[Senate Hearing 113-703]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 113-703

                 NOMINATION OF HON. SHAUN L.S. DONOVAN

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS


                             SECOND SESSION

                               __________

    NOMINATION OF HON. SHAUN L.S. DONOVAN TO BE DIRECTOR, OFFICE OF 
                         MANAGEMENT AND BUDGET

                               __________

                             JUNE 11, 2014

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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                  THOMAS R. CARPER, Delaware Chairman
CARL LEVIN, Michigan                 TOM COBURN, Oklahoma
MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana          RON JOHNSON, Wisconsin
CLAIRE McCASKILL, Missouri           ROB PORTMAN, Ohio
JON TESTER, Montana                  RAND PAUL, Kentucky
MARK BEGICH, Alaska                  MICHAEL B. ENZI, Wyoming
TAMMY BALDWIN, Wisconsin             KELLY AYOTTE, New Hampshire
HEIDI HEITKAMP, North Dakota

                  Gabrielle A. Batkin, Staff Director
               John P. Kilvington, Deputy Staff Director
                    Mary Beth Schultz, Chief Counsel
         Troy H. Cribb, Chief Counsel for Governmental Affairs
            Deirdre G. Armstrong, Professional Staff Member
               Keith B. Ashdown, Minority Staff Director
         Christopher J. Barkley, Minority Deputy Staff Director
               Andrew C. Dockham, Minority Chief Counsel
                     Laura W. Kilbride, Chief Clerk
                   Lauren M. Corcoran, Hearing Clerk
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Carper...............................................     5
    Senator Coburn...............................................     7
    Senator Enzi.................................................    16
    Senator Johnson..............................................    18
    Senator Begich...............................................    21
    Senator Tester...............................................    24
    Senator Baldwin..............................................    27
    Senator Portman..............................................    30
    Senator Levin................................................    33
Prepared statement:
    Senator Carper...............................................    39
    Senator Collins..............................................    41
    Senator Landrieu.............................................    44

                               WITNESSES
                        Wednesday, June 11, 2014

Hon. Susan M. Collins, a United States Senator from the State of 
  Maine..........................................................     1
Hon. Mary L. Landrieu, a United States Senator from the State of 
  Louisiana......................................................     3
Hon. Shaun L.S. Donovan, Nominated to be Director, U.S. Office of 
  Management and Budget
    Testimony....................................................     8
    Prepared statement...........................................    46
    Biographical and financial information.......................    49
    Letter from the Office of Government Ethics..................    68
    Responses to pre-hearing questions...........................    70
    Responses to post-hearing questions..........................   116

 
                 NOMINATION OF HON. SHAUN L.S. DONOVAN

                              ----------                              


                        WEDNESDAY, JUNE 11, 2014

                                     U.S. Senate,  
                           Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:12 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Thomas R. 
Carper, Chairman of the Committee, presiding.
    Present: Senators Carper, Levin, Pryor, Landrieu, Tester, 
Begich, Baldwin, Coburn, McCain, Johnson, Portman, and Enzi.
    Chairman Carper. Good morning. Senator Collins, have you 
been in this room before? [Laughter.]
    We actually thought of naming it after you at some point in 
time.
    Senator Collins. Only about 5,000 times. I think that is a 
rough count.
    Chairman Carper. Something seems wrong with you sitting on 
that side of the table.
    Senator Collins. It does to me, too.
    Chairman Carper. Do you want to come up here? [Laughter.]
    I am sure you would do well.
    Senator Landrieu is going to join us, I think, shortly, and 
if it is OK with Dr. Coburn, I think we will just go ahead and 
recognize you to make some introductory remarks, and then if 
she is here, we will let her take over, and if not, we will 
proceed. Thank you. It is nice to see you.
    And, Shaun, to you and your family, welcome. We are 
especially happy to see your bride and those two sons of yours. 
We are happy you are all here.
    Susan, please proceed.

TESTIMONY OF THE HONORABLE SUSAN M. COLLINS,\1\ A UNITED STATES 
                SENATOR FROM THE STATE OF MAINE

    Senator Collins. Thank you very much. Chairman Carper, 
Ranking Member Coburn, Members of the Committee whom I am sure 
will be joining us shortly, I come before you this morning to 
introduce Shaun Donovan, who has been nominated to be the 
Director of the Office of Management and Budget (OMB).
---------------------------------------------------------------------------
    \1\ The prepared statement of Senator Collins appears in the 
Appendix on page 41.
---------------------------------------------------------------------------
    In many ways, my appearance here today is, as the Chairman 
indicated, a homecoming, as I served for 16 years on this 
Committee. And introducing Secretary Donovan is, in many ways, 
bittersweet. I very much enjoyed the opportunity to work 
closely with him since becoming the Ranking Member of the 
Appropriations Subcommittee on Transportation and the 
Department of Housing and Urban Development (HUD) in 2011. So, 
we have worked very closely together, and I will miss working 
with him.
    During his tenure as HUD Secretary, Secretary Donovan has 
been widely recognized as an effective and knowledgeable 
leader, and not just in terms of HUD's own programs. As this 
Committee may well be aware, he has been centrally involved in 
shaping the future of the government's role in housing finance 
and he also led the recovery efforts following Hurricane Sandy.
    Having served on this Committee for many years, I know that 
I frequently was frustrated by the OMB Directors ignoring the 
``M'' in OMB. Effective management of Federal procurement 
policy, analysis of proposed Federal regulations, and the 
reduction of unnecessary government paperwork are core 
functions of OMB, and yet oftentimes the focus of the OMB 
Director has been solely on budget issues. Important as those 
are, it is also important that there be a concentrated focus on 
the management issues that are so important and in which OMB 
plays such a key role.
    So, I think it may be of considerable interest to this 
Committee to know about the data-driven approach that Secretary 
Donovan brings to improving the effectiveness and efficiency of 
Federal programs. At HUD, he instituted quarterly reviews, 
known as HUDStat, to improve the Department's performance and 
to ensure that HUD programs are meeting their goals. Central to 
these reviews has been the use of data to develop plans to 
overcome challenges and strengthen the effectiveness of 
programs.
    I have no doubt that the Federal Government would benefit 
from the broader application of these efforts by having him 
lead the Office of Management and Budget. I know this is an 
issue that Senator Coburn has been interested in for many 
years, the need to have metrics so that we are actually 
measuring whether or not our programs are working and whether 
the taxpayers' investment has been warranted, and that is 
exactly the kind of data-driven system that Secretary Donovan 
instituted at HUD that was not there prior to his becoming the 
leader of that Department.
    He has demonstrated the ability to achieve meaningful 
results by measuring programs, and perhaps nowhere is that more 
evident than the goal of reducing homelessness. It is one thing 
to have a broad goal to reduce homelessness and put some money 
behind it and create some new programs. The question is, does 
it work? Since 2010, due in large measure to data-driven 
solutions leading to more effective programs, chronic 
homelessness in this country has been reduced by 16 percent, 
and veterans' homelessness has been reduced by 24 percent.
    Not only is Secretary Donovan knowledgeable and data-
driven, but he has also demonstrated his responsiveness to 
Congress, and I cannot say that about every member of this 
cabinet or this Administration. I would like to briefly cite to 
you just one example.
    We had reports surface in my State of Maine of poor 
conditions at HUD subsidized housing. The problem was first 
brought to my attention by a local fire chief in western Maine 
who was really worried that some of this housing was so 
dangerous, it was at risk of serious fires. I turned to the 
Secretary, requested assistance from him, and he understood how 
important it was to resolve these issues as quickly as 
possible. He worked with HUD's Inspector General (IG) to have 
HUD and the Office of Inspector General (OIG) staff come to 
Maine, inspect the properties, identify the underlying 
oversight deficiencies in the inspections that the State 
housing authority was doing, and formulate a correction plan. 
The board of the Maine State Housing Authority used these 
findings and recommendations to implement sweeping reforms, 
including much-needed leadership changes to prevent these 
unacceptable problems from happening again.
    I mention that example because it demonstrates the 
Secretary's commitment to protecting not only the tenants who 
were living in squalor, in some cases, and really dangerous 
conditions, but also to protecting the taxpayers who were 
subsidizing this unacceptable housing.
    With the confirmation, if you choose to do so, of Secretary 
Shaun Donovan as Director of OMB, I can assure you that the 
American people will have a leader of integrity and 
intelligence in a critical job. I want to thank him personally 
for his service at HUD, and I would respectfully urge this 
Committee to give him your support.
    Thank you for the opportunity to introduce him to the 
Committee today. I, of course, would welcome any very hard 
questions that you would like to direct to the nominee. 
[Laughter.]
    Chairman Carper. All right. Here is my first question. 
Where is Senator Landrieu?
    Senator Landrieu. Right here.
    Senator Collins. She has arrived right on time.
    Chairman Carper. You called it. That was a wonderful 
statement. Thank you.
    Senator Landrieu, great to see you. Thank you.
    Senator Landrieu. Mr. Chairman, thank you.
    Chairman Carper. Senator Collins just wrapped up. She had 
nothing good to say about him, but maybe you will. [Laughter.]

TESTIMONY OF THE HONORABLE MARY L. LANDRIEU,\1\ A UNITED STATES 
              SENATOR FROM THE STATE OF LOUISIANA

    Senator Landrieu. I do not believe that.
---------------------------------------------------------------------------
    \1\ The prepared statement of Senator Landrieu appears in the 
Appendix on page 44.
---------------------------------------------------------------------------
    Hello, family.
    Good morning to the Chairman and Ranking Member, and I 
apologize for being a few minutes late and I thank my 
colleague, Senator Collins, for going ahead, because we are 
both here so privileged and grateful for the opportunity to 
introduce someone who I believe, and I think shared by Senator 
Collins, is one of the brightest lights in President Obama's 
cabinet and one of the best collaborative leaders I have ever 
known in my career. And, I have been now doing this quite a 
long time. In fact, Senator Collins and I have similar careers, 
having started much earlier and served at our State level and 
now have the privilege to serve here in Washington for almost 
the exact same time.
    So, I know that she has given some background of this 
nominee, but let me just remind the Committee of his 
extraordinary educational background at Harvard University, 
Master's of Public Administration and a Master's Degree in 
Architecture. And, I find that his work as a scholar in those 
fields really comes into play every day that he is here working 
in the jobs that this Administration and others have entrusted 
to him in really building a better Nation, and that is really 
what we are all here to do. I know, Mr. Chairman, you feel very 
strongly about that, as does your Ranking Member, building a 
greater democracy, more fair, more generous, and a government 
that is more effective and more efficient every day.
    During the President Clinton and President Bush 
Administrations, Secretary Donovan served as Deputy Assistant 
Secretary for Multifamily Housing at HUD, and Acting 
Commissioner of the Federal Housing Administration (FHA). In 
2004, he became Commissioner of New York City Housing 
Preservation and Development, which is no easy job to take on. 
It is really just a monumental assignment, a $500 million 
budget, having to work with a variety of different stakeholder 
groups. I can only imagine. Every time I fly into the city of 
New York, I am always amazed that it can be run at all, it is 
so huge, and he did his part in doing it.
    But, on a more personal note--and, Mr. Chairman, I think 
you will get a chuckle out of this--as you know, I am the 
daughter of a HUD Secretary, and my father served proudly for 
President Carter. I have said in front of my father that I 
thought once he was the best Secretary of HUD that ever served, 
but I have met one even better. Now, Shaun gets very 
embarrassed, and my Dad does not like it, but it is true.
    So, I am thrilled to be here, and let me just say in 
conclusion, because I know we want to hear his testimony, that 
when Hurricanes Katrina and Rita struck, the two fiercest 
natural disasters to strike our country, and unfortunately 
struck within 3 weeks along the same coast about 9 years ago, 
it was this Secretary that really stepped up in his first trip 
as Secretary, came down to New Orleans and the Gulf Coast, went 
to Mississippi, as well. He has visited multiple times. He has 
really been the light and the strength that has helped us to 
rebuild, which starts with schools and hospitals and housing, 
primarily, in neighborhoods, so that cities and communities can 
come back. He also understands small business coming back as 
soon as possible.
    So, I just want to say, because of all my dealings with him 
in a variety of different fields, I have watched him on the 
ground with people. I have watched him, literally, as he has 
jogged through neighborhoods in New Orleans. I have seen him on 
the stump. And, I have been in many conferences with him, 
trying to work out very difficult problems. And, I find him to 
be very straightforward, very honest, and most importantly, 
hard working and caring.
    So, this is a big job he has been nominated for, a really 
big one, but I know that he can do it and I have every 
confidence and would give him my strong support and would ask 
the Members of this Committee to support him in every way they 
can.
    Thank you, and I will submit the rest of my testimony for 
the record.
    Chairman Carper. Senator Landrieu, thank you so much.
    Senator Collins, before you arrived, was good enough to 
offer to answer any questions that we had, and I asked one, 
just as you were coming in. I would ask one question of you 
before you leave, and that is, would you say that Secretary 
Donovan is one of the two best HUD Secretaries that our country 
has ever had. [Laughter.]
    Senator Landrieu. Yes. He would be among the top two.
    Chairman Carper. OK. Fair enough. [Laughter.]
    I am glad we got that on the record.
    Senator Landrieu. Thank you.
    Chairman Carper. Dr. Coburn, do you have anything?
    Senator Coburn. No.
    Chairman Carper. Susan, Mary, great to see you both. It 
means a lot, I know, to our nominee and to us that you are 
here. Thank you. Welcome home.

