving Performance and Accountability......................... 5
Moratorium on Full Draw Program.................................. 33
Mutual Mortgage Insurance (MMI) Fund............................. 29
Overall Use of HUD Funds......................................... 47
Oversight of Troubled Public Housing Authorities................. 37
Public Housing:
Authorities (PHAs)--Emergency Capital Needs.................. 43
Drug Elimination Program..................................... 43
Regulatory Burdens............................................... 12
Rental Assistance Demonstration (RAD)............................ 41
Reverse Mortgage Loans........................................... 30
Section 8 Reforms................................................ 12
Sequestration:
Budget Numbers............................................... 34
Impact on:
Most Vulnerable, the..................................... 4
Public Housing Authorities............................... 30
Shortfalls Under Sequestration................................... 36
Super Storm Sandy................................................ 41
Transformation Initiatives....................................... 12
Veterans Affairs Supportive Housing (VASH) Vouchers.............. 12
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
787 Dreamliner................................................... 92
Aircraft Certification....................................... 105
Acquisitions Workforce........................................... 103
Additional Committee Questions................................... 103
Agricultural Aviation and Low-Level Airspace Safety Issues....... 122
Aircraft Certification........................................... 105
Process...................................................... 120
Airport Improvement Program (AIP) Grant Funding..................83, 91
Alternative Jet Fuels............................................ 90
Armed Drones..................................................... 112
Audit(s) of:
Los Angeles International Airport............................ 102
Revenue Diversions........................................... 102
Budget Control Act (BCA)/Contract Tower Program/Furloughs........ 78
Business Aviation and General Aviation--Economic Impact and
Opportunities.................................................. 121
Contract:
Control Towers...............................................86, 96
Towers.................................................79, 117, 120
Program.................................................. 78
Weather Observers............................................ 116
Controller Training and Safety................................... 99
Cost-Savings..................................................... 99
Electronic Devices on Planes..................................... 101
En Route Automation Modernization (ERAM)......................... 90
Furlough(s).................................................78, 80, 100
Impact(s) on:
Facilities............................................... 115
NextGen.................................................. 89
General Aviation Alternative Fuels............................... 119
Government Accountability Office (GAO) Report on Unmanned
Aircraft Systems............................................... 112
Grants-in-Aid for Airports....................................... 113
Helicopter:
Noise........................................................ 114
Operating Practices.......................................... 93
Next Generation Air Transportation System (NextGen).............. 117
Master Schedule.............................................. 103
Operations in Newark Airport..................................... 115
Passenger Facility Charge (PFC).................................. 84
Performance-Based Navigation (PBN)............................... 106
Remote Highjacking of Aircraft................................... 116
Retention Bonuses................................................ 107
Runway:
Incursions................................................... 81
Status Lights................................................ 104
Sequester Coordination........................................... 118
Sequestration...................................................97, 100
Unmanned Aircraft System (UAS)..............................84, 94, 109
Airworthiness Certificates................................... 111
Test Ranges.................................................. 110
User Fees........................................................ 121
Office of Inspector General
Federal Aviation Administration (FAA) Has Opportunities To More
Effectively Manage Its Controller and Inspector Workforce...... 68
Opportunities Remain To Better Ensure the Safety of the National
Airspace System................................................ 75
Sound Management Strategies Are Key to the Cost-Effective
Implementation of FAA's Modernization and Infrastructure
Efforts........................................................ 70
[all]