Segment 2 Of 2 Previous Hearing Segment(1)
SPEAKERS CONTENTS INSERTS Tables
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USE OF PFCS FOR TRANSIT PROJECTS
Mr. WOLF. Clearly, the FAA has failed to enunciate a well-defined policy about the eligible uses of PFCs and airport revenue for transit projects, and appears to apply eligibility standards on an ad hoc basis. You will recall similar issues were raised during consideration of the BART extension to the San Francisco Airport. Why has the FAA been unable to define a policy for the appropriate use of PFC and other airport revenue? What has been taking so long?
[The information follows:]
We are not certain why FAA has not articulated a comprehensive policy or criteria for use of PFCs for landside projects. FAA has published Order 5100.38A, issued October 24, 1989, which contains some guidance as to what constitutes an eligible landside project. According to the order, access roads are eligible projects provided they are located on the airport or within a right-of-way acquired by the airport sponsor and the access road serves exclusively airport traffic. It further provides that rapid transit facilities within the airport boundary that are necessary to provide a connection to a rapid transit system may be eligible if that system would primarily serve the airport.
DENVER TRANSIT PROJECT TO AIRPORT
Mr. WOLF. In the conference report accompanying the fiscal year 1998 Transportation Appropriations Act, the conferees expressed their concerns that the City of Denver may be considering the diversion of airport revenues to buy rights-of-way from the Union Pacific Railroad for a rail extension to the airport and directed the IG to review the situation.
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What have you concluded so far?
Mr. WEINTROB. We have recently begun that particular audit. So far we have found out that there are preliminary indications of some revenue diversion. We are at a fairly early stage. We have identified some diversion. We also know there is a good deal of money going from DIA to help market the old Stapleton and make it attractive. I believe that preliminarily we are finding that the money to market Stapleton is over what the original estimates said that amount would be.
Mr. WOLF. I think the record shows that if you ever want to build an airport, it is helpful to have the Secretary of Transportation be from that area. There was tremendous pressure on the FAA during the whole period when Mr. Pena was the Secretary with regard to all of these things, and now you tell us they are using money from Denver International, where the gates are probably the highest cost anywhere in the country, and then you are using those funds to promote Stapleton. Stapleton, promoting to do what?
Mr. WEINTROB. Buy it up and sell it and get the money back. It is supposed to come back to the airport.
ADVANCED TECHNOLOGY TRANSIT BUS
Mr. WOLF. On the advanced technology transit bus, a year ago you issued an audit of FTAs advanced technology transit bus. You concluded that, notwithstanding the high cost of the development project, $47.3 million thus far, FTA could not show the ATTB would be more cost-effective or safer than those on the roads today. In particular, your audit raised questions about the adequacy of the life cycle cost estimates for the ATTB.
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What has FTA done to respond to these concerns and when can the committee expect a comprehensive life cycle cost analysis to be completed?
Mr. WEINTROB. I can't answer the question about when they will have a life cycle cost completed. FTA did commit to have these buses tested at the bus testing facilities that FTA uses before they are put into revenue service, even for demonstration purposes. We haven't done a follow-up audit yet, so we don't have any details on it.
DEPARTMENTAL REORGANIZATION
Mr. WOLF. In regard to Office of the Secretary issues, in your most recent semiannual report, you stated, ''DOT needs to develop an appropriate management structure to achieve the most cost effective delivery of services.''
What specific reorganizations are needed? A lot?
Mr. DECARLI. Well, that, Mr. Chairman, reflects on the field structure of the department. Once again, a couple of years ago this committee took $25 million from the Department of Transportation in an effort to change the field structure. A lot of those cuts filtered down and in fact did not have any impact on the field structure at all.
Mr. WOLF. The Federal Highway Administration hasn't changed anything yet.
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Mr. DECARLI. That is correct. They are still thinking about where they ought to take their field structure.
Mr. WOLF. That was 4 years ago.
Mr. DECARLI. That was the issue about how the department ought to be structured. If you look, there are personnel offices and various administrative functions that duplicate each other, and it is a question of how you can pull those together.
Mr. MEAD. I am sorry for my silence. I was trying to tie the question to something else. But on the regional office issue, there is a draft proposal. A weakness in it is how much savings is the restructuring expected to accrue and when will it happen? So without those two elements, the draft plan they have—and I don't know if it has been shared with the staff here or not—is weak. FHWA needs to say when it is going to do it and how much they think it is going to save.
SAFETY AS A DOT PRIORITY
Mr. WOLF. The last question on this, from a number of your audits it appears that almost all of the DOT agencies are negligent or lax in firmly enforcing their safety regulations. In a question for the record of last year's hearing, your office wrote, ''The perception by DOT safety inspectors that senior departmental and operating administration personnel did not support rigorous enforcement actions was probably the single consistent reason why DOT has not frequently used the enforcement powers it has. We encourage the new Secretary to reemphasize the importance of transportation safety and to pronounce his support for enforcement actions.'' Has Secretary Slater made such a pronouncement?
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Mr. MEAD. The Secretary repeatedly says that safety is his number one priority. I can tell you that from the standpoint of our Inspector General operation, he has reinforced that. Before, in my oral summation, I mentioned that a very high priority area for us is motor carriers, the falsification of driver's licenses and the falsification of hours of service. I don't mean by one or two hours, I mean highly consequential violations. We have over 20 criminal investigations ongoing right now.
I did not know about the response to that question for the record. I have to follow up on it.
Mr. DECARLI. I think I can add to that. I have personally been at senior staff meetings with the Secretary where he has made it very clear what his expectations were in the safety arena, and that included enforcement. I think he has been pretty straightforward on that issue, and very forceful in talking to the modal administrators on what his expectations were.
Mr. WOLF. The last two questions for the day deal with the Highway Trust Fund and revenues. We have heard that in an ongoing audit of the Highway Trust Fund financial statement, your auditors have raised a concern that the Department of Treasury may not have an accurate understanding of how much money is in the trust fund because of deficiencies at the IRS. Would you explain this concern to us?
The second part of the question is, how much could the trust fund balance be off?
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Mr. MEAD. Yes, I understand your question. The first question is what is the problem? And the second part is, so what?
The problem seems to be that the Internal Revenue Service receives reports of gas tax collections that ultimately go to the trust fund. An office in the Treasury Department makes estimates which are given to main Treasury. The estimates that main Treasury is given come to us, to the department, and they are certified as the balance for the Highway Trust Fund and the receipts that are creditable to the trust fund.
The General Accounting Office is conducting an audit of the Treasury under the Chief Financial Officer's Act, trying to determine if the Treasury estimates could be validated and if there was documentary support behind them.
We are advised that the General Accounting Office has serious difficulties of validating those estimates. That means that when we, the office of Inspector General, have to certify to the financial statements of the department, we must do so for the Highway Trust Fund. If we do not have assurances that the balance of receipts is reasonably accurate, we cannot certify. I cannot give an unqualified opinion that the trust fund has as much money in it and the right amount of money being credited to it as is being claimed. So we are dependent on GAO and the Treasury Department to straighten this out.
How much money is involved? We do not know. It could be an excess issue, it could be an undercount.
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Mr. WOLF. Do you think it has been overstated or understated?
Mr. MEAD. I think it has been overstated.
Mr. WOLF. This is a big issue up here. Let us have something on that for the record.
DOT is required to report, in its financial statement, the financial activity for four DOT Trust Funds—Highway, Airport and Airway, Oil Spill Liability, and Aquatic Resources. The Department of Treasury, not DOT, has control over the collection, reporting, and investment of the excise tax revenue for these Trust Funds. Excise tax revenue is received daily, while supporting information (tax returns) on how the revenue should be distributed is submitted generally quarterly. Therefore, Treasury estimates the initial distribution of this revenue. Subsequently, the Internal Revenue Service (IRS) uses the tax returns to certify the amount that should have been transferred, and Treasury makes the appropriate adjustment. Neither the Treasury OIG or the General Accounting Office have audited the process Treasury uses to estimate the initial distribution of excise tax revenue, or IRS's certification process. The fiscal year excise tax revenue for the Trust Funds, as reported by Treasury, is a combination of actual and estimated excise tax revenue, and adjustment to the estimates.
Since September 1995, the actual quarterly excise tax revenues, certified by IRS, for the Highway Trust Fund (HTF) have fluctuated greatly from the estimates, ranging from an understatement of $903 million to an overstatement of $638 million. Errors in the reporting of actual/estimated excise tax revenue could result in a similar problem which occurred in FY 1994 when a Treasury clerical error understated HTF revenue by $1.59 billion.
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Mr. MEAD. It is mentioned in the prepared statement, I mention it in the oral statement. I want to elevate this, because I think it deserves attention. This is totally external to the DOT. We are in a sense hostage to the Treasury Department determination.
Mr. WOLF. I have not read your full statement. But I will.
Mr. MEAD. When GAO comes up this afternoon, Mr. Wolf, they may be in a position to give you a number but we are very concerned about it. We are working with GAO. But it is going to require a high level of attention. The Deputy Secretary is aware of this and so is the Secretary.
Something like this happened several years ago, and it amounted to a couple billion dollars.
Mr. WOLF. A couple billion dollars?
Mr. MEAD. So that is why I don't want to mislead the committee into saying this is just an issue of a few hundred thousand dollars.
Mr. WEINTROB. It is important to say were it not for the question of this number, and us not being able to rely on this number, everything else we have seen in the department with regards to the Highway Trust Fund is accurate and most likely Federal highways will get on their statements an unqualified opinion as they did last year.
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Mr. MEAD. Mr. Chairman, you will recall also something like this happened on aviation, in which the Treasury Department was crediting billions of dollars that they did not have, and as a result of that, Congress had to move up its timetable for reauthorizing the aviation taxes. My recollection is Congress had not planned to do that for several more months, and when they learned there was little money left in the Aviation Trust Fund, they had to do something quickly.
CLOSING REMARKS
Mr. WOLF. Okay. Well, I appreciate your testimony very, very much. I just want the record to show that I and the Members of the committee appreciate so much you and your staff, the degree of professionalism, the degree of honesty, the degree of candor, and also, in an appropriate way, not to attack other people or seek a headline. We haven't tried to make headlines here, but just good, honest information that helps us.
I think the Secretary should be commended for selecting you for the job, because I think it strengthens him and his operation of the department and the operation of all of his people. So I do appreciate it very, very much. You can take back to the people who are not here from your office how much we appreciate it. We will submit a number of other questions. It is 1 o'clock and we are going to vote soon. We will submit a number of other questions for the record, and thank you very much.
Mr. MEAD. Thank you very much, and, for the staff too, your comments, we will pass those on.
"The Official Committee record contains additional material here."
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Thursday, February 12, 1998.
U.S. GENERAL ACCOUNTING OFFICE
WITNESSES
JOHN H. ANDERSON, JR., DIRECTOR FOR TRANSPORTATION ISSUES, RESOURCES COMMUNITY AND ECONOMIC DEVELOPMENT DIVISION
JOEL WILLEMSSEN, DIRECTOR FOR CIVIL AGENCIES INFORMATION SYSTEMS
JOSEPH CHRISTOFF, ASSISTANT DIRECTOR
ROBERT LEVIN, ASSISTANT DIRECTOR
JAMES RATZENBERGER, ASSISTANT DIRECTOR
MARNIE SHAUL, ASSISTANT DIRECTOR
RONALD STOUFFER, ASSISTANT DIRECTOR
ROBERT WHITE, ASSISTANT DIRECTOR
RANDALL WILLIAMSON, ASSISTANT DIRECTOR
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Introductory Remarks
Mr. WOLF. Welcome to the Committee. We appreciate your coming up. Your full testimony will appear in the record as read, and you can proceed as you see fit.
Mr. ANDERSON. All right. Thank you, Mr. Wolf. I am pleased to be here today to discuss some important challenges facing the Department of Transportation in 1999 and beyond.
With me are the cast of characters that are responsible for the bulk of work that GAO does for you in the transportation area, and I will just introduce them. First, on my right is Joel Willemssen. He is responsible for reviewing DOT's year 2000 problems, along with year 2000 issues at other Federal agencies.