              OPENING STATEMENT OF CHAIRMAN CARPER

    Chairman Carper. All right, ladies and gentlemen. As we all 
know, our previous OMB Director, Sylvia Mathews Burwell got 
another job. You knew her when she was Sylvia Mathews, did you 
not? She has been confirmed as Secretary of Health and Human 
Services (HHS). In the past, this might have left us with a 
vacancy at the top of OMB for a long time. Fortunately, in this 
case, the President has moved promptly to nominate a 
replacement for Secretary Burwell, and we are glad that he has.
    Our Committee has, in turn, moved forward with a similar 
sense of urgency. I want to thank Dr. Coburn--I want to thank 
his staff, and mine, as well--for working with us on a 
bipartisan basis to move this nomination forward, but with due 
diligence.
    Our Nation's fiscal crisis may have receded from the 
headlines in recent months, but, in fact, we are still dealing 
with the same challenges we faced for years now. As I have 
stated before, our country needs a comprehensive, long-term 
budget plan that really does three things. One of those is to 
raise some revenues, hopefully, to do tax reform that looks at 
corporate rates. We need to really overhaul some of our 
entitlement programs in ways that save money, save the programs 
for our future generations, and does not savage old people or 
poor people. And, we need to look at everything that we do and 
ask, how do we get a better result for less money? And you, 
your purview, your job, if confirmed, will really encompass all 
of those, so we are anxious to drill down on each of them.
    But, the Director of OMB is a critical player in making 
decisions and making progress in these areas, including helping 
to put our country forward on a fiscally sustainable path. We 
need a leader in this role who will be a strong voice for 
fiscal responsibility and for effective government management, 
as our two introducers have said.
    We have had the privilege of working with Sylvia Mathews 
Burwell, who played, as you know, an integral part in achieving 
the bipartisan budget deal reached late last year. I believe, 
colleagues, that we have the same kind of leader in Shaun 
Donovan, as well.
    And to those of us in Congress and so many other Americans, 
Secretary Donovan is a familiar face, having served as 
Secretary of HUD for the last 5 years now. From his work there, 
we know he can take on and solve tough problems. We have heard 
that from our two introducers already. During his time at the 
Department, he has guided Federal housing programs through 
economic crisis and helped millions of Americans modify their 
mortgages and avoid foreclosures.
    He has also demonstrated an ability to cut through red tape 
and find ways for agencies to work together more effectively. 
He did this with President Obama asking him to be Chair of the 
Hurricane Sandy Rebuilding Task Force, and he has done so on a 
number of other issues, including transportation, energy 
efficiency, and veterans' homelessness.
    Secretary Donovan's tenure at the Department of Housing and 
Urban Development gives him a strong foundation when it comes 
to understanding how agencies tick. He also knows how the 
Federal budget process works. And, just as importantly, he has 
also worked in local government and in the private and 
nonprofit sector. He knows from those experiences how decisions 
at the Federal level can impact communities, businesses, and 
individual citizens.
    In each job that he has held, Secretary Donovan has earned 
a reputation as someone who uses data and evidence to get 
better results and to save money for taxpayers. He is someone 
who wants to find out what is working and do more of that, and 
to find out what is not working and do less of that.
    Secretary Donovan is also someone who values strong public-
private partnerships. He has consistently championed ideas that 
further the public good while also spurring economic 
development.
    This Committee works in close partnership with the Office 
of Management and Budget in all areas, but especially as we try 
to identify areas where we could achieve results throughout the 
Federal Government while spending fewer taxpayer dollars. Based 
on his previous experience and our past conversations, I 
believe that Secretary Donovan is committed to continuing those 
efforts at OMB and governmentwide.
    Everything I know about Secretary Donovan's 
accomplishments, commitment to public service, tell me he is 
going to be a strong and effective leader at the Office of 
Management and Budget and a good partner with this Committee if 
he is confirmed.
    His predecessor at OMB is an exceptional leader, and left 
big shoes to fill at the agency, a tough act to follow. Dr. 
Coburn and I thought and think the world of her and the team 
that she has put together. But, I think Secretary Donovan, 
colleagues, is ready to hit the ground running. I expect 
Secretary Donovan to work just as hard and to continue the same 
bipartisan approach and to be as accessible as Sylvia was. She 
was incredibly accessible, as were the senior members of her 
team.
    I look forward to your testimony today--we look forward to 
it--and we hope the full Senate will consider your nomination 
as soon as possible.
    And with that, I will turn it to Dr. Coburn for any 
comments he might like to make. Thank you. Dr. Coburn.

              OPENING STATEMENT OF SENATOR COBURN

    Senator Coburn. Well, Mr. Secretary, thank you for spending 
the time with me yesterday. I enjoyed it and got to know you 
better.
    We talked a lot about management yesterday, and I am not 
going to talk about that today. I feel pretty comfortable in 
that area.
    But, I am going to raise some questions with you during the 
question and answer period about responsiveness. I sent several 
letters to HUD that, on the replies, multiple questions that 
were asked in the letter never were answered, which is in 
contrast to Sylvia Burwell. The No. 1 thing we think is we have 
an obligation to get answers to our questions. And so, for me, 
that is a troubling track record. Most of the time, Mr. 
Secretary, you do not write the answers to those. Somebody else 
writes them for you, and you are not necessarily fully 
informed. So, that, to me, is concerning and would relate to 
management in terms of really knowing.
    The second area of concern was your testimony before this 
Committee on Hurricane Sandy and the Task Force and the details 
of what was testified versus what the actual facts were. And, 
again, I think that is totally excusable, given your position, 
but again, it is important for us to have testimony that is 
accurate and clear. And, no malicious motive is implied in 
that. The fact is, the facts that we were given were not 
exactly the facts, as we later found out.
    So, I would welcome you to the Committee. I have no doubt 
that you are going to be approved. What I would like to do is 
establish with you the kind of rapport we had with Ms. Burwell, 
which means that we got answers to every question. Sometimes we 
did not like the answers, but we got answers. No. 2, she was 
timely and responsive, which I think is an important 
characteristic.
    And so I have a lot of questions for you on specific 
details of OMB's obligations and some of your personal 
philosophy in terms of some of the things that have happened 
around here on the big problem in terms of solving our fiscal 
issues, and you are going to be the key for this Administration 
in directing that and leading that.
    I would also say, I thank you very much for being willing 
to serve, seeing your two young boys. I have some advice for 
you. This job will consume you, and what you have to do--I know 
you called me on a Saturday, I think, at home, and I was pretty 
short. But, the fact is, I have reserved weekends for my 
family, and what I do, and my recommendation to you, is get out 
of there at a decent time every day so you can spend time with 
your boys and your wife because they are far more important 
than that job.
    Chairman Carper. I am Tom Carper and I approve this 
message.
    Let me just take a moment to again welcome our witness, his 
wife, Liza, and sons Milo and Lucas. Thank you for joining us. 
In a moment, you will have an opportunity when you speak to 
make some further introductions of them and others that you 
might wish to recognize in the audience.
    Our nominee, as you know, currently serves as the Secretary 
of HUD. While at that position, he also served as the Chair of 
the Hurricane Sandy Rebuilding Task Force. Secretary Donovan 
also previously has served in a variety of important roles, 
including Commissioner of the New York City Department of 
Housing Preservation and Development, and as Deputy Assistant 
Secretary for Multifamily Housing at the Department of Housing 
and Urban Development. Secretary Donovan also worked in the 
private sector on ways to finance affordable housing and as a 
consultant to the Millennial Housing Commission, which seeks 
ways to increase the number of multi-family housing options.
    Secretary Donovan, before you proceed with your Statement, 
our Committee rules require that all witnesses at nomination 
hearings give their testimony under oath, so I am going to ask 
you to stand, raise your right hand, if you will, and here we 
go.
    Mr. Donovan, do you swear that the testimony you will give 
before this Committee will be the truth, the whole truth, and 
nothing but the truth, so help you ,God?
    Secretary Donovan. I do.
    Chairman Carper. Please be seated. OK. Secretary Donovan, 
feel free to proceed with your statement, and again, introduce 
family and friends as you would like. We are happy you are 
here.

TESTIMONY OF THE HONORABLE SHAUN L.S. DONOVAN,\1\ NOMINATED TO 
       BE DIRECTOR, U.S. OFFICE OF MANAGEMENT AND BUDGET

    Secretary Donovan. Thank you, Chairman Carper, Dr. Coburn, 
Members of the Committee, for welcoming me here today. It is a 
privilege to be considered by this Committee as the President's 
nominee to be the Director of the Office of Management and 
Budget.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Donovan appears in the Appendix 
on page 46.
---------------------------------------------------------------------------
    I want to begin by thanking Senator Landrieu and Senator 
Collins for their kind words. I have had the great pleasure of 
working with these distinguished public servants on a broad 
range of issues over the years. As you heard, Senator Landrieu 
and I have collaborated to improve the way our Nation responds 
and rebuilds after a natural disaster strikes. Senator Collins 
and I have worked together to make HUD operate better and on 
many other issues, particularly her great leadership, along 
with Chairman Patty Murray, in making sure that we get our 
heroes off of our streets around this country. They have been 
great partners and I am deeply grateful for them being here 
today and for their leadership and friendship.
    I also want to thank my wife, Liza, and my two sons, Milo 
and Lucas. In public service, the biggest burdens and 
sacrifices often fall on our families. So, I deeply appreciate 
their continued support as I seek to take on this new 
challenge.
    I am also grateful to President Obama for nominating me. I 
continue to be honored and humbled by the confidence he has 
shown in me.
    Finally, I want to thank Members of the Committee and their 
staffs for meeting with me over the last few weeks and for 
sharing your insights. If I am confirmed, I very much look 
forward to continuing these conversations.
    I recognize that now-Secretary Burwell has set a high bar 
for OMB Directors going forward, both with her strong 
leadership and her efforts to maintain solid relationships with 
Congress. If confirmed, I would look forward to picking up 
where Secretary Burwell left off by engaging with you and your 
colleagues to achieve common goals, to meet deadlines, and to 
work with Congress to restore regular order.
    During my time as the Secretary of the Department of 
Housing and Urban Development, I worked tirelessly to ensure 
that the Federal Government is doing its part to help the 
American people secure access to safe and affordable housing. 
Homes are the center of every person's life. They play a key 
role in shaping safe neighborhoods, good schools, solid 
businesses, and, ultimately, a strong economy.
    For the past 5\1/2\ years, HUD has been creative in helping 
families obtain this key part of the American dream, and during 
these tough fiscal times, have done so in a fiscally 
responsible fashion. Working with colleagues across the 
Administration, we have helped millions of families fight off 
foreclosure, reduced the number of veterans experiencing 
homelessness by 24 percent in 3 years, revitalized distressed 
neighborhoods, and helped communities hit by natural disaster 
rebuild stronger than before.
    Through all this work, I have seen firsthand how critical 
the Federal budget process is and how it makes an impact on the 
people we serve. The Federal budget is not just numbers on a 
page. It is a reflection of our values, and it is important to 
our future.
    I believe the President's budget shows a responsible path 
forward for the Nation. It creates jobs and lays a foundation 
for growth by investing in infrastructure, research, and 
manufacturing. It expands opportunity by ensuring health care 
is affordable and reliable, expands access to housing, invests 
in job training and preschool, and provides pro-work tax cuts. 
And, it ensures our long-term fiscal strength by fixing our 
broken immigration system and addressing the primary drivers of 
long-term debt and deficits, health care cost growth, and 
inadequate revenues to meet the needs of our aging population.
    Over the last 5 years, the deficit has been cut in half as 
a share of the economy, the largest sustained period of deficit 
reduction since World War II. Our Nation can continue this 
progress while focusing on the critical goals of accelerating 
economic growth, creating jobs, and expanding opportunity for 
all Americans.
    I would like to briefly outline my priorities, if I am 
confirmed as Director. First, if confirmed, I look forward to 
working with Congress to continue the important progress made 
on the budget over the past year. The Bipartisan Budget Act and 
Consolidated Appropriations Act for Fiscal Year 2014 were good 
first steps in moving beyond the manufactured crises of the 
past few years and providing some measure of relief from the 
damaging cuts caused by sequestration. But, there is more that 
we must do to invest in our economy, create jobs, promote 
national security, while continuing to promote fiscal stability 
by addressing the key drivers of our long-term debt and 
deficits.
    Second, I want to acknowledge the critical management side 
of OMB's responsibilities. I would work to advance the 
President's Management Agenda, which is focused on making the 
Federal Government more efficient, effective, and supportive of 
economic growth. Under the President's leadership, the 
Administration is working to improve key citizen and business-
facing transactions with Federal agencies. It is working to 
increase the quality and value in core government operations 
and enhance productivity to achieve cost savings to the 
American taxpayer. It is working to open Federal Government 
assets to the public, including data from Federally funded 
research, to create a platform for innovation and job creation. 
And, it is working to unlock the potential of the Federal 
workforce and build the workforce we need for tomorrow by 
investing in training and ensuring agencies can hire the best 
talent from all segments of society.
    Third, it is critical that OMB's Office of Information and 
Regulatory Affairs (OIRA) continue the Administration's 
regulatory focus on maintaining a balance between protecting 
the health, welfare, and safety of Americans, and promoting 
economic growth, job creation, competitiveness, and innovation. 
And, I would seek to continue the President's successful 
regulatory retrospective review, or regulatory look-back, where 
the Administration is streamlining, modifying, or repealing 
regulations to reduce unnecessary costs and burdens.
    Finally, I want to note what a particular honor it would be 
for me to serve as the head of OMB. OMB plays a unique and 
critical role in the functioning of the Federal Government. As 
HUD Secretary, I work closely with OMB's leadership, including 
Deputy Directors Brian Deese and Beth Cobert, and I have seen 
the outstanding contributions made by the talented men and 
women who work throughout this institution.
    To give just one example, in my role as the Chair of the 
Hurricane Sandy Rebuilding Task Force, I saw the tireless 
efforts made by OMB staff, many of them long-serving career 
employees, as they worked literally day and night for weeks and 
even months to ensure that disaster relief was delivered 
swiftly, fairly, and responsibly. It was OMB employees who had 
the expertise, knowledge, and governmentwide perspective to 
help coordinate the effort and make sure it was done right.
    Again, I want to thank the President for giving me this 
opportunity and the Committee for considering my nomination. I 
look forward to answering any questions you may have.
    Chairman Carper. Thanks so much for that statement.
    I need to start our questioning today with three standard 
questions we ask of all nominees.
    Is there anything you are aware of in your background that 
might present a conflict of interest with the duties of the 
office to which you have been nominated?
    Secretary Donovan. No, there is not.
    Chairman Carper. All right. No. 2, do you know of anything, 
personal or otherwise, that would in any way prevent you from 
fully and honorably discharging the responsibilities of the 
office to which you have been nominated?
    Secretary Donovan. No, I do not.
    Chairman Carper. No. 3, do you agree, without reservation, 
to respond to any reasonable summons to appear and testify 
before any duly constituted Committee of Congress if you are 
confirmed?
    Secretary Donovan. I agree.
    Chairman Carper. All right. I want to go back to that first 
question, about conflict of interest, and I want you to talk 
about any potential conflict of interest that might flow from 
your 12-year-old son, Lucas, performing in a rock-and-roll band 
with Jay Carney's son and Michael Froman's son. I think they 
are called Twenty20. Is there a conflict of interest there, any 
that you can think of?
    Secretary Donovan. I promise not to depend too much on my 
retirement being dependent on his success in his rock band. 
[Laughter.]
    Chairman Carper. All right. Milo there will probably be 
managing the band, and we look forward to great things from all 
of you.
    I just want to say, Dr. Coburn and others have mentioned 
the sacrifice that families make on behalf of their moms or 
dads who serve in these positions. Your sacrifice begins today 
by giving up a part of a day in school, so thank you for your 
willingness to do that and to join us here.
    Let us talk about Sylvia Mathews Burwell. I understand you 
have known her for a while. Where did you all meet?
    Secretary Donovan. We met in our dorm, freshman year at 
college, actually.
    Chairman Carper. No kidding.
    Secretary Donovan. We have been friends ever since.
    Chairman Carper. OK. Why do you think she has been just 
enormously successful, highly regarded, highly respected here 
and really kind of taken the place by storm over the last year 
or so? Why do you think that has been the case?
    Secretary Donovan. Well, from the thank you note that I got 
from her freshman year when we actually went on a double-date 
together, through my long experience with her since, I would 
say, first and foremost, something that Dr. Coburn really 
focused on is her responsiveness and outreach. And, one of the 
key things that I would want to do, if confirmed, is to 
continue in what I think she has built as a very strong set of 
relationships with the Committee and more broadly with 
Congress.
    I also think when she came in, she was very focused on 
making sure, not just that the ``M'' side of OMB was not 
forgotten, but that, in fact, the ``M'' side and the ``B'' wide 
of OMB worked very closely together. I believe very deeply, as 
I think you have heard a little bit about today--I often say to 
my team, too often, we do not know what success looks like in 
Government, and by measuring, setting clear goals, measuring 
those goals, I believe we not only can achieve success in 
achieving the ends of Government, we can also save money for 
taxpayers, and that is really, for me, where we have to make 
sure the ``M'' and the ``B'' in OMB are connecting.
    And, finally, I would say that Sylvia is beloved within the 
institution of OMB, despite a short time there, because she has 
really focused on building the institution. To be frank, if I 
am confirmed, 2\1/2\ years is not a long time, and I do believe 
that it is absolutely critical to make sure that OMB is adding 
to the terrific team that is there with the best and the 
brightest and to making sure that the institution is strong, 
particularly among the career staff that is there. So, not just 
managing across government, but managing OMB itself as an 
institution is something that she has focused on and I would 
want to continue.
    Chairman Carper. Good. When you and I met, we talked a 
little bit about regulations. This Administration, every one of 
them, put out a lot of regulations and OMB plays a critical 
role in that process. We probably have a lot of regulations 
that are still in effect that maybe are not worth much and we 
ought to do something about them. Cass Sunstein in his earlier 
role as the head of OIRA within OMB sought to do that. Tell us 
a little about your approach to the regulatory side----
    Secretary Donovan. Yes.
    Chairman Carper [continuing]. Of OMB and how we--what kind 
of look-backs you would be interested in, updating regulations' 
timeliness, that sort of thing.
    Secretary Donovan. I am glad you raised this, Mr. Chairman, 
because it really is one of the most important functions that 
OMB plays through OIRA. And, I think, we absolutely have to be 
focused on a common sense balance between protecting the air 
that we breathe, the water that we drink, the safety of the 
American people, with ensuring that our regulatory framework 
supports economic growth, more jobs, and building as strong an 
economy as we possibly can.
    I mentioned the regulatory look-back in my remarks. I think 
that is a very good example of how we can work together on a 
bipartisan basis to make our regulatory system work more 
effectively. And, I thought maybe I would just give you a 
couple examples of work we have been doing at HUD. Obviously, 
given the crisis----
    Chairman Carper. Just make them fairly brief----
    Secretary Donovan. OK.
    Chairman Carper [continuing]. Because I have one more 
question.
    Secretary Donovan. I am happy to do that. So, within the 
mortgage world, obviously, this has been a major area of focus, 
and as Senator Tester knows from his service on the Banking 
Committee, he and a number of other members have expressed an 
interest in making sure that we are not necessarily treating 
our community banks and small lenders in the same way we treat 
the largest banks, that we have to have a real focus on small 
business. And, so, one of the rules that we have issued 
recently streamlined the way that we oversee smaller 
institutions, the reporting requirements we have for them 
within the FHA program. I think that is a very good example.
    Another example I would give you is we have adopted e-
signatures in FHA. We are one of the first agencies across the 
Federal Government to do that. And what I have heard 
consistently from citizens and small lenders is it has made 
their process not only less expensive and faster, but it has 
allowed consumers to sit at their kitchen table and read those 
stack of documents we usually get at mortgage closings to make 
those simpler, more accessible, but also give families time to 
really look at them rather than being rushed at the closing 
table.
    So, those are two examples at HUD of the kinds of things 
that I think we really need to do more of.
    Chairman Carper. Good. Thanks.
    Let us go back to the ``M'' in OMB and talk a little bit 
about management. In the Navy, when you are trying to do 
something really hard, what we used to say is like trying to 
turn an aircraft carrier, you need the whole crew in order to 
be able to do that, and you are going to need not just the crew 
at OMB to actually affect and implement the President's 
management budget. But, talk to us about how you plan to 
network, to build a sense of team and coordinate working with 
us, with the Government Accountability Office (GAO), working 
with the Inspector Generals and others that can help implement 
a thoughtful management agenda.
    Secretary Donovan. I think this is a really important area 
in the sense that what I saw in local government, some of my 
frustrations, frankly, with the Federal Government is that, too 
often as a Federal Government, we operate in our silos of 
agencies and we do not necessarily connect with other agencies, 
with local government, and with Congress effectively or the 
private sector.
    And so I think one of the hallmarks of the work that I have 
tried to do at HUD, whether it is on the mortgage crisis, 
whether it is in our response to natural disasters, whether it 
is on homelessness, where health is a critical savings we 
actually get out of the work that we do on homelessness, with 
education, with the Department of Energy, I have built strong 
cross-governmental relationships where we have actually set 
shared goals and we have looked to achieve those in a 
coordinated way.
    And so one of the reasons I am excited about taking on OMB, 
if I am concerned, is it occupies a special position in working 
to coordinate and make sure that we are working as one 
government as effectively as possible.
    Chairman Carper. All right. Thanks very much. Dr. Coburn.
    Senator Coburn. Thank you.
    One of the things that has not been able to be achieved yet 
is a consensus between the Administration and Congress on 
tackling the big elephant in the room, which is deficit 
reduction, in a way that will solve the problem into the years. 
We have a $17.5 trillion debt, predicted to go back to a 
trillion dollars a year deficit in the next few years. And OMB 
plays a critical role for the Administration, but also for the 
country.
    So, my first question is, I have worked very closely with 
the Government Accountability Office. I recommended that you 
spend time with GAO. When you see the last 4 years' reports 
from GAO on duplication--and, by the way, the Administration 
has done a fairly good job at outlining some of those things in 
the annual budgets--what is your level of frustration when you 
see that, according to my staff's calculation, we have about 
$250 billion a year in duplication with minimal metrics 
outlined by the GAO? What is the position within the 
Administration in terms of addressing that, in terms of the 
real leadership of asking Congress, fix this?
    Secretary Donovan. Well, Senator, you and I spoke a little 
bit about this and it is an area where I think we have made 
some real progress. Just to give you one example, the 
President's budget for 2015 outlines about 130 programs where 
we can achieve cuts, consolidations, other types of savings, 
for a total of about $17 billion.
    Certainly, my experience at HUD has been that there is a 
lot that we can do. One of the primary areas I focused on as 
soon as I arrived, we have 13 different rental assistance 
programs at HUD, and some of that makes sense. We have a 
program for seniors, a program for people with disabilities 
that have logical differences. But, too often, those 
differences are just history and circumstance rather than being 
logical.
    So, I started an effort called the Rental Assistance 
Demonstration, which is already about two-thirds of the way 
consolidating older, frankly, obsolete programs into a single 
program, and we have been working with Congress, and, in fact, 
in our Senate budget--Senator Collins really should get some 
credit for this--we have been able to start to consolidate 
about one-fifth of all public housing into the Section 8 
program.
    And, so, I think there is more work that we can do with 
executive authority. To be frank, Senator, I think, too often, 
what is hard is achieving bipartisan consensus about whether it 
is reducing the number of offices that we have around the 
country or reducing programs. And, so, I do think we need to 
find ways, and I would love to talk to you further about it, 
get suggestions, on ways that we could drive not just ideas 
about consolidation, but get to actual bipartisan consensus 
where we can achieve legislative reforms, both in the budget 
and otherwise, as well.
    Senator Coburn. My understanding is OMB has the power to 
require agencies to put metrics on programs. Do you agree with 
that?
    Secretary Donovan. Yes, I do, and, in fact, I would 
compliment the Committee. The Government Performance and 
Results Act (GPRA) Modernization has been a very important 
tool. I am a particularly big believer, referencing something I 
said earlier, in cross-agency goals.
    Senator Coburn. Fine.
    Secretary Donovan. That is the reason we have been able to 
achieve such success on veterans' homelessness, is because we 
built a data system that was shared between HUD and the 
Veterans Administration (VA) and we meet on a very regular 
basis with the most senior leadership to really look at the 
progress we are achieving, not just nationally, but place by 
place, to see what is working and what is not.
    Senator Coburn. But, the way to find out if things are 
working is to have metrics on the things, which you testified 
in your opening statement----
    Secretary Donovan. Absolutely.
    Senator Coburn [continuing]. And we agree with that. So, I 
guess, my question for you is, are you committed to trying to 
implement that across the government through both the GPRA 
Modernization Act as well as your authority as OMB Director, 
because if you cannot measure these programs, you cannot manage 
them effectively and we will not know. And, that is one of 
GAO's biggest recommendations, is there are no metrics on most 
of the programs. We do not know what we are doing.
    Secretary Donovan. I could not agree more. And, in fact, 
not just in the last 5\1/2\ years, but my 5 years working under 
Mayor Michael Bloomberg in New York, as you know, the CompStat 
process was started at the Police Department in New York City.
    Senator Coburn. Yes.
    Secretary Donovan. And, I created, both in my agency in New 
York and here at HUD, an Office of Strategic Planning and 
Management whose specific responsibility it was to create and 
track those metrics across the most critical programs and, 
frankly, to do process improvement work, as well, because it is 
one thing to identify the problem. You have then got to fix it, 
and having the capacity to actually have a team that can go in, 
almost like an internal consultant within the agency to do 
that, I think, is absolutely critical.
    And to be frank, many people--this is not an area that they 
think is one of the most interesting or sort of most noteworthy 
around--I am not only interested in doing this, I am actually 
passionate about it and I drive my team crazy at HUD in terms 
of my wanting to understand the numbers.
    Senator Coburn. Congress and this Committee recently passed 
the Digital Accountability and Transparency Act (DATA) and it 
has some deference to the Defense Department (DOD). It gives 
them some extra time. But, one of the things that is going to 
be required by that is the head of OMB to keep the commitment 
that we are going to meet the goals of that legislation. Will 
you state before this Committee that you will do everything in 
your power to keep the commitment that the DATA Act timelines 
are fulfilled?
    Secretary Donovan. Senator, I am committed to working with 
you very closely to make sure that we can achieve those goals 
of the DATA Act. I am getting up to speed on this. I know there 
was lots of bipartisan work on that bill. I know that OMB is 
currently trying to understand with agencies what system 
changes, what investments are going to be required. So, you 
have my commitment to come back very quickly, if I am 
confirmed, and work with you to meet those timelines.
    Senator Coburn. You just made a statement that shows what 
kind of trouble we are in. The agencies do not have that 
information now to comply with the DATA Act. And, the very fact 
that they have to get up to speed to comply tells you that they 
do not know what they doing in terms of management because they 
do not know where they are spending the money. This is pretty 
straightforward. Where did you spend your money? It is a pretty 
straightforward bill. And the very fact, across the government, 
agencies do not know where they are spending their money and do 
not aggregate those to look at it so that they could comply 
with the DATA Act is the very reason we wanted the DATA Act in 
the first place, is to force that consolidation of data so that 
they will actually know what they are doing and where they are 
spending the money.
    In your statement, you mentioned investing in our economy. 
How would you reconcile additional spending with the need for 
additional deficit reduction, given the fact that the 
Congressional Budget Office (CBO) has a point line mainly based 
on the entitlement programs, the mandatory programs. In your 
own mind, outside of what the Administration policy would be--
how do you reconcile those two positions?
    Secretary Donovan. Senator, I think about this in terms of 
the work that I have done on housing, which is obviously one of 
the most significant drivers of our economy. What we have to 
do, and at times it can be a difficult balance, but it is 
absolutely critical, there are critical functions that we need 
to invest in. We have not just a fiscal deficit, we have 
deficits in our infrastructure, we have deficits in our 
educational system, we have deficits in the investments we are 
making in research and development, which we know contribute in 
the long run to the economic competitiveness of our country and 
ultimately to economic growth.
    We have to find ways to invest in those critical things 
while at the same time dealing with what are really, as I 
mentioned in my statement, the two primary drivers of our long-
term deficits. Our health care costs have grown more quickly 
than we have been able to control in our budget, and, at the 
same time, we have a wave--the Baby Boom generation--that will 
be adding to, given the commitments we have to seniors, to 
those long-term costs. And so, we have to find a bipartisan way 
to make those critical investments in the medium-term while at 
the same time dealing with those long-term drivers of the 
deficit.
    Senator Coburn. OK. I am past my time.
    Chairman Carper. OK. I am just going to run through the 
list. This is in order of appearance. Senator Enzi, you are 
next, followed by Senator Johnson, Senator Begich, Senator 
Landrieu, Senator Tester, Senator Baldwin, Senator Pryor, 
Senator McCain, and then, after we have lunch, we will probably 
get around to Senator Portman, or maybe even before lunch.
    All right. Michael, you are up. Please proceed.