I also have my assistant directors who head up the work we do in the various areas, Joe Christoff, Bob Levin, Jim Ratzenberger, Marnie Shaul, Ron Stouffer, Bob White, and Randy Williamson. And I will summarize my statement and ask that the entire statement be entered into the record.
SURFACE TRANSPORTATION PROGRAMS
First, I will discuss the Department's challenges in managing its surface transportation programs. Improved oversight of highway and transit projects, costing hundreds of millions to billions of dollars, is needed to ensure that they are well managed, can be successfully financed, and costs are controlled.
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At your request, Mr. Chairman, we have reviewed the cost and financing of eight major infrastructure projects that are estimated to cost a total of $23 billion, and that report is being issued to you today. We found that cost increases, schedule delays, and financing problems continue to be associated with most of these projects. For example, regarding the Los Angeles Red Line subway, construction has been suspended for at least 6 months on two key extensions because of severe financial difficulties.
Second, DOT's budget calls for accelerating the deployment of intelligent transportation systems. Before widespread deployment can occur, however, major obstacles such as the lack of technical knowledge at the State and local level need to be addressed.
Third, we have testified before this subcommittee that DOT could potentially save millions of dollars by reorganizing its extensive field office structure. DOT has begun to examine restructuring FHWA's nine regional offices and co-locating 160 field offices at 50 sites. It is unclear, however, when any reorganizations will take place and whether any cost savings will result from these efforts.
Additional challenges face the Department as it tries to achieve improvements in rail and highway safety. For example, 10 rail accidents and collisions in the summer of 1997 have raised questions about the effectiveness of the Department's new rail safety program. In addition, the Department's efforts to use performance-based data to better target commercial carriers for safety reviews will be hampered by the lack of complete timely data from the States.
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FEDERAL AVIATION ADMINISTRATION
I will now turn to the Federal Aviation Administration, which faces several formidable challenges. For example, FAA has been too slow in making its computer systems ready for the year 2000. At its current pace, it will not make it in time. As a result, hundreds of computer systems that are critical to FAA's operations, such as monitoring and controlling air traffic, could fail to perform as needed. In addition, despite a number of assessments over the past year, a consensus does not exist regarding FAA's future funding needs or an appropriate financing mechanism.
However, any estimate of those needs will likely increase as FAA confronts the challenge of preparing its computer systems for the year 2000, addresses cost growth associated with projects to modernize its aging air traffic control system, and implements security initiatives in response to the changing terrorist threat.
Additional challenges face the agency in improving the safety of our aviation system. For example, FAA needs to improve its oversight of aircraft repair stations, enhance its guidance and oversight of pilot training and crew resource management—human resource management issues—and resolve data protection issues to enhance the usefulness of recorded flight data to improve safety.
COAST GUARD
Turning now to the Coast Guard, with a relatively flat budget in recent years, the Coast Guard will need to continue cost cutting efforts and achieve savings far beyond its accomplishments from recent streamlining efforts. Such efforts are particularly important as the organization embarks on a costly capital improvement program to replace or modernize its aging fleet of cutters and aircraft. This effort is estimated to cost as much as $15 billion over the next 20 years.
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Mr. WOLF. Did you say billion?
Mr. ANDERSON. Yes. We have urged the Coast Guard to develop a more comprehensive strategy to achieve additional cost savings which may necessitate a fundamental reassessment of the agency's missions, goals, services, and customer needs. Such a reassessment could point to other cost-cutting measures, such as closing facilities and perhaps scaling back activities that will involve very difficult choices.
AMTRAK
Another area of continuing concern is Amtrak. Despite congressional action last year to improve Amtrak's financial health by injecting the corporation with $2.2 billion that may be used for capital improvements, Amtrak is still in a very precarious financial position and remains heavily dependent on Federal assistance.
Amtrak's net loss for fiscal year 1997 was $762 million. DOT has requested $621 million for Amtrak's capital expenses but not funds for operating expenses in 1999. However, Amtrak's capital requirements go well beyond the amount proposed in DOT's budget and the $2.2 billion made available during 1998 and 1999 by the Taxpayer Relief Act.
Amtrak's ability to meet its capital needs could be further reduced to the extent that it uses a portion of the $2.2 billion for expenses historically funded with operating subsidies. In our view, Amtrak will continue to require Federal financial support, both operating and capital, well into the future.
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TRANSPORTATION DEPARTMENT-WIDE ISSUES
Finally, DOT must confront Department-wide issues that affect its ability to effectively manage programs and address performance concerns. We have repeatedly pointed out serious problems with the Department's information resources and database management. These problems will be exacerbated by challenges facing the Department in addressing the year 2000 problem.
In addition, DOT needs to address the issue of unreliable financial management information due to problems with its financial reports, accounting systems and internal controls.
And, finally, if DOT can develop more results-oriented, performance-based management information, as envisioned by the Government Performance and Results Act, this could lead to improvement in the return taxpayers receive for their investment in transportation programs. The Results Act provides DOT with a useful tool to improve its program management, address performance challenges, and enhance the quality of information needed for congressional oversight.
That concludes my oral statement. I will be glad to answer questions.
[The prepared statement of Mr. Anderson follows:]
"The Official Committee record contains additional material here."
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HIGHWAY TRUST FUND AUDIT
Mr. WOLF. Thank you very much, Mr. Anderson.
Let me just begin by thanking you and your very capable staff for the good work that you do. It has been very helpful to the committee over the many years to have both the GAO and the IG come up before our modal hearings. I don't know if other subcommittees use this service, but I think it has been very, very helpful. I think it has been good for the taxpayer. I think it has been good for the Congress. I think it has just been a very, very good thing. So I do want you and the people who are not with you today to know that we do appreciate it. I think the system has been very effective.
We have a number of questions, and you raised a number of issues on the year 2000 and other things. We will get to them.
We heard that an ongoing—and we mentioned this to Mr. Mead today, who is your predecessor—that in an ongoing audit of the Highway Trust Fund financial statement, your auditors have raised a concern that the Department of the Treasury may not have an accurate understanding of how much money is in the trust fund because of deficiencies at IRS.
Would you explain that to us, and could you tell me how much money could the trust fund balance be off? This is very important.
Mr. ANDERSON. Yes.
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Mr. WOLF. And we are going to need this relatively soon, because there is a great debate raging as to what do you do with the trust fund money.
Mr. ANDERSON. Sure. We have an ongoing review right now, and I know that our Accounting and Information Management Division is planning on getting a report, I think, by the end of this month, to Ken Mead to let him know the results.
So I can't really talk specifics. I know that they have found some errors.
Mr. WOLF. How much could it be off?
[The information follows:]
Our procedures were designed to assist the IG's in assessing controls surrounding the collection and allocation of excise taxes to various trust funds. Our work was not designed to determine whether the balances in the funds were correct or not—that overall determination must be made by the IG. However, we did determine that there are some serious control problems related to the whole process. Therefore, the potential for the balance to be misstated certainly exists. I understand that the DOT IG's report is expected to be issued in early March.
BOSTON CENTRAL ARTERY/TUNNEL PROJECT
Mr. WOLF. Your testimony indicates that the net project costs and funding needs on the Big Dig have remained relatively constant in the 6 months since you reported on them last summer but that further cost increases of some magnitude are likely before the project is complete.
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Why are the construction costs still increasing despite additional actions taken by the State?
Mr. ANDERSON. I think that there are just some things that, even though the State is taking a number of actions to try to control costs and reduce them, there are some increases that are occurring that they just can't control. They set some fairly stringent cost containment goals: such that if they don't incur any additional cost increases on their ongoing construction contracts, the 30-some additional construction contracts that they have left to award would have to grow by less than 1 percent over current estimates in order for them not to incur any additional cost increases.
Mr. WOLF. Did you hear—this is not necessarily a question. We asked the IG today, the head of the Big Dig hired an outside coach to coach him for the CBS 60 Minutes.
Mr. ANDERSON. I read those articles, yes. We didn't look into that at all, but I read those articles.
Mr. WOLF. I understand that the State of Massachusetts did not have a cost containment program in effect until 1995. Since that time, the State has established aggressive goals to contain and control the project's construction. However, your report indicates that it is not meeting the goals. Are the goals too aggressive and too unrealistic?
Mr. ANDERSON. You know, in discussions that my staff have had with the project staff and FHWA, there is always a little bit of honest disagreement about, well, should you set the goals real high in the hopes that you are going to be more successful?
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Clearly, they have not been successful in meeting their goals. They have set fairly high goals. They have recently reduced cost growth on on-going construction contracts, I believe, from 17 percent to about 14 percent or something like that. But they are still not meeting their goal of 10.7 percent.
[The information follows:]
These goals form the basis for the cost estimate and finance plan. Last July we recommended that the state decouple its goals from its cost estimate. In other words, keep the aggressive goals to manage your contractors and try to hold costs down, but revise the cost estimate to be more realistic with respect to what the actual experience has been.
CENTRAL ARTERY FINANCE PLAN
Mr. WOLF. Your report indicates that the State's finance fund does not adequately consider how additional needs would be met if cost increases or funding is less than predicted. The recent finance plan includes a discussion of your recommendation and states that such contingencies were addressed in an earlier finance plan. Why is that discussion insufficient, and how has the Federal Highway Administration responded to your concerns?
Mr. ANDERSON. Overall, we made a number of suggestions, and I know we spoke with your staff about some concerns we had with the latest finance plan, and I believe that they have taken into account many of our concerns. One of them that they haven't addressed, though, is this idea about having a contingency plan and what they are going to do if costs increase or funding is not sufficient.
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And I can understand from a political point of view, that they might want to keep close to the vest what their alternatives might be if costs increase and they have to get some more funds somewhere else. But we continue to believe that they need to disclose to the taxpayers and others that are interested in the project just what the risks are and what the possibilities are for dealing with it.
COST ESTIMATES
Mr. WOLF. Your report further indicates that the Big Dig's cost estimate does not include the cost of borrowing. Borrowing costs for grant anticipation notes and other bridge financing are estimated to cost roughly $776 million. Why are the costs not included in the project's cost estimate?
Mr. ANDERSON. This has been sort of a standard practice, I believe. FHWA does not require states to prepare total cost estimates for projects and none of the highway projects we looked at included this cost.
Mr. WOLF. What about in transit projects?
Mr. ANDERSON. In transit projects?
Mr. STOUFFER. Yes.
Mr. WOLF. The interest is included in transit projects?
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Mr. STOUFFER. The full funding grant agreement does lay out the interest charges in the FTA grants, right. This is the difference between FTA and FHWA.
There is a difference between FHWA and FTA. FTA full funding grant agreements do outline or lay out the costs of borrowing. FHWA, as a matter of tradition, has not done that. One of the changes we were able to persuade FHWA and the state to make in their finance plan was to disclose the value of some of the borrowing costs and the fact that all borrowing costs were not included in the Big Dig cost estimate.
Mr. WOLF. But it is close to a billion dollars?
Mr. STOUFFER. It could be.
Mr. WOLF. Well, it would seem to me the recommendation ought to be enacted by the Federal Highway Administration so that we have total actual costs. On your credit cards, your interest is a cost, you have to pay for it, and it is something you have to budget in your overall monthly budget or else you are in trouble.
Mr. ANDERSON. Right.
Mr. STOUFFER. One of the things that we point out in our February 1997 large dollar report is that FHWA has not defined what total costs are. That is one of the weaknesses in the system in terms of managing highway projects.
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CENTRAL ARTERY TOTAL COST ESTIMATES
Mr. WOLF. Well, ultimately what do you think the total costs of the Big Dig will be?
Mr. ANDERSON. You know, Mr. Chairman, I wish I could tell you what that number was. I think it is likely to grow, and it is likely to grow in terms of hundreds of millions of dollars. They still have a number of construction contracts to award, and if they can't control their cost growth or find savings in other areas, it could potentially go up significantly.
Mr. WOLF. If it does, what would that be in? What would we be talking about? How many billions of dollars?
I mean overall, if you added these concerns to what the base is, what do you think the costs could be potentially?
Mr. ANDERSON. There could be exposure, of up to another $400 million.
Mr. WOLF. For a total of?