               OPENING STATEMENT OF SENATOR ENZI

    Senator Enzi. Thank you, Mr. Chairman, and thank you, Mr. 
Donovan, for being here and testifying.
    I am kind of curious as to why you would want to switch 
from an agency that you already have good control over and a 
lot of potential for solving some big problems that are the 
drivers for the economy in the United States to move over to 
OMB and start over again.
    Secretary Donovan. Other than the fact that I love data and 
management, it is a chance to work on the big challenges that 
face my kids that are sitting right behind me. And, as I often 
say, public service is tough work. I do not necessarily like it 
every day, but I love it every day and it is a challenge that I 
want to take on.
    Senator Enzi. Well, I appreciate your being willing to do 
that, and I am assuming that you are going to make it through 
the process fine and want to give you----
    Secretary Donovan. I appreciate your confidence.
    Senator Enzi. I want to give you a small task to start 
with. [Laughter.]
    A huge priority for my State is something called Abandoned 
Mine Land Money. This was a program that was started when they 
started mining coal in the Powder River Basin. Of course, there 
has been coal mining going on all over the United States for 
years and years. Our State agreed, rather than taxing and 
keeping it all for ourselves, that we would allow a Federal tax 
and half of that would go into a trust fund for Wyoming and the 
other half would go for reclamation east of the Mississippi 
River, where they did not have nearly as much mining going on.
    When I got to the Senate, no money had been given out of 
that trust fund yet and it had grown to a substantial number, 
and Senator Kennedy, in a bipartisan way, helped me to get that 
released. It took a super-majority to do it. We got the backlog 
released over a 7-year period.
    But, right now, the Office of Surface Mining (OSM) is 
reinterpreting that and determining that we do not get all of 
that back pay. So, it is something that I would like for you to 
look into and to help me work on, because I like numbers, too, 
and I am keeping track of this, and so I know that it was 
supposed to be given to us over a 7-year period. Five of the 
years passed, and the balance that is still owed us, without 
interest, is $165,401,519---- [Laughter.]
    Which might not sound like a lot in the Federal scheme of 
things, but for a small population State like Wyoming, it is a 
real big thing. So, I hope you can commit to me to work with 
OSM to get a correct interpretation on how the money is to be 
distributed so that this trust fund can truly be a trust fund.
    Secretary Donovan. Senator, should I be confirmed, this is 
an issue I look forward to getting up to speed on it and seeing 
what I can do to help resolve it.
    Senator Enzi. Thank you. Now, on the broader scale, and 
Senator Coburn started on this and I want to pursue it a little 
bit more, and that is the $17 trillion in debt that we have and 
how we are going to get some kind of control over the spending 
that we are doing, and you are in a prime position to do that. 
Do you have any kind of an idea of a plan where we can start to 
get toward a balanced budget and perhaps a mechanism for 
actually doing some prioritization? That is what Senator Coburn 
was talking about earlier, the GPRA process. Do you have any 
ideas for how to implement those?
    Secretary Donovan. Generally speaking, Senator, what I 
would say is I think we have begun to make some bipartisan 
progress on the deficit. Over the last few years, we have seen 
the deficit coming down faster than at any time since World War 
II. But, there is more that needs to be done, and I think, in 
particular, if you look at the President's budget, over the 
budget window, it would bring down deficits as a share of the 
gross domestic product (GDP) from nearly 4 percent to about 1.6 
percent. So, I think there are some important things to build 
on there.
    In particular, I think the $400 billion in savings that are 
contained in the budget in Medicare and Medicaid are critically 
important. I would also point to places where we can really 
look at wasteful spending that we have in our tax code through 
closing loopholes and other efforts. I think those are a very 
good beginning to a longer-term solution.
    Senator Enzi. Well, I appreciate those comments. I hope 
that you will look at the duplication that there is out there 
and maybe get some kind of a system for prioritization.
    Wyoming was faced with needing to make a 6-percent cut, 
partly because of the money that I just mentioned a little bit 
ago, but the Governor came up with a mechanism. If you just ask 
agencies, what is your top priority, or can you give me a 
priority, everything is a top priority. So, he asked them to 
prepare lists showing what they would cut if they had to cut 2 
percent, 4 percent, 6 percent, and 8 percent, and then he could 
look at the lists. And if it showed up on all four, it was one 
they were probably willing to cut. But, if it only showed up on 
the 8 percent list, it was probably pretty important.
    You are welcome to that idea from one of the laboratories 
of the States, which in this case happens to come from Wyoming, 
but I think they have a lot of ideas out there that will work.
    I know that you headed up the recovery effort following 
Hurricane Sandy. In that process, did you discover any waste or 
inefficiencies that we ought to be correcting?
    Secretary Donovan. And, I would share the frustrations of, 
I think, many of your colleagues in seeing places where we can 
speed up and improve the way government works, and I would 
actually just recognize Senator Landrieu, who was very focused 
on working after Hurricane Katrina to rationalize, simplify, 
streamline the approval processes, and I would say particularly 
around the environmental review process.
    So, for example, when we worked with Congress to pass the 
Sandy Supplemental Appropriations Bill, we included a provision 
that allowed any community that was using multiple sources of 
Federal dollars to rely on one single environmental review. Too 
often, we end up having to require multiple agencies to do 
environmental reviews for a single project, and that is 
obviously one example, but one very expensive example, of an 
inefficiency.
    And, I would say I am very encouraged by the bipartisan 
work that has been done in the Committee around infrastructure 
permitting more broadly. That is something, given how much 
investment is going into infrastructure after Hurricane Sandy, 
we created a regional working group with every critical Federal 
agency, with State and local government, to dramatically 
streamline how we are going to get those large infrastructure 
projects done. And, as I think you know, there has been great 
work that the Committee has done with OMB and the Department of 
Transportation to implement that around high-priority 
infrastructure projects.
    The best example of that is the Tappan Zee Bridge in my 
home State of New York, where we took a process that would have 
been probably 3 to 5 years to get the permitting done and 
dramatically cut that to under 2 years.
    Senator Enzi. Thank you, and my time has expired.
    Chairman Carper. Thanks, Senator Enzi.
    Senator Johnson, and then Senator Begich.

              OPENING STATEMENT OF SENATOR JOHNSON

    Senator Johnson. Thank you, Mr. Chairman.
    Secretary Donovan, welcome.
    Secretary Donovan. Nice to see you, Senator.
    Senator Johnson. I appreciate you spending the time to meet 
in my office and I appreciate your willingness to serve. It is 
a big job, and I agree with you, OMB is right at the center of 
addressing so many challenges we face in this Nation.
    Let me start first by getting your take, and assessment of 
where we are economically. In terms of recoveries after big 
recessions, our post-World War II average after 19 quarters--
and that is how far we are into the recovery now, 19 quarters--
economies have, on average, recovered by about 23 percent, in 
other words, grown by 23 percent. After the 1980 recession, 
during the Ronald Reagan recovery, our economy had grown at 
25.6 percent. Following the Great Recession here under 
President Obama, our economy is growing at 10.8 percent. So, we 
have not even achieved half the average growth of post-World 
War II recoveries. Do you have any explanation of why do you 
think that is?
    Secretary Donovan. So, it is interesting you asked this, 
Senator. We actually spent some time with the economic team and 
the President just yesterday on this issue and a range of 
factors. The biggest factor, most economists agree, is actually 
the demographic changes that we are undergoing, and that 
accounts for about half of the difference between this recovery 
and other historical ones.
    Other factors that are very important, the debt overhang 
that we have from this crisis. Financial crises, in general, 
are slower to recover from. We see that across the world in the 
performance of world economies relative--the United States is 
actually relatively doing better, but that has made it a slow 
recovery overall.
    The dramatic cuts in government spending, local government 
and State government spending, is actually a significant 
contributor, as well. There are a few other factors, but----
    Senator Johnson. Are you saying the Federal Government has 
cut spending?
    Secretary Donovan. There were reductions in State and local 
government that were very unusual.
    Senator Johnson. OK, but you are working for the Federal 
Government. We have not cut spending in the Federal Government, 
correct? We have not increased it as much as people wanted, but 
it has actually been flat for a couple years. We have not cut 
anything, right?
    Secretary Donovan. As a share of our economy, which is the 
traditional way that budget experts look at this, we have 
reduced discretionary spending significantly relative to the 
expectations we----
    Senator Johnson. But, as a percent share of our economy, 
last year, we spent 20.8 percent, and for 50 years, the average 
is about 20.2 percent, so as a percent share of our economy, we 
are spending a little bit more than average. And, that has 
actually come down from a high of close to 25 percent early in 
the Administration, correct?
    Secretary Donovan. In terms of overall outlays, you are 
talking about, Senator----
    Senator Johnson. Yes, the Federal Government.
    Secretary Donovan. Again, our estimates are that we have 
reduced overall the deficit, and this is on a bipartisan basis, 
about $3 trillion. Most of that has come from reductions in 
spending relative to what our expectations were.
    Senator Johnson. You talked about investing in our economy. 
Can you give me your opinion, who is the better allocator of 
capital, the private sector or government?
    Secretary Donovan. I would answer, the private sector.
    Senator Johnson. OK. All things being equal, is it good to 
have low-cost energy if you want to manufacture, if you want to 
get your economy going, or high-cost energy?
    Secretary Donovan. Low-cost energy, and, in fact, one of 
the bright spots in our recovery has been that we have 
significantly increased our production of energy domestically. 
I think, as you know, as we talked about the other day, we are 
now actually producing more here in this country than we are 
importing from overseas at this point. We have seen a doubling 
of our renewable generation, and particularly for 
manufacturers, an area you know very well, the production of 
natural gas has been a huge boost----
    Senator Johnson. As a candidate, President Obama did say 
that because of his cap and trade proposal, electricity rates 
would necessarily skyrocket, and now we are trying to, through 
regulatory agencies, enact those cap and trade proposals or 
something similar to that. Do you think that is a good thing or 
a bad thing?
    Secretary Donovan. Senator, I am not an expert. I assume 
you are referring to the new rule----
    Senator Johnson. Right.
    Secretary Donovan [continuing]. That has been issued. I am 
not an expert in talking great detail about that----
    Senator Johnson. But, in general, if government regulations 
or policy drives up the cost of energy, that is not good for 
economic growth, is it?
    Secretary Donovan. Generally, low energy costs are good. As 
I said, the policies under this Administration have actually 
led to a significant expansion of domestic energy production, a 
doubling of renewables which is one of the strengths in the 
economy that I hear out there as I talk to the private sector.
    Senator Johnson. Let us talk about it. Let us talk about 
allocation of capital and government investing, because I hear 
this word ``investing'' all the time, and generally, it means 
spending. But, President Obama in his acceptance speech said he 
would invest $150 billion over the next 10 years, the next 
decade, in affordable renewable sources of energy, wind power, 
solar power, and the next generation of biofuels, an investment 
that will lead to new industries and five million new jobs that 
pay well.
    There have been a number of reports, the most recent one 
from the Institute for Energy Research, that says that we have 
spent about $26 billion, and 17.5 percent of that $150 billion 
investment. They calculate we have produced about 2,300 jobs, 
about 0.046 percent of the five million jobs.
    You mentioned you have to measure your goals. Do you think 
that was an achievable goal? Do you think it was a wise goal? 
Do you think that was a wise investment? And, do you think it 
worked?
    Secretary Donovan. Senator, to be honest, I am not familiar 
with the report that you are quoting from. I would be happy to 
look at it and tell you my assessment. Should I be confirmed, I 
would love to spend more time talking to you about it, but I 
cannot give you an answer about the report----
    Senator Johnson. The point I am making is we have spent 
about $26 billion on green energy jobs, created about 2,300 
jobs at a cost of about $11.5 million per job. And, from my 
standpoint, if you really want to take a look at what is 
happening in terms of this economy and why it is not growing as 
rapidly as it really should be is the onerous nature of the 
size of government, a regulatory environment that, according to 
the Competitive Enterprise Institute, cost $1.8 trillion per 
year to comply with, and OMB is right at the center of trying 
to rein in that regulatory burden. I wish you all the best luck 
in trying to do just that. Thank you.
    Secretary Donovan. Thank you.
    Chairman Carper. Senator Johnson, thanks for those 
questions.
    Senator Begich, you are next, then Senator Landrieu and 
Senator Tester.

              OPENING STATEMENT OF SENATOR BEGICH

    Senator Begich. Thank you very much, and thank you for 
being here and appreciate you being here.
    I am going to actually have some questions, but I am going 
to wrap back around at the end, if I have time, on the energy 
issue----
    Secretary Donovan. Yes.
    Senator Begich [continuing]. Because I come from a State 
that understands energy, not only from an oil and gas 
perspective, but we also will be 50 percent renewable energy 
for State consumption by 2025. No other State will meet us in 
that kind of percentage. We are a leader in this area. So, I am 
going to hold that for a second, but I want to be specific on 
some Alaska issues.
    As we talked about, one was the Transportation Security 
Administration (TSA) and the current recent proposal to 
eliminate the definition of round-trip in assessing Passenger 
Security Fees. This, in my view, exceeds the Congressional 
intention which was laid out in the Budget Control Act. And, 
what this means for Alaska, as you know, you have been there. 
You know it is not one flight and you land. It is multiple 
flights. And, because of that, it adds additional burden, 
especially in our rural areas, on the cost.
    And, I would hope and ask if you would be willing to take a 
look at this, because I think the intent of Congress is not 
what I think now the regulation is attempting to do, which is 
basically grab every dime they can from every time you stop. 
And, in Alaska, in a rural State, and, I can tell you, I am 
sure from Senator Tester's State, Montana has the same 
situation, that I think this would be a concern, and would you 
be willing to kind of reexamine this and work with us to make 
sure this does not do damage to rural travel and the ability 
for people to afford to move from one place to the other.
    Secretary Donovan. Senator, as you mentioned, I have spent 
time with you, many others on the Committee, seeing the needs 
in rural communities, in Native American communities, and 
should I be confirmed, I would be happy to sit down with you, 
talk more about this, and see if there is a resolution we could 
reach.
    Senator Begich. Fantastic, and especially, 80 percent of 
our communities are not accessible by road, so the air is the 
road for us, so it is important.
    Secretary Donovan. Hooper Bay, good example.
    Senator Begich. Hooper Bay is a great example. Thank you 
for, again, coming up.
    Another one which you talked about was the Department of 
Labor's (DOL) recent proposed change to the Employment 
Retirement Security Act, or their view of what they have the 
role and responsibility there, which would have a direct impact 
to 401(k)'s and the Individual Retirement Accounts (IRAs) and 
how they are managed and how average, everyday Americans 
utilize their broker or their individual manager of those 
accounts. And, it seems they are chasing a problem that does 
not exist. This is now under the Securities and Exchange 
Commission (SEC) and they manage it well. I am not getting a 
lot of complaints about the people they are working with, but 
for some reason, the Department of Labor sees this as an 
opportunity, which I do not know what that means. It just seems 
to me another layer of bureaucracy that would impact smaller 
investors who invest in an IRA or 401(k).
    And, again, we talked about this, and again, I just want to 
put on the record, are you willing to take a look at that and 
see if there is an opportunity to understand and see if maybe 
there is an overreach by the Department of Labor here.
    Secretary Donovan. If I am confirmed, Senator, I would look 
forward to sitting down to talk to you more about it.
    Senator Begich. Fantastic. The other one, and we have been 
doing a lot of work in my Subcommittee on Emergency Management, 
Intergovernmental Relations, and the District of Columbia here 
on getting agencies to look at how monies can be utilized, and 
there was some discussion here about post-Sandy and some of the 
review we have done through my Subcommittee here on trying to 
make sure agencies have flexibility on using their funds, not 
just for response, but mitigation, which seems to be the better 
use long-term. I know there is a short-term always, disaster, 
we have to deal with it----
    Secretary Donovan. Yes.
    Senator Begich [continuing]. But, really, the front end is 
the more important, mitigation. And, OMB has a huge role here 
by policy guidance in how agencies can be more flexible.
    Based on your experience on Hurricane Sandy and your work 
that you have now, is this an area that you will look at and 
try to help us understand what we can do to make a better use 
of our Federal resource here?
    Secretary Donovan. Senator, I think you put your finger on 
something that is enormously critical. And, just to sort of 
boil it all down, we now have very good evidence that for every 
dollar we spend on mitigation, on making communities safer, we 
save four dollars the next time a storm comes. So, this not 
only saves lives, it saves taxpayer dollars, and I think there 
are a range of things, not only that we can do, that we are 
doing, much of it coming out of the work that we did on the 
Sandy Recovery Task Force, starting with how do we get families 
and communities the best information about what risks are.
    I think the Federal Government is in a unique position to 
have the best science available for communities, and we have 
done that in transparent ways, creating websites that a family 
can go and click and figure out what the risk is on their 
street, to their home, 50, 100 years into the future, but also, 
frankly, working to figure out where the government can get out 
of the way on this. At times, we found that many of the Federal 
agencies had different standards about how we should rebuild, 
and so we created for Hurricane Sandy a single, consistent 
standard that cut across all the rebuilding programs, as much 
as we could under existing laws, and that just makes life a lot 
easier as a family is rebuilding, not have to understand what 
four different agencies require, but actually that there is a 
single, simple standard.
    Senator Begich. Very good. We will work with you in that 
arena, because I think it is an important opportunity.
    The other last thing that I will do--if I have seconds 
left, I will say something about the energy--but, I do want to 
have a conversation at some point with you in regards to 
revenue sharing on the Outer Continental Shelf. The Gulf States 
receive it. Alaska does not. We have legislation pending. OMB 
is always concerned, because they always want the money, but we 
also know the impact on Outer Continental Shelf development of 
oil and gas is felt by communities that are attached to it. 
And, so, we will work with you on that. I just more want to put 
it on your radar screen. I did not have time the last time when 
we talked. I forgot to kind of put that on the list. I think it 
is pretty important not only for Alaska, but other Coastal 
States that are dealing with Outer Continental Shelf oil and 
gas development.
    Let me, if I can--and I just will make a general comment. 
You do not necessarily need to respond. I understand my 
colleague's concern about investment, but, when you think about 
the military who invested in the Internet, I am sure it was not 
a moneymaker back then. They probably were investing because 
they had to because of communication capacity and new 
technology. Well, today, it spawned enormous amounts of 
business.
    Renewable and alternative energy, as I said, for Alaska, we 
are an oil and gas State, but we also are going to be a 50 
percent renewable energy by 2025. The State of Alaska has put, 
literally, hundreds of millions of dollars in this investment 
because we know it is the right thing, because the more you get 
off of energy from foreign countries that hate us means we get 
more money staying in our economy here, no matter what the mix 
of energy profile is.
    And, so, when I hear these arguments that it is almost, 
like, a waste of investment, it is not a waste of investment if 
we are turning around, not spending money with people who hate 
us, running two trillion-dollar wars trying to defend oil and 
gas issues overseas. It makes sense long-term. So, I would love 
to have--I am using you as a conduit here, but I would love to 
have that debate, because we spend a lot of money, a lot of 
lives, protecting oil and gas and energy sources around the 
world when the more we diversify our base here, the better off 
it is. And, it does produce jobs. It produces opportunity and 
new innovation.
    So, I thank you for your time. Thank you for allowing me to 
rant there for a minute. Thank you, Mr. Chairman.
    Secretary Donovan. Thank you, Senator.
    Chairman Carper. Thank you for serving as a conduit for 
Senator Begich and others.
    All right. Senator Landrieu is next. She has stepped out. 
Senator Tester, and then Senator Baldwin.