Mr. ANDERSON. That would bring the total net cost to $11.2 billion if they would go up that much, but there is no real way of knowing until the things actually happen. That is why I think it is a good idea to keep tracking, keep monitoring the project closely.
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PUBLIC RELATIONS COST
Mr. WOLF. We have heard that they were going to hire a public relations firm to put the good image on. Do you think that should be paid by the Federal Highway Administration or any tax dollars, or do you think that should be paid out of a separate fund that is not——
Mr. ANDERSON. You know I would have to look into that to find out whether or not that would be an authorized use of the funds. I really don't know whether that would be.
Mr. WOLF. If you would supply that, if you could.
Mr. ANDERSON. Okay.
[The information follows:]
In a February 20, 1998, letter FHWA informed the state that federal funds could only be used for public information activities that contributed to helping motorists and better moving traffic through construction areas, or activities that encouraged motorists to use alternate means of transportation during the construction. FHWA further told the state that federal funds could not be used for public information activities with any other objectives. However, according to the solicitation the state sent to prospective contractors, the goals of the 1-year, $2 million public information campaign are to increase awareness and public support for the Central Artery/Tunnel project, remind residents and businesses of the long-term benefits of the project (including new parks, playgrounds, and transit service), encourage residents to continue using downtown businesses and places of entertainment, and thank the public for its patience and understanding to date—as well as persuading motorists to use alternate means of transportation particularly during the construction.
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The project's public information campaign has not yet been designed; prospective firms have submitted proposals and Massachusetts plans to award a contract to one of these firms in mid to late March 1998. FHWA has informed the state that it reserves the right to review each element of the program once it is designed to verify that it meets the conditions laid out in its February 20, 1998, letter. State and FHWA officials told us that the state is prepared to use its own funds for those elements of the program that FHWA determines is not eligible for federal funding.
Mr. OLVER. Mr. Chairman.
Mr. WOLF. Yes.
Mr. OLVER. If I may, if you are going to go on, would it be possible to just piggy-back on to a couple of things in relation to the Big Dig?
Mr. WOLF. Yes. I was finished, and I was going to recognize Mr. Packard.
Mr. OLVER. Okay.
Mr. WOLF. Mr. Packard.
ALAMEDA CORRIDOR PROJECT
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Mr. PACKARD. Thank you very much, Mr. Chairman.
I apologize for not being here for your testimony. I have been holding hearings of my own, and it has interfered and conflicted. But I will read your testimony.
I am pleased, Mr. Anderson, to hear the GAO's report on the Alameda corridor project, which is of great importance to southern California and to me, too, and to the Nation generally. I would like to underscore my deep commitment to the national significance of this project. It is expected to cost a significant amount. It is a 20-mile dedicated rail link.
What is the status of the project, and what challenges do you find that it currently faces?
Mr. ANDERSON. I think the biggest challenge that it faces right now is preparing for construction, I think it is supposed to start in 1999 and be completed by 2001—if I am correct on that, Joe.
Mr. CHRISTOFF. Yes.
Mr. ANDERSON. I think the biggest challenge is trying to meet that rather ambitious construction schedule. They are going to be using a design-build technique where they award the same contractor the contract to design and build the thing. And, you know, 10 miles of that project is going to be a trench that is going to be 30 feet deep and 50 feet wide, and there are problems that could come up in terms of hazardous materials, groundwater, electrical utility lines, and things like that that they are going to encounter. And I think that is probably the biggest unknown associated with the project.
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There is also some concern—I think MTA owes another $218 million to help fund the project, and, you know, they are in dire straits.
Mr. PACKARD. Is that not, though, a binding contract and thus they will have to come up with that—their share of that contract?
Mr. ANDERSON. I understand that they are committed to it, yes.
ALAMEDA CORRIDOR FUNDING
Mr. PACKARD. And from what source will those funds come?
Mr. ANDERSON. I don't know.
Joe?
Mr. CHRISTOFF. It seems to be changing every month in terms of where MTA believes that it will be getting the funds. MTA official believe that of their $218 million commitments, $68 million will come from revenue bonds based upon local Proposition C sales taxes, and they are hoping another $150 million will come as a grant from the State that they could then pass on to the Alameda corridor.
Mr. PACKARD. Okay. How will the IRS ruling limit segments of the project that can be financed through tax-exempt revenue bonds, and how will that affect the schedule?
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Mr. ANDERSON. Well, the IRS ruling, I think, could just drive up the long-term cost of financing the project because they won't be able to issue the, full amount of the project's bonds as tax-free bonds.
Mr. CHRISTOFF. That is correct. The IRS is saying that there are certain parts of the Alameda corridor that are for public purposes like highways and therefore you can issue tax-exempt bonds for these project segments.
The rail line itself would be for private sector purposes, and must be financed with taxable bonds. So they are trying to figure out the mix of these $866 million in taxable and tax exempt, revenue bonds, and that would affect the long-term interest rates on the bonds.
Mr. PACKARD. Has FHWA required a financing plan, and do you feel that one is necessary?
Mr. CHRISTOFF. The Alameda corridor does have a preliminary finance plan, as required by the $400 million Federal loan agreement. It is a finance plan that is going to be constantly revised as project officials try to assess the IRS ruling.
Mr. PACKARD. In your review, do you feel that the project is moving along then as it should and all the parts are coming together?
Mr. ANDERSON. As far as we can tell right now. In fact, we toured the project last summer, and you can actually see a need for it. There is a lot of congestion that occurs along the corridor.
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Mr. PACKARD. And it could become a prototype for other places in the country, I would imagine.
Mr. ANDERSON. Yes.
Mr. PACKARD. Thank you very much, Mr. Chairman.
Mr. WOLF. Thank you, Mr. Packard.
Mr. Olver.
BOSTON CENTRAL ARTERY/TUNNEL PROJECT MANAGEMENT
Mr. OLVER. Thank you, Mr. Chairman.
I would like to go back and ask a couple of things about the Big Dig situation. Do you think that this project is well managed?
Mr. ANDERSON. Yes. Overall, we can see that there is a concerted effort on the part of the folks involved with that project to try to keep the costs controlled and that sort of thing, yes.
Mr. OLVER. I think—I may have missed this, but did the chairman ask whether there had been a cost containment program in effect prior to 1995?
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Mr. ANDERSON. Yes.
Mr. OLVER. Or is this cost containment program a very recent thing?
Mr. ANDERSON. No; I think they have had a cost containment program for some time.
Mr. OLVER. For some time?
Mr. ANDERSON. Yes. I am not sure when they actually instituted it.
[The information follows:
Massachusetts did not have a formal cost containment program in place until 1995. Certainly they were doing things such as value engineering before that time; but a formal program with specific goals and strategies for managing costs was not instituted until 1995.
Mr. OLVER. So some of the changes you are seeing—by the way, you said that maybe $400 million or something like that was the number that might be expected as additional costs. That does not, apparently, include the $776 million, which is the borrowing costs of the anticipation notes.
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Mr. ANDERSON. That is correct.
Mr. OLVER. Which are not included, we have discovered, in these type of highway projects as opposed to transit projects.
Mr. ANDERSON. That is correct.
Mr. OLVER. So would I be right in saying that we should expect the total costs to go up $1.2 billion? Or have I somehow missed something in here?
Mr. ANDERSON. As sort of a standard operating procedure, none of the highway projects we looked at include the interest costs. So when you add those in, you are being unique with regard to the central artery. But yes, if you want to add those, you can.
Mr. OLVER. Okay. But whatever the costs are, are then—whatever cost changes are here are not now attributable, in your view, to any kind of poor management, any kind of lack of management——
Mr. ANDERSON. Not anything——
Mr. OLVER [continuing]. That has taken place?
Mr. ANDERSON. Not anything that we have seen. These are unforeseen things that happen. You have construction problems that occur. Once you basically design, when you actually get in there and dig up the ground, you find some unique unexpected problems that increase costs.
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But we are not aware of any particular management problems or anything like that.
Mr. STOUFFER. No. In fact, over the past couple of years, management has worked very hard to come up with savings to offset the cost growth in the construction area. They have come up with about a billion dollars in savings to offset it against the construction costs growth.
Mr. OLVER. To the point where you are using this as a suggestion as to what we ought to be doing for other big projects in terms of the general mechanisms, the pattern of mechanisms?
Mr. ANDERSON. Clearly. The cost containment processes that they are trying to use are things that should be emulated elsewhere, yes.
I think our biggest concern with the Big Dig over the 3 years or so that we have been looking at it for the chairman, is having more full disclosure in terms of the finance plan, in terms of what is at risk and what is the current total estimated cost of the project. And I think this finance plan, with the recent changes that have been made to it, comes much closer to it than ever before.
Mr. OLVER. Well, Mr. Chairman, given that I am from Massachusetts but from the far end of the State from where the Big Dig is, I can't but concur that it would be nice to know what the implications might be for us in this process. But it is also good to know that the project is managed well and that these cost changes which have occurred over time are not some error in that process.
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That is all. Thank you.
Mr. WOLF. Thank you. Thank you, Mr. Olver.
We have been a bit concerned, you know, about that. So what the committee did several years ago is to develop a relationship with the IG and the GAO and the Federal Highway on these large megaprojects to catch them, and we learned a lot from the Big Dig, and we are doing that on other ones.
So I think that knowing that the IG and the GAO are going to be looking at it, I think, puts a certain incentive in for the Federal Highway Administration and for whatever project is involved. So it has worked very, very well.
Do you have any other questions?
Mr. OLVER. No; that is all. Thank you, Mr. Chairman.
BART PROJECT TO SAN FRANCISCO AIRPORT
Mr. WOLF. Another large project is the BART extension to San Francisco. The project is estimated to cost $1.2 billion. Can you bring the committee up to date? We had asked you to look at this project, too.
Mr. ANDERSON. Yes. Basically, this project has moved along considerably. The biggest question it faces now is that it is going to have some construction coming up, too. Some of the concerns in the past in terms of the negotiations with the airport and what were going to happen with some of those things have been resolved.
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Joe, do you want to expand on BART at all?
Mr. CHRISTOFF. Since we talked about BART last year, the Federal Transit Administration signed a full funding grant agreement with BART in June of 1997 and committed the Federal Government to provide $750 million. Their big construction effort is going to begin this year. Next month, they are going to be signing four very important construction contracts that are expected to cost about $400 million.
Our key concern is that BART's current finance plan comes up a bit short in terms of having a complete package. They have to have some additional short-term financing or debt financing. We are estimating that they will need an additional $30 million just for their short-term borrowing program, primarily to reflect the slower pace in receiving Federal appropriations than was expected under the full funding grant agreement and their current finance plan.
BART RIGHTS-OF-WAY THROUGH CEMETERIES
Mr. WOLF. The proposed alignment of the BART extension goes through cemeteries, we were told, in the area of Colma. These rights-of-ways were to be resolved in the legislation that passed both houses of the California legislature but were vetoed by the Governor. How will the issue be resolved, and how will it impact on both the schedule and the costs of the extension?
Mr. CHRISTOFF. I think when we talked to BART about that just a couple of weeks ago, they are trying to resolve the cemetery issue.
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Mr. WOLF. Is it one cemetery?
Mr. CHRISTOFF. I don't know. I am not certain.
Mr. WOLF. I thought it was several cemeteries six of eight.
Mr. CHRISTOFF. Six of eight?
Mr. WOLF. Yes, so it is not just one.
Mr. CHRISTOFF. We can look into that further.
Mr. WOLF. Would you, please?
Mr. CHRISTOFF. Sure.
Mr. WOLF. I cut you off. You were finishing something.
Mr. CHRISTOFF. No. I mean, when we talked about——
Mr. WOLF. Do you have any indication of what it will do with regard to the schedule and the costs?
Mr. CHRISTOFF. The schedule, I don't know. I don't know. I am sure it wouldn't affect the costs, but it might affect the schedule just in terms of the delays.
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Mr. WOLF. Well, if it affects the schedules it could affect the costs?
Mr. CHRISTOFF. Yes.
Mr. WOLF. If you could look at that and get back to us——
Mr. CHRISTOFF. Certainly.
Mr. WOLF [continuing]. Relatively soon before we move ahead.
Mr. CHRISTOFF. Absolutely.
[The information follows:]
BART has reached agreement with all seven of the Colma Cemeteries for construction activities during the airport extension. The final agreement, with Cypress Lawn Cemetery, was completed in January 1998. BART agreed to shorten the construction time affecting the cemetery from 36 to 18 months, monitor cemetery irrigation wells, not disrupt services, and not harm cemetery structures such as historic mausoleums. Cypress Lawn Cemetery agreed to drop its lawsuit against BART, and there are no other lawsuits pending with the cemeteries. The airport extension completion date has not changed as a result of these agreements. BART must still complete its acquisition of right-of-way from the cemeteries.
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BART COST ESTIMATES
Mr. WOLF. How often are they required to submit the periodic cost estimates to FTA?
Mr. CHRISTOFF. They are not. There is no requirement that a finance plan, for example, be updated. But BART does intend to update their finance plan in March, primarily for two reasons. Number one, their current finance plan is not reflective of what the full funding grant agreement says that they are to get from the federal government. It is overly optimistic. Second, once BART receives final bids on its construction contracts, it is going to tell them how accurate their estimates were. So they are going to have to update that finance plan, and they intend to do so in March.
Mr. WOLF. They are going to do it, but they are not required, is that it?
Mr. CHRISTOFF. Correct. All recipients of full funding grant agreements are required to work with the Federal Transit Administration and submit quarterly reports about the projects' schedule and financing. But there is no requirement that a finance plan be periodically updated.
LOS ANGELES RED LINE PROJECT
Mr. WOLF. In January, the Los Angeles Metropolitan Transportation Authority decided to suspend construction for at least 6 months on two of the four remaining extensions of the Los Angeles Red Line Subway project while it addresses severe financial difficulties. ABC News reported that the termination costs exceed $75 million. Are these reports accurate?
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Mr. ANDERSON. We think—we don't know exactly what the potential is in terms of increasing the costs; but it could—in terms of known costs, growth and the slippage, was it something like $28 million?
Mr. STOUFFER. We were told $28 million by the MTA that that would be their demobilization costs for the Red and Blue lines. That is the cost of suspending the contracts, terminating the contracts and making sure that the designs are preserved so that they can be picked up again in the future. Now, that $28 million did not include employee severence costs.
Now there could be increased costs in terms of picking up these designs after a given shelf life and moving on with them in the future. That could account for some of the difference between the number they told us and what ABC reported.
Mr. ANDERSON. I think that this is going to be one thing, Mr. Chairman, that they are going to have to flesh out in their restructuring plan that they come up with, too, because there undoubtedly will be some additional costs associated with this.
RED LINE FUNDING SHORTFALL
Mr. WOLF. Your report indicates that the total Red Line funding shortfall has increased to $617 million and that the Congress has provided $302 million less than FTA committed in the full funding grant agreement.
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While construction has been suspended on the east side and mid-city extensions, construction has not been suspended on the North Hollywood segment, which we thought was on schedule but we heard today that maybe it has fallen a little bit behind schedule. What funding shortfalls exist solely for this segment?
Mr. ANDERSON. I don't know that we have the numbers that break it down for that segment. I know the $302 million was the shortage in Federal funds, and $315 million was the shortfall for State and local funds. Do we have it by segment?
Mr. STOUFFER. I believe there is another about $185 million that was committed by the Federal full funding grant agreement for the North Hollywood segment of the Red Line; and, of course, they have asked for another $100 million, I believe, this year.
Mr. WOLF. Well, do you believe it is on budget and on schedule?
Mr. STOUFFER. Fairly close, yes.
Mr. WOLF. What is your definition of fairly close? Because the——
Mr. STOUFFER. As far as we know, within a month or so of May 2000. They are scheduled to complete North Hollywood by May 2000, ahead of the December 2000 date set in the full funding grant agreement.
Mr. WOLF. Are there any potential problems for completing this segment?
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Mr. STOUFFER. None that we are aware of. The extension is about 50 percent constructed.
Mr. WOLF. Your report indicates that California has withheld $20 million for the Red Line. What is the status of these funds?
Mr. STOUFFER. I don't know what the status of the state commitment is. I would suspect—and maybe I shouldn't hazard a guess—but, the whole Red Line program has suffered a series of problems, including construction problems on the other segments, design problems, sinkholes, that perhaps they, like the Federal Government, have been reluctant to follow through with their funding commitments until a recovery plan is approved.
Mr. WOLF. So what do you think is going to happen out there? Do you think that they are going to go ahead with the North Hollywood segment and what do you think is going to happen on the east side and mid-city extension?
Mr. ANDERSON. I don't think we really know.
Mr. WOLF. What do you think should happen?
Mr. ANDERSON. Well, I would really like to see the restructuring plan come forth and see them actually lay out just exactly what they have in mind. I don't think that this is going to happen anywhere in the near time frame. It might be more than 6 months away.
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Mr. WOLF. Do you think they may go ahead with North Hollywood and then do some other bus or fixed guideway to the other?
Mr. ANDERSON. I would imagine that that would be an option that they would have to consider. Then, of course, the question comes up how many—how much of the Federal funds that had originally been approved as part of the full funding grant agreement and should continue to go if it is not the same project as originally envisioned.
Mr. WOLF. Well, my own sense—and I am only speaking for myself—but I would think that whatever the Federal Government committed ought to be continued, because they certainly have a transportation problem.
But if they in good faith had the courage to come in and say, this system—North Hollywood is good, the east side and mid-city is not but we want to do an aggressive fixed guideway, rail/bus system that would move people, then I would think—I would hope this committee would be understanding of that.
I commend Mayor Riordan and the city council because it is very tough to tell people that you are not going to build what you said but yet you have a system that will move as many people or more people with a reliable, dependable rail, bus, new type system that will get people in and out. And I would hope that Congress could be sympathetic. Because whether you do that—and I think they are going to have a hard time funding this thing on rail—they do have a transportation problem.
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Mr. STOUFFER. Sir, if I could clarify one statement I just made.
MTA has requested $100 million for segment 3 for fiscal year 1999. The President's budget includes $100 million for the L.A. subway. $62 million of that would be for the North Hollywood extension; $38 million of it would be for the east side, which is almost 100 percent designed. The mid-city line is much farther behind that.
Mr. WOLF. So you recommend that Congress not give them that, then?
Mr. STOUFFER. I am not sure I would say that. But what MTA has told us, that if the suspension holds longer than the 6 months—and MTA received the full $100 million—that they would transfer the $38 million that was originally targeted for——
Mr. WOLF. To the North Hollywood.
Mr. STOUFFER. To North Hollywood, right, which is to receive about $185 million more in federal funds under the existing full funding grant agreement.
FEDERAL FUNDING FOR NEW TRANSIT PROJECTS
Mr. WOLF. The administration's budget for new starts calls for a total of $876 million for transit—Mr. Olver, any time you have something, just come on in—for transit new starts projects. This level represents the funding commitments contained in the 14 full funding grant agreements currently in place and any accumulated shortfalls, with the exception of L.A., for which funds are only requested for the North Hollywood segment.
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Of the $876 million, $144 million is for accumulated shortfalls. To what extent have these accumulated shortfalls affected the individual project's ability to proceed with their construction activities?
Mr. ANDERSON. I am not sure which portion of that $144 million is applicable to the projects that we looked at.
I know, Joe, you have looked at it for three of them, right?
Mr. CHRISTOFF. Uh-huh. Some of that $144 million, I think about $40 million of the L.A. subway would be in addition; another $24 million for St. Louis.
[The information follows:]
Some of that $144 million, for example about $24 million of the St. Louis-St. Clair extension request, is above the amount due the projects through fiscal year 1999 under their full funding grant agreements.
Mr. STOUFFER. Right.
Mr. CHRISTOFF. Overall, most projects can adjust to whatever funding levels the Congress provides. For example, BART has not received all of the commitments under the full funding grant agreement, it has adjusted by establishing a short-term borrowing program to make up some of the funding gaps during construction.
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Certainly, all the projects would prefer to have the commitments that the Federal Government has made to keep on schedule and keep costs down. But, at the same time, the projects do have the capabilities to have short-term debt financing to fill in some of the funding gaps.
SOUTH BOSTON PIERS PROJECT
Mr. WOLF. The South Boston Piers project has an accumulated shortfall of over $34 million. To what extent can individual projects spend these additional resources effectively and efficiently this fiscal year, should they be appropriated?
Mr. CHRISTOFF. Well, I think all the projects probably can effectively spend the additional money, because oftentimes they have not gotten the full funding grant commitments from previous years. If projects get more money, that means they can speed up construction and reduce debt financing.
We haven't looked at Boston. Or all 15 transit projects that have full funding grant agreements.
Mr. WOLF. Is there an urgency for the $144 million?
Mr. CHRISTOFF. Again, from the project's perspective, the additional funds could be used. But we have seen in our review of mega-projects that, if the money isn't necessarily forthcoming to the full levels in the full funding grant agreement, projects adjust. They have debt financing mechanisms in which they can fill in those funding gaps.
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DISCRETIONARY HIGHWAY GRANTS
Mr. WOLF. Okay. You recently completed a report that reviewed the selection process and criteria that DOT uses to fund projects under its discretionary highway programs to determine how the process has changed over the years and how these changes may have affected which projects the Department selects for discretionary funding. What were the conclusions of your report?
Mr. ANDERSON. Basically, what we found was that, from 1992 to 1994, there was a slightly different process that was used to select projects in the discretionary programs. It has always been a two-phase process where program staff will first look at the projects and make recommendations and then it goes to the Office of the Administrator for decisions.
From 1992 to 1994, 98 percent of the projects that the program staff recommended were finally selected. From 1995 to 1997, I think the Office of the Administrator took advantage of the discretion that the program allows, and there wasn't nearly the same level of match. I think 73 percent of the projects recommended by staff.
Mr. WOLF. What was it?
Mr. ANDERSON. 73 percent of the selected projects were ranked either most promising or promising projects.
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Mr. WOLF. Were you able to determine that the administrator-funded projects were projects that the program staff had evaluated as not qualified?
Mr. ANDERSON. No.
Mr. CHRISTOFF. No. There were several bridge program projects that were administratively not qualified. However, there were many projects that were rated as qualified.
FHWA has a four-tiered priority category ranking system: most promising, promising, qualified, and not qualified. There were many projects, particularly within the public lands discretionary program, that were rated qualified that were selected over projects that had been rated most promising.
Mr. WOLF. What do you personally believe the Administrator used to select the final project awards?
Mr. ANDERSON. We were told that they wanted to get some geographic distribution in terms of having projects spread throughout the country. That was the explanation that we were given.
Mr. WOLF. Is that political or is that scientific?
Mr. ANDERSON. I don't know. They were very careful in the words that they chose, and we couldn't find any evidence to say otherwise.
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Mr. WOLF. You have looked at all the places that they have done?
Mr. ANDERSON. We didn't look at any of the individual projects. We looked at them in total.
Mr. WOLF. I think you ought to do that. Why don't you do that?
Mr. ANDERSON. Okay.
Mr. CHRISTOFF. For some of the projects, FHWA was administratively and statutorily required to select projects from certain States. For example, in the public lands program there is a requirement that DOT give preference to projects from States with at least 3 percent of their lands that are Federal. So most of the public lands money you will see went to California, Montana, Arizona.
Mr. WOLF. Well, why don't you just look at the different projects?
Mr. CHRISTOFF. We will.
Mr. WOLF. And your report indicated that the Administrator relies on other factors, including congressional earmarks—you did say that, didn't you?
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Mr. CHRISTOFF. We did. We were quoting FHWA.
Mr. WOLF [continuing]. In making final determinations. Did it seem strange to you that this was a factor used by the Administrator over the last several years, notwithstanding the fact that the Congress has discontinued the practice of earmarking discretionary highway funding since 1996?
Mr. ANDERSON. I guess we didn't see anything in there that specifically prohibited him from doing what he did.
[The information follows:]
In addition, even though no earmarks were in the conference reports, earmarks were listed in the Senate reports, which FHWA did factor into its selection process. FHWA views this as addressing congressional interest in a project.