              OPENING STATEMENT OF SENATOR TESTER

    Senator Tester. Thank you, Mr. Chairman.
    Chairman Carper. Senator Tester.
    Senator Tester. Thank you, Mr. Chairman, and I want to 
thank you for being here today, Shaun, and it is great to see 
your family.
    Secretary Donovan. Thank you.
    Senator Tester. I just want to echo what some have said 
today, and that is I appreciate your service, but I really 
appreciate your family sharing you with us. You are one of the 
smart guys around here, and I do not mean that in the negative 
sense. I mean it in a positive sense. [Laughter.]
    And, I think you have vision and I think we are blessed to 
have you as a part of the Administration, so thank you very 
much.
    Secretary Donovan. Senator, thank you. I appreciate it.
    Senator Tester. I want to talk about duplication for a 
second because I think it is one of those things that 
frustrates all of us, but sometimes we are the ones that create 
it. Now, let me give you an example, and these are all programs 
I love.
    You are the Secretary of HUD that deals with housing. We 
have a housing program in the U.S. Department of Agriculture 
(USDA). We have a housing program in VA. From my perspective, I 
am a rural guy, so USDA is a good thing, and I love veterans, 
and so the VA is a good thing. But, the truth is, if we want 
true accountability, it ought to be consolidated under one lid.
    How do we do that, and how do you encourage--or, you can 
pick another one, too. There are more egregious ones out there 
than housing. But, how do you, as OMB Director, how do you get 
us to a point where you can impact the duplication and impact 
Congress to reducing duplication?
    Secretary Donovan. Well, Senator, let me take an example 
that we have, and I mentioned earlier 13 different rental 
assistance programs at HUD. We have actually worked with our 
Appropriations Committee and have started to make real 
progress.
    Another example is on homelessness. We actually worked with 
GAO. They came to us with a report that looked at homelessness 
programs across the Federal Government, and we agreed. We have 
an Interagency Council on Homelessness, 19 different agencies 
represented. We have very clear metrics and goals for what we 
are trying to achieve, and because of that, this is where I 
think OMB can be very helpful in leading measuring success and 
being able to say not just there are too many programs, but 
which are the programs that are actually achieving success.
    What they found was that at HUD, the homelessness programs 
were actually more integrated, and working with Congress, we 
actually got some streamlining through the Homeless Emergency 
Assistance and Rapid Transition to Housing (HEARTH) Act of our 
homeless programs. But, there was a food program at the Federal 
Emergency Management Agency (FEMA), an emergency food program, 
that was basically going to shelters. It was not just being 
used for food, but that was the primary, and their 
recommendation was it is not as effective, in their view. Could 
we basically consolidate it with the Continuum of Care--that is 
what we call our programs at HUD. We liked what they said in 
their report. We thought it made sense. We have actually 
proposed in our budget this year to take that program from FEMA 
and consolidate it into the work that we are doing at HUD.
    So, I think that is exactly the way it should work. You 
have to measure it, find out what is successful, and OMB can 
help drive that coordination because it has a unique perch to 
look across Federal agencies rather than being in a particular 
silo.
    To be frank, the challenge, we have talked about this--that 
you find is, every program has its supporters.
    Senator Tester. That is correct.
    Secretary Donovan. Sometimes, there are different 
Committees----
    Senator Tester. Yes.
    Secretary Donovan [continuing]. As in this case, where you 
have--and, I think there is no substitute for the leadership of 
OMB and the agencies rolling up their sleeves, sitting down 
with Congress, and working those issues hard. But, I also 
think--and I would love to get your advice--we have to find 
ways to build more Democratic and Republican support, 
bipartisan support, for those kind of changes. And, I think 
what we can do on our side in the Administration is make sure 
that we are publicizing, making it very apparent what is 
working and what is not.
    Senator Tester. Yes.
    Secretary Donovan. That is why I am a big believer in the 
transparency this Committee has worked on. But, the political 
obstacles are real and, your advice on how we overcome those 
would be helpful, too.
    Senator Tester. Well, I wish that I had all the answers. I 
can tell you that I think that you can make a difference. I 
appreciate what you have just said. I think that 
recommendations from OMB on possible ways that we can make 
government more efficient, more effective----
    Secretary Donovan. Yes.
    Senator Tester [continuing]. And get more of the dollars we 
spend to the ground, I think, is critically important for us.
    In another area, yesterday, Senator Portman and I chaired a 
Committee meeting on information technology (IT) investments. 
We spend a lot of dough--Senator Baldwin was there, too--we 
spend a lot of money on IT, some of it with success, a lot of 
it without much success. The coordination is getting better, 
but it certainly is not where I believe it needs to be between 
agencies. Such things as the Dashboard at OMB----
    Secretary Donovan. Yes.
    Senator Tester [continuing]. The IT Council, all those 
things are good. I mean, how do you envision, as OMB Director, 
assuming you get confirmed, how do you envision your position 
between the agencies, empowering them to coordinate better?
    Secretary Donovan. So, this is an area--and I appreciate 
your work on it, Senator, your focus on it--our IT investments 
are some of the largest and most important investments that we 
make, and through my own experience, not just at HUD but in 
other leadership positions in the private sector, as well, they 
are also some of the places where it is easiest to go wrong.
    And, to give you the example I had, I came in. We were in 
the middle of a major reinvention of our financial systems at 
HUD. It was behind schedule. It was over budget. We had spent 
about $100 million, close to that, already, and, frankly, it 
did not look likely it was going to get us the results that we 
had wanted, and this had started almost 10 years before I had 
arrived.
    And, so, what was incredibly helpful is through the 
PortfolioStat process, OMB brought us ideas, and the shared 
services model in particular. We are now, to use the technical 
term, the poster child at HUD for shared services. We are in 
the process of migrating our entire financial systems over to 
Treasury. Starting by the first of the fiscal year, we will 
have the first piece of that system moved over. And, it is not 
a model--I would not have known that the Bureau of Fiscal 
Services at Treasury was really good at this, but they have 
credit reform programs. They do a lot of the things that we do 
at HUD, so it is a similar sort of financial system. And, we 
are going to get a better product, faster, at lower cost, than 
if we continued pursuing our own reinvention of our system.
    So, I am a big believer that OMB can play a very important 
role because I have lived it. I have seen it. And, we are now 
in the process of pursuing this shared services venture.
    Senator Tester. I appreciate that work and appreciate the--
I was going to ask another question about security clearances. 
My time is up, but we will get to that----
    Chairman Carper. Go ahead. Just make it brief, if you 
would. Go ahead.
    Senator Tester. Really? OK. Well, I am somebody who thinks 
we have too many people with security clearances, and I am also 
somebody that thinks that the kind of due diligence that is 
necessary to give those security clearances is somewhat 
lacking. We contract a lot of the work out, not a lot of 
oversight, from my perspective. And, I could be wrong on that. 
Actually, I hope I am wrong, but I do not think the record 
bears that out.
    As OMB Director, what role do you see yourself playing in 
the security clearance platform, if that is what you want to 
call it, and what role do you see us--what role can you play--
--
    Secretary Donovan. Yes.
    Senator Tester [continuing]. Allowing us to make the 
necessary reforms?
    Secretary Donovan. Well, first of all, Senator, I think you 
are already playing a very constructive role. I know you have a 
number of pieces of legislation in this area that you put 
together, and I, should I be confirmed, I look forward to 
working with you specifically on those.
    Where I am encouraged by this is the 120-day review that 
the President ordered that was completed in March, I think, is 
a very good sort of analysis of the problem and starting point. 
I know that OMB is working with agencies to get detailed action 
plans as part of the priority goal setting process. And, in 
fact, the fact that this is one of our 15 priority goals across 
the whole government, I think, is an indication that it is 
really important to us.
    The thing that I think, of the many things that we are 
working on, the thing that seems most important in the work 
that I have done to sort of get up to speed on this over the 
last few weeks is that we have to have a process that does 
continuous evaluation, right. We have this big backlog in our 
security clearances, right. But, even if we could catch up on 
that, the idea that you are only checking once every year, once 
every 5 years, given the technology that we have today, just 
does not make sense.
    And, so, how we move to a continuous evaluation process, 
where you have an automated way to check information, combined 
with working with State and local actors who may have--there 
may be a problem that an employee runs into with an arrest or 
something like that. If you do not have those access to those 
records----
    Senator Tester. That is correct.
    Secretary Donovan [continuing]. In real time, you are just 
not going to find stuff. So, that combination of automated data 
systems to do continuous evaluation with better data sharing, I 
think those, from what I have learned so far--you are more of 
an expert than I am on this--feel to me like critical things 
that we can do to move forward on this.
    Senator Tester. Just really quickly--thank you, Mr. 
Chairman--I wish you the best in the confirmation. I wish you 
the best in this job. As you know, you have a standing 
invitation to come to Montana. You can bring your family, too. 
We would actually rather have them come than you. [Laughter.]
    But, because we will put your kids to work. [Laughter.]
    But, the truth is, you have a lot of work to do here in 
Washington, D.C., but I hope you have the opportunity to get 
around the country to be able to continue seeing the challenges 
that are out there, because I think it is important. So, thank 
you. Thank you very much.
    Secretary Donovan. Well, I appreciate it. I will just say 
with my sons here that it is an important way they will earn 
their allowance. [Laughter.]
    But, I have been waiting--now that Milo has turned 15 and 
he has passed me in height, I think he will be a much more 
productive worker on the ranch than he would have been a few 
years ago. [Laughter.]
    Senator Tester. He can pick bales. That is good. 
[Laughter.]
    Chairman Carper. All right. Senator Baldwin.