Mr. WOLF. Yes, but, see, we don't do that anymore. We turned that back, the funding to the Governor, and of course, in ISTEA, they deal with that.
Mr. CHRISTOFF. Well, the switch did occur when you banned the use of demo projects, the switch in the process that FHWA used.
Mr. OLVER. Can I follow up on that?
Mr. WOLF. Sure. Go ahead.
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Mr. OLVER. The switch did occur. What am I supposed to infer from that?
Mr. CHRISTOFF. Well, the process changed. Between 1992 and 1994, the process that FHWA used relied on the staff's recommendations. Ninety-eight percent of the time, the Administrator went with the staff's recommendations.
Mr. OLVER. But there were, prior to that time, congressional earmarks?
Mr. CHRISTOFF. Pardon me?
Mr. OLVER. There were, prior to that, congressional earmarks?
Mr. CHRISTOFF. That is correct.
Mr. OLVER. Which would not have had staff recommendations.
Mr. CHRISTOFF. Beginning in 1995, the Office of the Administrator felt that, since it was a discretionary program, he needed to consider other factors that were important in addition to the staff input. Those additional factors that the FHWA staff told us were things such as congressional earmarks, congressional interests and geographic dispersion.
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Mr. OLVER. But there were no congressional earmarks.
Mr. WOLF. But there were no earmarks.
Mr. OLVER. So that certainly was not one of the factors.
But what I was wondering is that we were just substituting for congressional earmarks his use of discretion for geographical distribution, and perhaps the same percentage of projects were coming up. There must have been some congressional earmarks before that time.
Mr. CHRISTOFF. Uh-huh.
Mr. OLVER. I am amazed that 98 percent of the projects used to come up without congressional earmarks. That seems surprising to me. This is very interesting. Okay.
Mr. WOLF. Well, I think Mr. Olver raises a valid point. There will be a day that I am not the chairman of the committee and, whoever is the next chairman can do whatever they want to do. I think most members have been pleased with the fact that this has been a bipartisan, a nonpartisan process, that the funding goes back to the States. Then, you can work with your governor in the process. But I do think it raises a little bit of a question when there were not the earmarks.
Mr. OLVER. May I follow one other question here?
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Mr. WOLF. Yes.
Mr. OLVER. The point of your analysis of not qualified, qualified and——
Mr. ANDERSON. Promising and most promising.
Mr. OLVER [continuing]. Promising and most promising, do you feel the staff had an objective set of criteria in which they were doing that in the first place? I mean, sometimes those processes that staff are using—and staff have been in place for a long period of time—aren't terribly objective, either.
Mr. ANDERSON. That is true.
Joe, do you have anything?
Mr. CHRISTOFF. I don't——
Mr. OLVER. They are certainly different. Whether they are objective or not, I don't know.
Mr. CHRISTOFF. Yes, that is true. A lot of the criteria that was used, either under the old process or the new process, oftentimes is statutory criteria. So in many respects the process was similar in terms of the criteria. Such as in public lands, there are certain States that have a higher percentage of public lands that would get most of the funds. Overall, we felt the staff's criteria was objective.
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Mr. OLVER. All right. I am not going to get anywhere with that.
Mr. WOLF. Well, we need to be candid with the committee, because the Congress shifts back and forth to Republican and Democrat. The administration shifts back to Republican and Democrat. Members have the right to know that there is a consistency.
If you had a Republican administration, I mean, Mr. Olver would have to know that he had a fair——
Mr. CHRISTOFF. Certainly.
Mr. WOLF. You know, a fair shot.
I do sense that you have been a little withholding. You haven't been as forthright as you really could have been on this.
We have attempted to make it truly as nonpartisan as it possibly can be and this is a political process. We have worked very hard up here to make it that way, knowing that, everyone who is up is going to eventually be down, and everyone who is down is eventually—I mean—it just moves. In my time, it has flipped. I came in with Ronald Reagan, and now we have Bill Clinton; and we had Tip O'Neill, and now we have Mr. Gingrich—Speaker Gingrich from Speaker O'Neill. So everything flows.
I think that the members of this committee and the Members of Congress have to know that if they are not in the party in the majority in the Congress or if they are in a party that is not in a majority with regard to the administration, they all have some sense of fairness in this process so that a Republican Congress isn't doing a Democratic Member in or a Democratic administration is not doing a Republican Member in.
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So I think you ought to look at these and see if there is more there than meets the eye. Just so everyone knows.
Mr. CHRISTOFF. We can. We looked at the process, not particularly at the specific projects.
Mr. WOLF. Yes.
Mr. ANDERSON. Part of the problem, too, is I get the impression that there is not a lot of documentation that is going on in terms of the final decisions that were made by the Office of the Administrator. So we can go back and see what we can find.
AMTRAK
Mr. WOLF. All right. We will have a number of other questions for the record.
In 1994, Amtrak undertook a major restructuring effort that sought to make it more self-sufficient. GAO has been reviewing the results of this restructuring effort. How is Amtrak doing to date?
Mr. Olver, any time you want to come in, just go ahead.
Mr. ANDERSON. I think Amtrak is still in dire financial straits. They came up with strategic plans and that sort of thing, and they have been making some progress. They have improved. But they still have a long way to go. They had a loss of some $762 million in 1997.
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Mr. WOLF. $762 million. How did that compare with the previous year?
Mr. ANDERSON. I believe in 1996 the loss was about the same as in 1997, $762 million; and, in 1995, it was $808 million.
A piece of the loss in 1997, it would have been about $63 million more if not for the sale, one-time sale, of some assets that they had, too. So that helped.
Mr. WOLF. Really, though, that doesn't count, because you can't sell your shoes more than once if you only have one pair of shoes.
Mr. ANDERSON. Right.
AMTRAK OPERATING SUBSIDY
Mr. WOLF. I think the loss of Mr. Downs, who was a pretty good fellow and understood, is really a blow to Amtrak. I thought he was getting a handle there.
I am going to ask one more question, and then I am going to defer to Mr. Aderholt.
Congress recently enacted the Amtrak Reform and Accountability Act, which makes the corporation eligible for $5 billion in funds and significantly reforms Amtrak's operations. Also, with the passage of this Act, $2.3 billion in capital funds is released. And you have got to be candid here, because we have got to find out, will this legislation cure Amtrak's problem and eliminate the need for a Federal operating subsidy by the year 2000?
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Mr. ANDERSON. Not necessarily.
There are a number of other things that Amtrak has got to do. We do believe Amtrak is in dire financial straits. There is no question that injecting another $2.2 billion, after you take out about $100 million that has to go to States that don't have Amtrak service and that sort of thing, leaves $2.2 billion from the Taxpayer Relief Act.
If they have to end up using a significant portion of that money to help cover some costs that were traditionally paid out of operating funds, then that reduces the amount of money that you have got left to do capital improvements. And the heart of fixing Amtrak's problems first lies with getting it properly capitalized with enough equipment and getting the equipment and the facilities in good shape so you can attract ridership.
Mr. WOLF. Well, that is what the act was meant to do, that——
Mr. ANDERSON. That is right. But it remains to be seen, because the administration's budget request this year is only asking for funds for capital. And I hear some discussions are going on that maybe they will allow some use of the money, as well as what is allowed under the Taxpayer Relief Act, for maintenance types of costs and things like that.
But it is almost like you are robbing Peter to pay Paul. You are taking it out of one pocket and funding something else out of the other pocket.
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Mr. WOLF. Well, I want Amtrak to survive. I have always been a strong supporter of it.
The members of this committee will move on. Mr. Olver may be ranking on another committee next year or a chairman or who knows what. Mr. Aderholt may go. I may go to something else, and then Amtrak will come in again.
They really have to do what they said they were going to do. I think you are going to have to be very forthright when you look at these things because it will be a new person coming in and saying, well, okay, well, we are going to go another 5 years.
Everything possible should be done to make sure that they can economically survive; and they have said, correct me if I am wrong, that they can do it without an operating subsidy by the year 2002.
Mr. ANDERSON. That is right.
Mr. WOLF. So we are looking for GAO to say it is going to work or if it is not going to work. This is the reason. But the year 2002 is really almost——
Mr. ANDERSON. Very close.
Mr. WOLF [continuing]. Almost here.
Mr. ANDERSON. You know, besides the capital—I will just say a couple more things, Mr. Chairman. Besides the capital, you know, their revenue forecasts have got to come through for them, which is partly dependent upon their capital and their getting the trains and the equipment working like they want them to.
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They have also got to get some of their nonpassenger revenue operations going the way that they want. They have got to reduce their costs. They have got to get some concessions from labor, and they have got to reduce their costs. And I know that the legislation has given them the authority to do that, but now they have got to carry it through.
Mr. WOLF. Mr. Aderholt.
Mr. ADERHOLT. I don't have anything right now.
Mr. WOLF. Okay. We will have a series of questions.
One is, what progress has Amtrak made in eliminating its need for a federal operating subidy. You don't have to answer this, now but we would like information as detailed and as specific as we possibly can. Would all of you bet your life on the fact that there will be no subsidy in the year 2003?
Mr. ANDERSON. No.
Mr. WOLF. Would you guess the percentage of getting there are—what—80 percent? 50 percent? 30 percent? 30 percent?
Mr. ANDERSON. I believe they are going to need it for the foreseeable future, and I think that goes beyond 2002. They are going to need Federal operating and capital support.
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Mr. OLVER. Mr. Chairman, may I follow up on one thing there?
Mr. WOLF. Yes, Mr. Olver.
Mr. OLVER. Do you believe that the Taxpayer Relief Act of 1997 that carried the Amtrak Reform and Accountability Act—carries their capacity to use some of those monies for operating assistance?
Mr. ANDERSON. Oh, yes. The Taxpayer Relief Act clearly does allow them to upgrade their maintenance facilities and maintain existing equipment. That is included as part of the authorization. That is correct.
Mr. OLVER. So you can—we can live with the fact that there is no direct operating money in the President's budget?
Mr. ANDERSON. The key here, Mr. Olver, is that their capital needs far exceed that $2.2 billion.
Mr. OLVER. If you rob that, then some of their capacity to see operations in the black down in the future, getting some of these capital needs in place, that is the robbing Peter to pay Paul?
Mr. ANDERSON. Exactly.
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Mr. OLVER. Thank you.
AMTRAK ROUTES AND LABOR OBLIGATIONS
Mr. WOLF. We tried to get, and were not able to, a base closing commission concept. Then we were going to have GAO look at it, and pretty soon it got down to the nothing.
What percentage of the routes do you think ought to be shut down?
Mr. ANDERSON. Well, we are looking now at the revenue of each of the routes. Ultimately, what route should be shut down is really going to come down to a policy call that you are going to have to make at the Congress and whether or not there are other transportation alternatives.
Mr. WOLF. But the Congress doesn't know if you don't really tell us. There are some routes that are legislated. There is the Cardinal. That is legislated. The Northeast Corridor is certainly the cream, and the opportunities from Washington to Boston, that is never going to be shut down.
Mr. ANDERSON. You know, that is why we supported—I think in our big report that we issued when Ken Mead was still here in 1995—we supported a base closure commission type of a process. Because, under that process, you can take more factors into account than the dollars, revenue and costs associated with particular routes.
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The types of policy decisions were: are you going to cut out train service to this community or are you going to find a way to help subsidize it and keep a true national system? These are the types of decisions that—you know, the GAO can't make those. Those are going to, you know, be policy calls.
Mr. WOLF. Yes, they are policy calls. But by the fact that we were not able to do something, we are actually hurting Amtrak. Because I think many of the States and many of the governors—if I were governor of a State, I would want Amtrak operating in my State. So I would look at some creative ways to take some of my money to help.
The fact that we have not forced this issue has meant some States that would normally come forward have not come forward. So we haven't really helped Amtrak stay in existence. We have actually hurt it.
Last year, Mr. Downs testified it will cost the Federal Government between $6 million and $10 billion if Amtrak went bankrupt. However, in October, GAO informed Mr. Kasich and Mr. Shuster that, ''the United States is not liable for the labor protection obligations arising from a partial or complete discontinuance of passenger service, and the United States is not liable for Amtrak's pending nonlabor protection obligations in the event of bankruptcy.'' In brief, please explain how you reached this conclusion.
Mr. ANDERSON. I might have our attorney come up if this isn't sufficient. But the bottom line is the United States was not a party to any of the contracts that Amtrak has let or any of the financial obligations that they have committed to, the United States Government is not a guarantor of any of that. So technically, legally speaking, the Federal Government is not liable.
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Mr. WOLF. You don't believe there is any liability at all if it went bankrupt?
Mr. ANDERSON. That is correct.
Mr. WOLF. So it would cost us nothing. It would cost the country a lot.
Mr. ANDERSON. Exactly.
Mr. WOLF. But the liability of the Federal Government would be zip?
Mr. ANDERSON. That is correct.
FAA'S OVERSIGHT OF REPAIR STATIONS
Mr. WOLF. Let me get to this issue of the FAA for a second. Mr. Aderholt walked in, he wasn't here when it was brought up yesterday, but Mr. Olver was. There were a lot of questions from Members. Questions on runway incursion and turbulence by Mr. Pastor. Questions on repair stations by Mr. Sabo. We don't really have the ability on a day-to-day basis to monitor the FAA.
We hold oversight hearings, we complain, and we get some things moving. But what we want to do is establish a group that can set up a measurement device whereby we can say, for instance, aviation is safer today than it was 5 years ago.
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Mr. Pastor raised a very good issue on the 737s. We have the delay in WAAS, we have the delay in STARS, we have the year 2000 issue that we are going to get into later. What we would like to get is your commitment to be part of a team that can develop a measurement stick on FAA's progress in solving critical safety issues so that any Member of Congress can look at it and understand it. Also the group would issue quarterly progress reports. On that team, Jim Hall has agreed to have representation, the IG has agreed to have representation, we would have the Flight Safety Institute. We would have NASA, maybe ALPA, we would like the GAO to be part of it. Otherwise these things come and go and there is no measurement stick.
The FAA has a significant number on the most wanted list. Now, Administrator Jane Garvey, I think, is very open. She is not defensive, she is open to new ideas, she is open to this. I think this could be an arm for Jane Garvey who has agreed to stay on for 5 years. Somebody ought to take a picture of her today and then 5 years from now. She will really have aged.
Mr. OLVER. She will not. I have known her for many years.
Mr. WOLF. But I appreciate that she has given a commitment for 5 years. I think this will be an opportunity for her to go and use this. Can we get the participation of GAO in this?
Mr. ANDERSON. We will participate, yes, sir.
Mr. WOLF. Good. I will appreciate it. Currently half of the maintenance, renovation and repair of commercial aircraft owned by U.S. airlines is conducted by independent repair stations rather than the air carriers themselves. These are located worldwide and their use has grown significantly in recent years.
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In a recent audit of repair station oversight, you found that the FAA was not deploying their staff efficiently to oversee these stations, and they had no standards on what documentation should be kept by their inspectors. Is that accurate? And would you explain?
Mr. ANDERSON. Yes. When we looked at the repair stations issue, I think there are something like 2,800 independent repair stations. Twenty-five hundred of them are domestic. About 270 are foreign repair stations. Basically, what we found was FAA was meeting its requirement to inspect each repair station once a year. That was a plus.
We also found that 84 percent of the inspectors that we did a survey instrument, a questionnaire to believed that the repair station compliance was good or excellent. However, half of the inspectors thought that the compliance could improve. I think one of the biggest findings that we had was that they rely too much on an individual inspector to go out there and inspect a repair station. We found some instances where they were using teams of inspectors to go out and do it. Those inspections ended up being more comprehensive, better inspections. They would uncover things even though there might have been an individual inspector at this facility just a few months earlier. When the team came in, they found some systemic problems. So it was obvious that it wasn't being caught by the individual inspector. So we do believe that they do need to use more teams of inspectors.
The documentation problem is a serious one because this has implications for their targeting system. They are supposed to be developing a system to target their inspections to those areas that are the greatest risk. You need good information in your files and recorded in your information system in order for that targeting system to work. And then another thing that was more of a minor finding, but it is an irritant, since 1989 they have been working to try to revise the regulations that exist for repair stations and it still hasn't happened and it is 1998.
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Mr. WOLF. That is the type of thing we are talking about. Two hundred seventy of these are abroad. I am sure a lot of the stations are excellent. Are some in countries where it is wide open and nobody is monitoring anything? China? Places like that?
Mr. ANDERSON. Bob, are you familiar with where the foreign ones are?
Mr. WHITE. The majority of the foreign ones are in Europe, but there are some smaller ones scattered around the world.
Mr. WOLF. Turkey was mentioned yesterday.
Mr. WHITE. Turkey was implicated in the ValuJet engine explosion that occurred.
Mr. WOLF. How were they implicated in the ValuJet explosion?
Mr. WHITE. Not the ValuJet crash, but the case in which an engine exploded on the ground while the ValuJet aircraft was taking off. The engine had been serviced in Turkey.
Mr. WOLF. ValuJet didn't fly to Europe, if my memory serves me. Did ValuJet fly to Turkey, get the job done and bring the plane back?
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Mr. WHITE. I would assume that is true, but I don't know.
Mr. WOLF. Was that just to save money?
Mr. WHITE. I don't know the answer to that. It sounds likely.
Mr. ANDERSON. Often that is the case. You have cheaper labor rates overseas and that sort of thing. This is not something that we have looked at specifically, but reports that I have read and news media accounts and things like that indicate that that is part of the problem.
Mr. WOLF. I think you might want to look into that. If we have a spare parts problem, bogus parts problem in this country, imagine what you might have down in some of the southern republics, I will start with Russia. They had killed five members of the Russian duma, gunned them down in the streets. Do you think they are going to have a hesitation on putting a bogus part in? I think we really have to look at that. The documentation, if there is no documentation, how will we know how to have follow-up inspections?
Mr. ANDERSON. That is part of the problem. You don't. It is relying on the judgment of the inspectors. I do want to interject one point here.
Mr. WOLF. One is inspected every year?
Mr. ANDERSON. Once every year. What we found was that the documentation that existed for the foreign repair station inspections was much better than existed for the domestic inspections. So I think FAA has taken it seriously, recognizing that they are dealing with foreign companies that are doing this sort of thing. So it was better documented. They also use team inspectors almost exclusively to do the foreign inspections. So they are more thorough.
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Mr. WOLF. Why has it taken since 1989?
Mr. ANDERSON. To update the regs? I have to think it hasn't been given the priority it needs. Of course there have been changes in aircraft, components and things that should be reflected in the regs, but they are not there.
Mr. WOLF. Do we know of any accidents that have occurred other than the one whereby a loss of life was involved?
Mr. WHITE. No, I don't think any directly attributable to a lack of new regulations.
Mr. WOLF. Do we know for a fact that none have been?
Mr. WHITE. No, we don't.
Mr. WOLF. There were reports of life-taking accidents of bogus parts here in the U.S.. We are also talking about private aviation, too. Can you say that there have been no accidents or no life-taking accidents that have been the result of any of this?
Mr. WHITE. I thought your question went to the lack of updating the regulations. It is hard to tie that—but on the bogus parts?
Mr. WOLF. On bogus parts or on foreign repair operations. Not on the regulations.
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Mr. WHITE. I would be hard put to cite one right now. But I have no doubt that there have been accidents related to those concerns where fatalities have been involved.
Mr. WOLF. What was the make of the aircraft off the Dominican Republic that was switched where the people, most of them were Germans, were killed?
Mr. WHITE. I don't know.
Mr. WOLF. Do we know where that plane came from? I thought it came from Turkey.
Mr. ANDERSON. I am not aware.
Mr. WOLF. Do we know where that plane was inspected?
Mr. WHITE. We could get you that information.
Mr. ANDERSON. We can check on it.
[The information follows:]
Both accidents—the Valujet accident in which an uncontained engine explosion resulted in several injuries and the Birgenair crash in the Dominican Republic—have some link to Turkey, but the probable cause of the accidents as determined by the investigating authorities was quite different. The engine that exploded in the Valujet aircraft had been purchased from Turkish Airways and had been installed on an aircraft purchased from Delta Airlines. The installation took place just three months before the accident in June 1995. (Neither the aircraft nor the engine were subsequently serviced in Turkey.) The National Transportation Safety Board concluded that the probable cause of the accident was the failure of personnel at the repair station operated by Turkish Airways to identify a crack in an engine disk during the engine's last major overhaul in 1991, nearly four years before its purchase by Valujet.
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Birgenair is an air charter operation headquartered in Istanbul, Turkey. It provided the aircraft and crew for a charter flight organized by a German travel agency to the Dominican Republic. The Dominican Directorate General of Civil Aviation, under whose authority the accident was investigated, concluded that the probable cause of the crash was pilot error. The crew was confused by contradictory airspeed indications and failed to respond properly to stall warnings. The final accident report also found that faulty maintenance was a contributing factor to the accident. It concluded that the erroneous airspeed indication was caused by partial blockage of the air intake tube for one of the aircraft's airspeed indicators, and that this, in turn, most likely resulted from the failure of Birgenair's ground crew to cover the intake tubes during the aircraft's extended stay on the ground in the Dominican Republic. The report, however, did not identify any repair station deficiency as a factor in the accident.
Mr. WOLF. I think it would be helpful to see if that plane which came out of Turkey before it crashed and a lot of people were killed, if it was serviced at one of the foreign repair stations that ValuJet or somebody else used.
Mr. OLVER. Mr. Chairman?
Mr. WOLF. Yes, Mr. Olver.
Mr. OLVER. May I clarify, did I hear you say that you felt that the documentation on these type of repair stations outside the country are generally more reliable than what we have?
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Mr. ANDERSON. The documentation of the inspections that were done by the inspectors of the foreign repair stations was much better overall than it was for the domestic repair stations.
Mr. OLVER. Documentation of the inspections. But is there a protocol for what follow-ups there have to be at a series of times as opposed to inspections of the stations themselves? Of the stations themselves.
Mr. ANDERSON. The stations themselves.
Mr. OLVER. Not some sort of monitoring or accountability on the actual repair.
Mr. ANDERSON. That is right. What FAA inspects is the repair station itself, in terms of whether or not the repairs are done and that sort of thing. I don't know to what extent they get into that on each individual inspection.
Mr. OLVER. Follow-up performance and follow-up monitoring of what has happened over time?
Mr. ANDERSON. Right. I don't know to what extent they do that.
Mr. OLVER. Thank you. Thank you, Mr. Chairman.
Mr. WOLF. Would it be fair to say that the airlines which contract out a large percentage of their maintenance work to repair stations receive less safety oversight than others?
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Mr. ANDERSON. I don't think that we could say that that is the case. They do have a minimum requirement of inspecting the repair stations once a year. In terms of the inspection of the in-house repairs that are done by the airlines themselves, I don't know what that requirement is. I would have to check.
Mr. WOLF. Getting back to the ValuJet, some airlines contract this work out because they don't have the money to perform it in-house. That was obviously the reason that they did it. Couldn't this also be an indicator that they might not have the highest maintenance standards overall, thereby justifying a potential concern?
Mr. ANDERSON. I don't know. We haven't done the work to be able to make that leap. I know the biggest concern is that especially newer airlines that don't have the funds or don't want to invest in the capital to do their own repairs rely on repair stations to do the work. But jumping and saying that therefore, their standards are lower, I don't think that that is necessarily the case.
Mr. WOLF. As a follow-up to Mr. Olver's question, should the domestic surveillance be increased to be at the same level as the foreign surveillance?
Mr. ANDERSON. I think what they need to do is they need to do more team inspections. If that gives you increased surveillance, I think that that would help. And they clearly need to do better documentation of what they find. Because that is going to enable you to then use that history to target your inspections for the future. If you go out and you have documented that you found a lot of problems at repair station X, that repair station might show up on your screen for next year's inspection. You might want to look at them more closely.