              OPENING STATEMENT OF SENATOR BALDWIN

    Senator Baldwin. Thank you, Mr. Chairman.
    I want to thank you for also meeting with me, and I know 
you did with many Members of the Committee, prior to this 
hearing.
    Secretary Donovan. My pleasure.
    Senator Baldwin. We had a chance to talk quite specifically 
about three issues that concern me a lot. But, I want to say 
that the thing that I took away from our meeting was a phrase 
that you shared with us in your opening statement today, that 
you do not necessarily like your job every day, but you love it 
every day. And, I tend to be a pretty hopeful and optimistic 
person myself, but when we ended up talking about the very 
specific things that I brought to your attention, those are the 
things that, that I do not like.
    And, so, I do want to actually talk through the same three 
topics, but perhaps in a sort of broader sense, because you 
have not been confirmed yet, so you are not necessarily getting 
around to the details of working on these issues, but I want to 
know what you can do when you are confirmed, should you be 
confirmed, and what OMB can do and what sort of tools you can 
bring to these issues.
    And, the first one relates to a land transfer issue in the 
State of Wisconsin, one that has been pending for nearly 17 
years. And, I had a chance to work on it during my 14 years in 
the House, and, of course, I am continuing to work on it now. 
But, it, unfortunately, has been slowed by a difference between 
the Department of Defense and the Department of the Interior 
relating to a land transfer to a third party, a Tribe in the 
State of Wisconsin.
    I have engaged extensively with both Departments and it 
just does not seem like any are willing to take their heels out 
of the--they have dug their heels in. What can OMB do, as 
Office of Management and Budget, to prod, push, bring to 
resolution--because this is not the only such issue that has 
been pending for many years beyond what is rationale and should 
be expected.
    Secretary Donovan. Senator, as you mentioned, we talked 
briefly about this, and should I be confirmed, I, as I said to 
you the other day, look forward to talking to you more and 
trying to figure out how this might be resolved. It is hard for 
me to comment specifically----
    Senator Baldwin. Yes----
    Secretary Donovan. But more broadly, to go to your 
question, my experience, issues like this come up at HUD where 
different parts of HUD might be in disagreement, and my general 
experience has been--and I think if you talk to my team, they 
would tell you, I can be pretty impatient about this stuff--
that what you have to do is get everybody in the same room and 
figure out that everybody is communicating.
    What I often find is that these problems come down to an 
issue of, the interpretation--it is like a game of telephone--
is not necessarily the same. Get everybody in the same room and 
push to see if there are creative ways. I often find that if 
you are just in a view of, this is the way we have always done 
it, or, this is the way we have done it before, but looking for 
possible ways creatively to solve problems, you can often come 
up with a solution that--it may not be perfect, but it works.
    And the other thing, to be frank, is that what I often find 
sometimes is that agencies do not want to deliver disappointing 
news. If we really cannot do something, if there really is a 
statutory restriction against doing something, we owe it to 
you, to every Member of Congress, to come back and say, here is 
where the situation is, right. And, I have no idea on this 
issue----
    Senator Baldwin. Right we have not gotten into that level 
of detail----
    Secretary Donovan [continuing]. But, that communication and 
cooperation and being able to get back quickly, whatever the 
news is, to communicate it, I feel like, is something that I 
would want to prioritize at OMB, if I am confirmed.
    Senator Baldwin. Well, I appreciate your commitment to give 
attention to this. It is enormously frustrating, and it is one 
of those things that, I think, gives government, in general, a 
bad reputation. Seventeen years is unacceptable to all 
involved, and we really have not heard satisfactory answers, 
and I do not think it is a matter of giving somebody hard news 
or bad news. It is intractability that, in this case, is just 
unacceptable.
    I wanted to talk about the U.S. Forest Service budget and 
the issue of fire borrowing. Right now, as we have seen a 
lengthening of the fire season in the United States, as we have 
seen more extreme fire events, we have seen the movement of the 
Forest Service budget from the things that they anticipate 
doing on an annual basis to respond to the emergencies that 
seem to come up with much greater regularity. And, it is, in 
fact, making it much more difficult to do the very things that 
the Forest Service might do to prevent forest fires in the 
future, to manage and maintain healthy forests. It is certainly 
something that we are seeing have significant events in 
Wisconsin. I know in the Western States, this is very 
significant.
    Well, I know that we many of us on this Committee, 
actually, have sponsored a bill that would allow for the most 
extreme fire events to be funded through disaster spending 
rather than the Forest Service account. The President's budget 
for 2015 incorporates that proposal. So, I guess I would ask 
you, if confirmed, what can OMB do to see this through, and 
what impact does fire borrowing have, in your observation, on 
the Forest Service's ability to do what it is supposed to do?
    Secretary Donovan. Yes. I am glad you raised this, Senator, 
because I think it is an important issue and it is one where I 
am hopeful that there can be bipartisan progress on it. I know 
that it is important to many other Members of the Committee, as 
well, and thank you for your leadership on it.
    The cap adjustment proposal that you referenced, I think, 
makes a lot of sense in a number of ways. First, it would 
expand the ability of the cap adjustment to cover the kinds of 
forest fire fighting, particularly the most extreme fires. One 
percent of the fires account, typically, for about 30 percent 
of the costs, and those are the kind of extreme examples that 
we really ought to be creating some flexibility around. But, it 
would do so by offsetting the cap for others. So, it does not 
increase overall the cap adjustment, and I think that is a 
fiscally responsible thing to do.
    But, as you well know--we talked about this, and we just 
talked about it with Senator Begich--often, we force ourselves 
into short-sighted decisions. In this case, we are reducing the 
kinds of smart things that would actually limit forest fires 
going forward, clearing out kind of low-lying vegetation in 
forests that can help spark these fires, a whole range of 
things. If we are not doing that kind of regular maintenance we 
create greater risk of forest fires going forward. And, so, by 
making this cap adjustment, we are actually going to ensure 
that we are doing the kind of smart things in the short term 
that are going to limit these costs going forward. It is 
exactly the kind of mitigation, smart mitigation measures that 
we talked about before with Senator Begich.
    So, I am very encouraged by your focus on this and I 
appreciate it.
    Senator Begich. Thank you.
    Chairman Carper. Senator Baldwin, thanks very much for 
joining us today.
    Senator Pryor is not here. Senator McCain had to leave. 
Senator Portman, you would be next. I do not know if you were 
here in the room when, in answer to a question about the DATA 
Act from Dr. Coburn--I know you and Senator Warner spent a lot 
of time on the DATA Act. You just need to know, the Secretary 
trashed it pretty badly---- [Laughter.]
    And, now it is your time to ask questions. Go ahead.

              OPENING STATEMENT OF SENATOR PORTMAN

    Senator Portman. What a set-up. It just gives me another 
question, number 25 now, not just 24. [Laughter.]
    Well, first of all, thanks for coming before us and being 
willing to go through confirmation again. We had a nice 
opportunity to talk about this job that I once held and that 
is, as I told you, the worst job in government, but also the 
best job in government. It can be both, but it is a very 
important job, I think, some times over.
    In Administration, as we saw in the last and this 
Administration, people change back and forth, but the 
continuity is the management people there and the budget people 
there who are career professionals who do an amazing job, and I 
was honored to lead them, and a lot of them are still there. I 
know that will be the best part of your job.
    The worst part will be having to work with us, probably. 
But, there are lots of things that I would like to talk to you 
about today. I do not have time for all of them. I guess a big 
one is just understanding that you are now in a cabinet agency. 
Your job is going to be very different, and I know you 
acknowledge that and understand it. Let me give you an example.
    During your tenure at HUD, the paperwork burden has more 
than doubled on the American economy. In 2008, HUD regulations 
produced 27 million hours of paperwork. Today, that number is 
58 million hours of paperwork. At the end of 2013, HUD's 
paperwork burden imposed a $1.7 billion cost on the economy. I 
think a lot of that is Dodd-Frank, probably about half of it.
    Now, at OMB, you are going to be the primary enforcer of 
the Paperwork Reduction Act, so I hope you are prepared to 
change your focus a little bit. It is always said that the OMB 
job is the ``Dr. No'' job. That certainly was my experience. 
But, since I assume you have committed today to put the ``M'' 
back in OMB, which is what every new OMB Director says, I hope 
you also focus on this issue of Management: paperwork and 
regulations.
    In particular, there is a great opportunity with the DATA 
Act, since the Chairman mentioned it, to move quickly on making 
the data that is available to the public and to you, as a 
manager, more uniform. Standardize it. Ensure that you have the 
kind of transparency and visibility. What you do not know, you 
cannot manage. I know, earlier, there was a comment made that 
it is very difficult to manage something that you cannot 
measure. Well, the DATA Act is all about that. It is about 
measuring things accurately and uniformly across government.
    We do think it is a really important bill. Senator Warner 
and I worked on this for a few years and came up with what we 
thought was a very realistic and practical timeline for 
implementation. I have to say, what I have heard from OMB since 
the DATA Act passed the Senate and the House about a month ago 
has not been encouraging. Instead of committing to meet the 
deadlines in the law, OMB has committed to, and I quote, 
``implementing its requirements based on current funding and 
timeframes that permits.'' Not very encouraging.
    So, we left 3 years for implementation for parts of it. The 
uniform Federal financial data would not be made available to 
the public until May 2017. And, I tell you what, if you are not 
committed at OMB to that timeframe, it will never happen. You 
have to drive that.
    So, I am looking for a commitment from you today that you 
will drive it and America and you, as a manager will finally be 
able to see in detail how the government spends our hard-earned 
tax dollars.
    I did this when I was Director because I had to implement 
what was called the Federal Funding Accounting and Transparency 
Act (FFATA), a great acronym---- [Laughter.]
    Federal Funding Accountability and Transparency Act. It was 
actually Tom Coburn and Barack Obama who introduced that 
legislation, and it put all grants and contracts online over a 
certain threshold, and the DATA Act really is building on that 
to be able to track and report on Federal financial information 
more accurately.
    And, so I understand that it is a challenge, because I went 
through this, and the only way to have it work is if you drive 
it from the top. And, it has to be a huge priority of yours 
personally and of the agency. So, I guess I would--I know you 
are going to say to me, appropriated funds might not be there. 
They were not for me, either, but there are appropriated funds 
for Federal management, Federal financial management, in 
particular, and I just believe that a sustained leadership 
focus is going to be required.
    Will this be a priority of yours, implementing the DATA Act 
under your leadership, and do you think you can meet the DATA 
Act implementation day one priority that is critical to the 
timely implementation?
    Secretary Donovan. Senator, I commit to you, it will be a 
priority of mine. For me, the whole question of knowing what 
success looks like, measuring it, you cannot do that without 
good data. You talked about personal leadership--I, personally, 
attended every single HUDStat meeting that we have had over the 
last 5\1/2\ years. We created HUDStat and I attended every one 
of those meetings because I believe strongly in what you said, 
that it is about personal leadership and you need to take that 
kind of personal role to demonstrate the importance and to 
create work across the agencies.
    I also will make sure that I am not giving you answers 
without knowing the facts, and this is a significant 
undertaking and I do want to make sure, if I am confirmed, that 
I dig into this quickly and be able to come back and talk to 
you about implementation, what it looks like and what we can do 
on that, because I take it--this will be one of my highest 
priorities, is not just the implementation of the Act itself, 
but also, more broadly speaking, how do we make government more 
evidence-based, more focused on data, and I want to do that.
    I do want to take a moment, at some risk, to disagree with 
you on two things. One is that I am not going to promise to put 
the ``M'' back in OMB because I think Secretary Burwell has 
done that, and----
    Senator Portman. Did you say that? [Laughter.]
     I think I said it. I am going to put the ``M'' back in 
OMB. So----
    Secretary Donovan. I think it is going to be continuing the 
focus.
    Senator Portman. Yes.
    Secretary Donovan. I think, not only Sylvia, but also Beth, 
has done a good job working with all of you. And, I am going to 
disagree that dealing with this Committee is going to be the 
toughest part of the job. I do not think that is true, and I 
particularly look forward to getting your advice and guidance, 
given your personal experience.
    Senator Portman. Two other quick ones on the regulatory 
front. We do not have time to go into it in detail, but one is 
independent agencies. As you know, about 25 percent of the new 
rules are coming from independent agencies. There is 
legislation that is bipartisan here on the Hill that says, let 
us apply the cost-benefit analysis in an appropriate way to 
independent agencies. Senator Warner and I have been working on 
that for some time. Senator Pryor and I have worked on that----
    Secretary Donovan. Yes.
    Senator Portman [continuing]. In the larger Regulatory 
Accountability Act, really important. I just met with a bunch 
of manufacturers and they were talking about some of these 
agencies that have these acronyms like SEC and Federal Energy 
Regulatory Commission (FERC) and others. And, so, we want to 
work with you on that.
    And then on permitting, America just keeps falling behind 
in terms of permitting. Again, I just met with some folks that 
volunteered to me just moments ago, it is tougher to get 
investment here because investors are looking around the globe, 
and they look at America and they say, gosh, it is going to 
take 4 or 5 years to get this energy project up and going. It 
might be a wind farm, it might be oil and gas development, it 
might be just a commercial shopping center. And, so, they look 
elsewhere because of these permits and the problems with 
permitting. Sometimes, there are 34 Federal permits, sometimes 
seriatim. You have to get through one, then the other, on some 
of these energy projects, for instance. So, we hope you will 
work with us on that, too. That is a bill that Senator 
McCaskill and I have that is a common sense bill that would get 
at this permitting issue.
    And then, finally, thank you for your help with the City 
Gospel Mission. As you know, this is a great organization in 
Cincinnati. There is also one in Cleveland that has a similar 
issue. And, it is a distressing issue because this homeless 
shelter is not able to move forward right now with certainty 
because of a HUD deed restriction that has posed an obstacle 
to, really, an innovative and expanded way to deal with the 
homeless in our area of Cincinnati, Ohio. So, I know we are 
getting close to resolving this issue. I would ask for your 
sustained focus on that as we try to get across the finish 
line.
    Secretary Donovan. You will have it.
    Senator Portman. Thank you. Thank you, Mr. Chairman.
    Chairman Carper. Thank you, Senator Portman.
    Last, but not least, Senator Levin.