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Mr. WOLF. Your report concludes that it is the requirement for an annual certificate renewal, which accounts for much of the difference in Europe. Since stations must be annually approved, FAA officials have a stick to ensure enforcement. They must be able to document their decisions. Your report says the FAA headquarters does not want to extend the annual certificate renewal to domestic repair facilities, which Mr. Olver was talking about. However, field inspectors who have worked both domestically and overseas strongly support such a move. Inspectors based in the U.S. are more wary because they fear an increase in their workload. The least amount of support came from the FAA management. Why would the FAA management not support this idea? What do you think about it?
Mr. ANDERSON. Do you recall the discussion of that in the report? On what we found?
Mr. WHITE. No, but generally there was a question as to whether it would be cost-effective to impose that recertification on domestic stations. Apparently many members of FAA management did not think so, although as you pointed out, inspectors with service both in foreign and domestic stations, the majority of them did.
Mr. WOLF. Based on the fact that the FAA hasn't acted in 8 years, are there changes that should be made in the regulations?
Mr. ANDERSON. Yes. And that was one of our recommendations that they needed to get on with it and make the regulation changes.
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Mr. WOLF. Are they weak?
Mr. ANDERSON. They are outdated. They definitely need to be updated.
Mr. WOLF. Is that potentially an aviation safety problem that everyone who flies should be a little bit concerned about?
Mr. ANDERSON. I think it is something they need to get on with. We can't directly say it has been a direct cause of any particular problem.
Mr. WOLF. I didn't say that, but it is a potential.
Mr. ANDERSON. I think it has the potential. I think it needs to be updated.
Mr. WOLF. We have funded a 41.8 percent increase in the number of aviation safety inspectors. That is 984 inspectors, between 1994 and 1998, and additional increases are proposed for 1999 to fund 45 new inspectors. Your report indicates FAA may have wasted some of the additional resources by not deploying them in teams and not training them effectively. Would you comment on the findings with regard to the training? We already talked about deployment.
Mr. ANDERSON. I don't recall with regard to the training. Do you recall, Bob? We might have to provide that for the record. I know the biggest issue with the team inspections is having more than one set of eyes to look at a repair station, especially if it is a larger repair station, is going to give you better findings and give you more thorough review.
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Mr. WOLF. We understand that your survey of safety inspectors show that 80 percent of them believe more training was needed on inspection skills and almost half said that inadequate training undercut their ability to ensure compliance with existing safety regulations.
Mr. ANDERSON. This has been a problem that I think we have heard over the years from the inspectors' point of view. They don't believe that there is sufficient training. I know, I believe it was 2 years ago that additional funds were given for training, but I think it is still a problem in the view of the inspectors.
Mr. WOLF. Then that could be a potential safety issue, right?
Mr. ANDERSON. Yes. Potential.
Mr. WOLF. I would hate to be flying on an aircraft that was repaired or inspected in some foreign country by a safety inspector that felt he wasn't adequately trained to inspect it.
WIDE AREA AUGMENTATION SYSTEM (WAAS)
The FAA is currently planning to lease communication satellites for the WAAS program rather than buy them. Has the FAA conducted an adequate lease versus buy trade-off analysis?
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Mr. ANDERSON. Not that we are aware of. That is one of the questions that we have got. As you are aware, we are supposed to report to your subcommittee and the Senate subcommittee on WAAS by March 1. That is one of the things we will be talking about.
Mr. WOLF. Under this innovative type of lease, the FAA would guarantee to the contractor that funding would be provided even if the program were terminated. Only with such a guarantee would a contractor agree to assume the capital costs up front to do the work. However, if the government decided later to discontinue, we would have wasted a lot of the taxpayers' money. Would that be accurate?
Mr. ANDERSON. We have got some questions that we are going to be addressing in our report, Mr. Chairman, in terms of the lease versus the cost idea. Bob, do you want to expand on that a little?
Mr. LEVIN. Sure. For budget scoring purposes, there is a real question about whether this is a capital lease or an operating lease the FAA is proposing. My understanding is that FAA is supposed to report to you by February 15 on its strategy. I haven't seen that information. It was not part of the report that FAA just brought up here this week. We are probing FAA's strategy.
My understanding is that if the lease is scored as a capital lease, then all the funds have to be approved by Congress up front, which would make it very, very difficult for FAA to put it into its budget. It is a real question that probably has to be resolved here in the next month or so.
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Mr. WOLF. If we had tried this strategy with the AAS or the MLS or other major FAA procurements, would we have saved or wasted money?
Mr. LEVIN. For a leasing of the equipment in service? It is hard for me to say. The preliminary information we have seen on the cost for leasing versus buying is that FAA is going to pay a premium to lease. It is like buying a car, in a way. You are going to pay a little extra for leasing.
Mr. ANDERSON. It might be a lower monthly payment, but over the long term you might end up paying more.
CONTROLLER STAFFING
Mr. WOLF. In a study last year, GAO concluded that FAA's process for determining the number of air traffic controllers may result in excessive requests for new hires. This was partly because FAA's model used eligibility for retirement figures rather than the actual retirements, so eligibility versus actual. Have they revised the process in a way which addresses the GAO's findings?
Mr. ANDERSON. Yes, sir, they have. They are taking our recommendation into account now; they actually have data in their system and they are using actual information as opposed to guesstimates. We think that that will lead to better estimates.
Mr. WOLF. Is the relationship with the unions getting better, staying the same or worse?
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Mr. ANDERSON. We haven't done any work recently on that. I know they are in the process of undergoing some negotiations with the unions now. I really don't have a view on that one way or the other.
YEAR 2000 PROGRAM AT FAA
Mr. WOLF. The year 2000 problem, would you summarize for the committee your concerns with regard to that?
Mr. ANDERSON. Joel?
Mr. WILLEMSSEN. Mr. Chairman, our concerns on FAA's approach to the year 2000 program can be summed up as follows. One, FAA got a very late start in addressing this issue.
Mr. WOLF. How late?
Mr. WILLEMSSEN. They should have been on top of this beginning no later than 1997.
Mr. WOLF. When did they start?
Mr. WILLEMSSEN. They began some of the key basic awareness activities just within the last year. In fact, we saw some of the key basic awareness activities were still not completed at the end of calendar year 1997. Just to continue, from a wide year 2000 program perspective, awareness and assessment activities are the easy part, relatively speaking.
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Mr. WOLF. They were late on the easy part?
Mr. WILLEMSSEN. Right. Now you have constricted the amount of time for fixing and testing. That is the difficult part, where you need more time. We believe just from a testing perspective, you need to think at least in terms of a year, to thoroughly test your fixes. Leading experts in the area say that for a year 2000 program, you have to think in terms of about 50 percent of the time and cost of your program going into testing. Now we have got an unfortunate situation where the time left is beginning to be constricted and the amount of time remaining for actually fixing the code and then thoroughly testing it is diminishing.
Mr. WOLF. I was out at Reston the other day in a store, a guy came up to me and said that he thought that the FAA and every other agency would have a hard time getting the people to do it because, I think the State of Virginia is giving bonuses of $10,000 or $15,000 to hire people. Industry is doing the same. Do you think the FAA has the people on board now with the capability to do it?
Mr. WILLEMSSEN. The personnel issue would be one of our biggest concerns at FAA. Frankly, within the personnel issue, the biggest concern is retaining some of the key staff that they have who have been around a long time, who know these systems inside and out. Unfortunately, for many of these key system environments, we are talking about a handful of folks. As I testified last week, it is imperative that the administrator, OMB, OPM, do whatever is necessary to not let those people leave, frankly.
Mr. WOLF. What is the probability that the FAA will avoid significant disruption to the air traffic control system when the year 2000 hits?
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Mr. WILLEMSSEN. We are on record as saying that FAA and many other government agencies have to accept that there is not time to fix everything.
Mr. WOLF. Just for us so we all know, what should we expect when they don't make it? If they don't?
Mr. WILLEMSSEN. What we are pushing——
Mr. WOLF. Practically speaking.
Mr. WILLEMSSEN. What we want to see FAA do and what they have not done as well as we would like to see it is to set priorities and put as much attention as possible into the most mission-critical business processes and systems. For example, I would assume, if I am in the Administrator's shoes, the most important business processes I would want to deal with would be separation of aircraft in the en route and TRACON environments. That is where I would put my resources, where I would put as much effort as possible in thoroughly testing the fixes before I frankly even considered fixing some of the other lower priority systems. So it remains to be seen where, in fact, those impacts will be felt. It is almost totally dependent on the priorities that FAA decides upon and the actions that are taken in the remaining 22 1/2 months.
Mr. WOLF. Mr. Olver, go ahead.
Mr. OLVER. Thank you, Mr. Chairman. I am going to show my ignorance here. In your testimony, you say for the past several decades, systems have typically used two digits to represent the year, such as 97 for 1997 to save electronic storage space and reduce operating costs. In such a format, however, the year 2000 is indistinguishable from 1900. I don't exactly remember my history precisely, but I thought Orville Wright started flying around 1903. It is hard for me to imagine what critical data are in the FAA's computer systems that have an 00 tag to it.
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Why could one simply not archive that stuff, that is the 00 stuff, and then have the 00 be for the year 2000? And what data are we likely to want to put into the computer that is attributable to the year 00 that we might mistake for data for the year 2000 instead of the year 1900?
Mr. WILLEMSSEN. Let me give you an example, Congressman, of what can happen. In the host computing environment, we are looking at about 3.5 million lines of code. In that 3.5 million lines of code, we have got about 8,800 modules. In looking at the assessment package using some scanning tools on those modules, frankly, you are right.
Less than 5 percent of the modules have any date dependencies in them. So from an air traffic control standpoint in the en route environment, it is not a real frequent occurrence. The problem is it only has to happen a couple of times, and those kind of impacts can infiltrate the rest of the system and not allow the system to work properly unless you identify every single date dependency. You make the necessary fix, you look at the system and process from an end-to-end perspective, address all interface issues with all the other incoming data, whether it is from the airlines, the Department of Defense, the National Weather Service, whatever the case may be.
Date dependencies within these systems compared to other ones I have seen are not as frequent. But the magnitude of the number of lines of code is very significant and you have got to go through the tedious process of making sure that you have found everything in there. Because just one item can infiltrate and disrupt operations, whether it is providing bad data or actually aborting a system.
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Mr. OLVER. With the explosion of data and information nowadays, for practical purposes it remains hard for me to see what data would be important that we have back a 100-year scan. Anything up to a 100-year scan, since we are now in the point of doubling information about every 5 years or something like that, maybe somewhat less, once the magnitude of the increase has gone by several doublings, at least during this century and is obviously going to go on much faster for the future, it is going to get to a doubling in far less than even 5 years, would be my guess.
It still remains rather hard for me to visualize, to conceptualize in practical terms, in practical operations of these systems why there should be such a problem. Once one gets into research applications or where you are trying to think about a much longer time frame, you have to be able to distinguish and we have been used to doing that by having hard copy, I suppose, of whether we were talking about 1800 or 1900 or whatever. But in any practical terms, particularly with FAA—it is hard to see why there is anything much in there that would be before 1925 that could be of any——
Mr. WILLEMSSEN. It doesn't have to be before 1925. Let's say the 97, for example, is just shorthand for 1997. The logic——
Mr. OLVER. Are we putting in data relating to 2097?
Mr. WILLEMSSEN. If you were building a system, for example, in the mid 70s——
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Mr. OLVER. This isn't worth pursuing.
Mr. WOLF. I think it is important. Go ahead.
Mr. OLVER. It is all right. We will take it another time. We are not going to get very far with this, I think.
Mr. WOLF. I know Ms. Garvey is concerned about it. I give her a lot of credit. I think it is a problem that she cannot be held accountable for. I think she has this sense of emergency to move ahead. Practically speaking, so we all know, what would it mean, December 31, 1999 and January 1, 2000, what would it mean for everyone here?
Mr. WILLEMSSEN. If the worst case situation occurred and the most mission-critical systems associated with aircraft separation in the en route and terminal environments weren't fully addressed after thorough testing indicated that not all the necessary fixes had been made, our conclusion would be that the impact would most likely be economic in nature.
Mr. WOLF. A plane just wouldn't fly?