               OPENING STATEMENT OF SENATOR LEVIN

    Senator Levin. Thank you. Let me have 10 seconds.
    [Pause.]
    First, let me welcome you and your family, and I think your 
two boys deserve some kind of a special award this weekend---- 
[Laughter.]
    For not only staying awake, but looking interested. 
[Laughter.]
    Secretary Donovan. They love data, too. [Laughter.]
    Senator Levin. I think they probably love baseball a heck 
of a lot more. [Laughter.]
    At any rate, thanks for your ongoing service to the 
country.
    I also, by the way, have an interest in the independent 
agencies and the cost-benefit analysis as it applies to them 
and whether they should be bound by the exact same cost-benefit 
analyses that all the other agencies are bound by and I would 
appreciate your thoughts about the independence of those 
agencies, whether or not they need a measure of independence 
from the President and, frankly, from political pressure.
    Secretary Donovan. Senator, this is an area where, 
obviously, given, in particular, the challenges we had in the 
housing market and its connection to the broader financial 
system, I have spent a lot of time with not just the Federal 
Housing Finance Agency (FHFA) that oversees Fannie and Freddie, 
the Federal Deposit Insurance Corporation (FDIC), SEC, a range 
of other independent agencies, now the Consumer Financial 
Protection Board (CFPB). So, I have gained a healthy respect 
for the importance of the independence of those agencies.
    I do think there are roles that OMB can play in creating 
best practices, in sharing information and technical 
assistance. But, I do have a healthy respect for the 
independence of those agencies and the importance of respecting 
that independence.
    Senator Levin. Well, I hope that you are confirmed and 
confirmed promptly, and shortly after you are confirmed, 
because there is a bill which I believe is pending on this 
subject, I think it would be important for us to have your 
views after you are confirmed on this. Can you commit to give 
us that quick review of that bill? You know the bill number, I 
think--do you? Or you can----
    Secretary Donovan. I have it in my notes----
    Senator Levin. You know the bill I am referring to?
    Secretary Donovan. I do----
    Senator Levin. If you could give us that, to the Committee, 
after you are confirmed, after you have had a chance to look at 
that bill, but promptly, because I think it is on the calendar. 
Could you do that?
    Secretary Donovan. Should I be confirmed, I look forward to 
spending time with OMB staff quickly and getting up to speed on 
this, yes.
    Senator Levin. All right. And, then letting the Committee 
know what your views are?
    Secretary Donovan. Yes, sir.
    Senator Levin. In terms of, by the way, the discretionary 
spending in this country, I was trying to get a quick bunch of 
numbers here, since we are all numbers people today. On this 
question of discretionary spending, you and Senator Johnson had 
a conversation about it, and the way it looks to me is that in 
terms of even nominal dollars, at least in the last 5 years, we 
are spending fewer nominal dollars than we did 5 years ago, and 
less than any years since then. And, in terms of percentage of 
GDP, which you were also talking about, it is a smaller 
percentage of GDP since 2007. Does that sound about right to 
you?
    Secretary Donovan. Yes. And, in fact, if you look out 
through the President's budget proposal, we would end up in 
2024 with the lowest discretionary spending as a percentage of 
our economy in more than 50 years. So, this is not just a 
recent trend, it is a historical trend, as well.
    Senator Levin. And it is something which, I think, is 
creating all kinds of problems in terms of economic growth, as 
you point out. But, that kind of leads me to the subject which 
you and I have spent some time talking about, which is the 
question of tax avoidance, tax loopholes, corporate revenue, 
particularly, going down as a result of the use of a number of 
tax avoidance gimmicks, mechanisms, schemes, loopholes, 
inversions, you name it.
    I think that this Committee has really led the way in a 
number of ways at looking at wasteful spending, and it should 
be high up on the radar and I am all for it, because when we 
can identify it, we ought to get rid of it.
    But, there are also tax loopholes, which are wasteful, as 
well, which do not serve any economic purpose except tax 
avoidance. We have mechanisms which the most profitable 
corporations in the world use to avoid paying taxes. Inversion 
is one of the mechanisms. We have a way in which companies can 
transfer their income to themselves in tax havens and avoid 
paying taxes. We have mechanisms by which profitable companies 
transfer their intellectual property to themselves in tax 
havens and avoid paying taxes. We have a tax loophole called 
carried interest where the folks that run hedge funds pay a 
lower tax rate than people who work for them.
    There is a lot of debate over deductions and credits which 
serve purposes, and I understand that. But, I think we ought to 
distinguish between those kind of tax credits and those kind of 
deductions and the loopholes which do not have any economic 
purpose except to avoid paying taxes.
    And, the question is, when it comes to trying to fill some 
of the gaps in our economy--we are going to run out of highway 
funds in a couple of months, I mean, we are going to stop 
highway projects right in the middle of the project unless we 
do something about it, so we have a great debate going on as to 
how do we fill that gap. We have a big problem with trying to 
do the right thing for our veterans. We have a need for some 
additional funds. At least, in the Senate bill, we sure do. The 
House bill does not have any additional funds.
    So, we have a need for additional revenues. I think it is 
clear, both in terms of the number on Gross Domestic Product, 
the discretionary spending as a percentage of our economy, and 
the reduction in defense spending, as well, by the way, which 
is very troubling for me as Chairman of the Armed Services 
Committee, impact on our security.
    And, so, my question of you is whether or not you see the 
closing of at least some of the tax loopholes as a way of 
raising revenue, or should we look at closing even those kind 
of loopholes, the ones that serve no economic purpose except 
tax avoidance, as exclusively a way, if we do close them, of 
reducing rates?
    Secretary Donovan. So, Senator, the President is committed 
to comprehensive business tax reform. We think that is an 
important goal and that there should be a continued focus on a 
bipartisan basis on achieving that. At the same time, the 
President has proposed in his budget that we use one-time 
revenues from reform of our business tax code to invest in 
infrastructure, to go precisely to your point about making 
critical investments.
    And, should I be confirmed, I would certainly be open to 
working with you and others in the Senate on ways that we can 
eliminate wasteful spending in our tax code in shorter-term 
ways that would not necessarily be part of a comprehensive 
business tax reform. So, we would be open to those 
conversations.
    Senator Levin. Thank you. Good luck to you and we thank 
your family for their contribution that they make to your 
contribution.
    Secretary Donovan. And thank you for your service, Senator.
    Chairman Carper. Secretary Donovan, I have just a couple of 
more questions to ask, and I am going to ask you just to 
respond to them very briefly. I am supposed to be somewhere 
else right now. You probably are, too.
    Secretary Donovan. I appreciate your staying.
    Chairman Carper. The 800-pound gorilla in the room on 
deficit reduction, I believe, is entitlement programs. A big 
piece of that is health care, a big, major driver. And, I am 
going to submit some questions for the record, but I would just 
ask that you be especially mindful, that I am sure you are, the 
one piece of that is improper payments.
    And, if you look at the improper payments--for those who do 
not know what improper payments are, that is not necessarily 
fraud, but it is just mistaken payments, overpayments, 
mistakes, and so forth. And, I think we saw improper payments 
peak out at about $120 billion 4 years ago. They have dropped 
steadily to about $106, $108 billion today. But, we saw the 
number for Medicare actually rise over the last several years, 
and I am not sure--maybe my staff can tell me what it is, but 
it seems like it is around $45 billion. It has gone up, not 
down.
    I would just ask that you be especially mindful--and, we 
had an ongoing discussion, dialogue with Sylvia Mathews Burwell 
on this and Dr. Coburn and I have been all over this issue for 
the last decade, and he and I will continue it this year, but 
we really want to focus on that with you and your folks, 
assuming you are confirmed. After this hearing, you just never 
know, though, so we will see. [Laughter.]
    The other thing I want to mention, Dan Tangherlini and Beth 
Cobert sat right here with us 2 months ago. We had a wonderful 
hearing on the President's management agenda. And, one of the 
items we talked a lot about was strategic sourcing and how--my 
recollection is that some of the major companies in the world 
and in this country, private sector companies, I think they 
manage as much as 80, 90 percent of their contract spending 
through strategic sourcing and they save money. In the Federal 
Government, I am told that major Federal agencies examined by 
GAO only managed about 5 percent of their contract spending 
through strategic sourcing. That is dramatic. It may be 
unrealistic that we could get to 80 or 90, but we could sure do 
better than five, and we are going to be counting on you to do 
that and to work with Mr. Tangherlini and others, with Beth and 
your own shop, to get us there.
    There will be some other questions that my colleagues and I 
will have.
    [Pause.]
    My staff had given me a script here to use as the closing 
statement. [Laughter.]
    I just look to your sons back there. You guys, you have 
been here for the whole thing and you can give your Dad, like, 
one thumb up, or maybe two if you think he has really been 
exceptional. What do you think?
    I see two--OK, I see a couple. That is good. [Laughter.]
    OK. All right.
    Secretary Donovan. The check is in the mail, boys. 
[Laughter.]
    Chairman Carper. Well, I want to thank you all for showing 
up. I think one of my favorite sayings in life, showing up is 
about 80 percent of it. So, thank you for showing up and 
lending your support.
    You have a beautiful family, and I know you are very proud 
of them and I suspect they are fairly proud of you, as well. 
Dr. Coburn admonished you that there are priorities, as well, 
and I am sure that you are mindful of that. It is hard to find 
that balance. People ask me, what is the hardest thing in my 
life, in my work here and as Governor and so forth, and it is 
always finding the right balance between family and all the 
responsibilities there and trying to be a good public servant.
    I appreciate you going through this process. We are 
grateful to your family for their willingness to share you a 
bit longer with the people of our country.
    And, with that, I will say that the nominee, I am told, has 
filed responses to biographical and financial questionnaires, 
answered prehearing questions submitted by the Committee, and 
had his financial statements reviewed by the Office of 
Government Ethics. Without objection, this information will be 
made a part of the hearing record,\1\ with the exception of the 
financial data, which are on file and available for public 
inspection in the Committee offices.
---------------------------------------------------------------------------
    \1\ The biographical and financial questionnaire for Mr. Donovan 
can be found in the Appendix on page 49.
---------------------------------------------------------------------------
    The hearing record will remain open, until noon tomorrow, 
for the submission of statements and questions for the record 
(QFRs).
    Dr. Coburn had mentioned to me his belief that before we 
vote here in the Committee, that the QFRs should be completed 
so, I just ask that you try to do that and we will look forward 
to, hopefully, having a business meeting soon and being able to 
work with you in this new capacity.
    With that, I bid you all a good day and this Committee is 
adjourned. Thank you.
    Secretary Donovan. Thank you, Senator.
    [Whereupon, at 12:05 p.m., the Committee was adjourned.]
    
    
    
    
    
    
    
    
    
    
    
    
                            A P P E N D I X

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