Mr. WILLEMSSEN. That would be the worst case scenario. My experience working in systems issues in and out of FAA for 10 years, safety has always been a paramount concern. To the extent that there are any issues outstanding related to the reliability of those air traffic control systems, I think that is why the impact would be economic rather than safety.
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Mr. WOLF. They are not going to fly? They are not going to let them fly?
Mr. WILLEMSSEN. And that is the airlines' concern frankly. They are very concerned that if FAA systems aren't compliant, at least substantially so, they won't be able to get off the ground. The Air Transport Association has recently assigned an individual to monitor the effectiveness of FAA's program to make sure they are done in time.
Mr. WOLF. Could this go on for a while?
Mr. WILLEMSSEN. Possibly.
Mr. WOLF. They just wouldn't fly January 1 or maybe it would go on for a while?
Mr. WILLEMSSEN. Possibly. One of the areas, though, that we are pushing not only FAA, but other critical Federal agencies is you have to start thinking now about contingency plans.
Mr. WOLF. What do you mean?
Mr. WILLEMSSEN. If your main system isn't going to work, we have to look at backup situations.
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Mr. WOLF. The FAA has said they have a suitable contingency plan. Do you believe that they do?
Mr. WILLEMSSEN. I haven't seen that yet. They have contingency——
Mr. WOLF. Could you look at it and then make an analysis and get back to the committee if you think it is suitable?
Mr. WILLEMSSEN. Certainly. I might add, we are issuing a guide in less than 2 weeks in exposure draft form to the entire government talking about what to do to put together a contingency plan.
Mr. WOLF. It is better to be close to home on December 31, 1999.
Mr. WILLEMSSEN. I am still optimistic that FAA will crank it up and put the appropriate attention. I was encouraged that the Administrator has now made this a top priority.
Mr. WOLF. Yes, she has.
Mr. WILLEMSSEN. Which frankly during the course of our assignment we didn't see that.
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Mr. WOLF. I wish the previous ones had. She has. I have spoken to her. I think she is totally committed to this. The FAA is talking about a plan to replace the host computer hardware and rehost the existing software onto the new equipment before the year 2000. The last time the software was rehosted, it took 3 years according to the IG's office.
Assuming the FAA can do the current effort in a shorter amount of time, they would have to start right away and they don't have a budget request before Congress to begin. Are there significant risks in rehosting the existing software to new equipment? And how long is it likely to take?
Mr. WILLEMSSEN. There are significant risks to rehosting new hardware onto the additional software. Thinking that FAA is going to be able to do it at 20 centers in a little less than 2 years is highly optimistic.
Mr. WOLF. Do you think it is possible?
Mr. WILLEMSSEN. I think it is possible.
Mr. WOLF. Probable?
Mr. WILLEMSSEN. Probable is dependent upon the kind of effort we see within FAA and the kind of focus. If we can continue to see sustained effort that we have seen over the last few weeks, then I am more optimistic than what I had seen in the prior 6 to 9 months.
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Mr. WOLF. Do you believe they should be coordinating their effort with the airlines?
Mr. WILLEMSSEN. Most definitely.
Mr. WOLF. Are they?
Mr. WILLEMSSEN. They are beginning to. The new program manager, Ray Long, in fact, sent me a——
Mr. WOLF. Is he literally the person now for the FAA? He has been given——
Mr. WILLEMSSEN. That is right. The Administrator announced him last week and said he is reporting to her. That is an important distinction, because somebody has got to set priorities. You can't have every individual organization saying mine is the most important. Or otherwise this isn't going to work.
Mr. WOLF. I also heard that they determine the payroll for the whole Department of Transportation, using the FAA computer.
Mr. WILLEMSSEN. I believe under their outsourcing arrangement, that may be correct. I am not positive on that.
Mr. WOLF. You have met him?
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Mr. WILLEMSSEN. Oh, yes, I know Mr. Long.
Mr. WOLF. Two years ago, what was his job?
Mr. WILLEMSSEN. He was within the air traffic service area, in the computer side but not with any kind of overall responsibility. I think they made a good choice. He is very aggressive and he knows systems.
Mr. WOLF. Have you been to the ''war room?''
Mr. WILLEMSSEN. I have not personally been to the war room. All of my staff have been to the war room.
Mr. WOLF. Is it a war room or is it just an office with some desks? I have heard this expression, ''there is a war room.'' In my mind I think of charts and bright lights. What is the dimension of the war room?
Mr. WILLEMSSEN. I am going to let my staff come up and describe it for you. This is Colleen Phillips.
Ms. PHILLIPS. Not having seen a true war room, I can't draw you a comparison. I can describe the room to you.
Mr. WOLF. How big is it?
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Ms. PHILLIPS. Long and narrow, maybe 20-foot long, 10-foot narrow. About ten computers.
Mr. WOLF. Not a big war.
Ms. PHILLIPS. Lots of very experienced people sitting around at the computers.
Mr. WOLF. How many people?
Ms. PHILLIPS. I should back up a second and tell you there are actually several war rooms in niches around the building. I saw two. People, maybe 6 in one, 3 in the other.
Mr. WOLF. I have been a little concerned, I have heard them say—''we have a war room.'' My mind, my imagination goes through a movie of great war rooms and I was very reassured. Then I began to say, I wonder how big it is? I wonder if they have all these charts. I think the war room can give the impression of more activity than maybe there is.
Mr. OLVER. Mr. Chairman, I am utterly crushed. I thought I was going to hear about Star Trek.
Mr. WOLF. That is what I thought.
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Mr. OLVER. It is terrible.
Mr. WOLF. I would like to ask Mr. Efford, our aviation expert, to go visit the war room, just so the staff can know what it is; 20 by 10, that is not as big as my family room. It is very serious and we are going to have a number of other questions. We don't want to let this thing get out of hand.
I think in all fairness, it did get out of hand. Again, I have prefaced my comments all the time because I like Ms. Garvey, not that she has allowed it, but I think it has gotten out of hand. I think the fact that there was a hiatus where there was no Administrator for over a year and all those things took place. FAA just let this thing go. People who were getting ready to retire said it wasn't going to happen on their watch, they weren't going to get active. I think as a result of that, it has almost become a crisis situation. Is the DOD involved with them because they would also be controlling the DOD aircraft?
Mr. WILLEMSSEN. That is correct. In terms of exchange of information from different air traffic control facilities, that would be correct.
Mr. WOLF. I asked you the question, but they don't have a budget request before Congress to begin the work.
Mr. WILLEMSSEN. I think their 1999 request is around 38——
Mr. WOLF. But 1999 won't pass until October. Are they going to ask for a reprogramming in a supplemental?
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Mr. WILLEMSSEN. They are in the process of reprogramming quite a bit of the money. They estimate they are going to spend in 1998 about $89 million. Much of that is either through reprogramming or absorbing about $33 million of it from other accounts.
FTA GRANT MANAGEMENT OVERSIGHT
Mr. WOLF. In 1992, the GAO identified the FTAs grant management oversight activities as a high risk area. After significant improvement in its Grants Management Program, the FTA was removed from the GAO high-risk list in 1995. Since then the GAO has been monitoring the FTA's grant management activities. How are they doing 3 years after it was removed from high risk?
Mr. ANDERSON. Mr. Chairman, we have got a report that is going to be coming out in the next few months on that. The bottom line is it is a mixed view. There has been some improvement. The guidance and training for staff and grantees has actually improved. They have developed some standard oversight procedures and processes. They are using contractors to expand their oversight authority. All the regions seem to be doing better at oversight. But where the problem still exists is the grantees still aren't meeting the deadlines that are set for fixing problems and they often have to get additional time to fix the problems.
Mr. WOLF. Why do you think noncompliance takes so long?
Mr. ANDERSON. I don't know. I don't know if it comes down to a staffing issue or what but this is something that I think FTA needs to stay after and get the grantees to get into compliance on.
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Mr. WOLF. Do you think they are really serious?
Mr. ANDERSON. Yes, I think they are. I think FTA has taken a more concerted effort since we first looked at them back in 1992 and before and they are serious about it. I think they are doing some things. Another problem that we found is that the information system that they use, and this is a typical problem throughout the Department of Transportation, but for the oversight of the grantees, the information system is lacking current and accurate data.
Again, the information system is there to give you an early warning of things that might go wrong, if grantees aren't complying with a large number of requirements. And if the system is not working, it doesn't give you that early warning. Another thing that we found is that the New York region of FTA that is responsible for more of the grant dollars than any other region, their documentation is woefully inadequate.
Mr. WOLF. The only political appointee in any of the region offices happens to be in New York.
Mr. ANDERSON. I understand that is correct, yes.
Mr. STOUFFER. I understand that FTA is seeking to make a change in that. The other thing I would add in terms of FTA grant oversight improvement is that since 1995 when we last looked at this, we have seen a change in attitude in terms of enforcement actions on the part of FTA—the withholding of funds, stern letters, those types of things. They have moved ahead in a positive direction, but there are still improvements to be made.
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Mr. WOLF. With the implementation of the Government Performance and Results Act, how is FTA able to assess its own oversight to determine the effectiveness of the program?
Mr. ANDERSON. We haven't actually seen any of the specific goals and things that they have established for that yet, but that is one of the things we are going to be looking at in the future.
Mr. WOLF. Is there a wide variation between different offices?
Mr. ANDERSON. I don't know. I haven't seen it.
Mr. STOUFFER. One of the things we say in our report is that the FTA information system could prove to be a very useful tool in terms of looking at improvements made by the grantees. If they would get that system up and running, make it a little more user friendly, they certainly would be able to measure results much more effectively.
RAIL SAFETY
Mr. WOLF. FRA has been working with railroad labor and management to identify safety hazards and develop corrective measures to eliminate these hazards before they become problems. To accommodate FRA's new collaborative study initiatives, FRA has shifted some resources away from site-specific inspections.
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GAO recently reported these inspections declined by 23 percent from 1994 to 1995. As a result, a greater number of railroads are not being inspected and FRA inspectors are conducting fewer reviews of the railroads own inspection efforts. Are you satisfied that FRA's safety assurance and compliance program is not compromising rail safety?
Mr. ANDERSON. No, we are not. This is something that I think we are going to continue to watch to see what happens. Overall there has been improvement in terms of statistics, in the number of accidents, but history shows that when there is a drop, it is followed by a rise—it is like three steps forward and two steps back. Sometimes the improvements are taken away with some other things that occur. I mentioned in the statement there were 10 accidents that occurred in 1997 with Union Pacific and CSX in terms——
Mr. WOLF. And 10 people died.
Mr. ANDERSON. Yes. That raises questions about the overall effectiveness of FRA's program because the FRA had to send in a large team of inspectors in each case to find out what was going on and they found some other problems.
Mr. WOLF. Wouldn't it mean if 10 people died from Union Pacific since 1995 or since they put this in effect that there is something wrong? Yesterday, I think it came out that there were 14 accidents.
Mr. ANDERSON. One of the concerns that we have got is you talk about going—the pendulum swinging——
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Mr. WOLF. Those are from 1997.
Mr. ANDERSON. That is right.
Mr. WOLF. I think that was actually more if memory serves me than you had from 1990 to 1996.
Mr. ANDERSON. I believe that is right. But there is some concern about whether or not the pendulum in terms of the enforcement process and procedures that you use, it swings too far from a cooperative, collaborative approach and gets too far away from the actual inspection enforcement side. That is why we think we need a little more time to tell. There is no question that they will never have enough inspectors to be able to inspect everything that they need to inspect. But there has to be a proper balance of the inspection versus the collaboration. Joe, do you want to elaborate at all?
STATE INFRASTRUCTURE BANKS
Mr. WOLF. It is hard for those families.
Last year, Mr. Anderson, you testified there was not sufficient data to determine if the State Infrastructure Bank Program was effective in assisting States to cover shortfalls in transportation programs.
Can you share with us any insight into how well the State Infrastructure Bank Program is meeting this goal now that it has been in existence for approximately 2 years?
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Mr. ANDERSON. The only information I have that I can share with you, we have not done a specific follow-up review yet, but there are certainly a number of additional States that are participating. I believe right now in some form or another, there are 38 States plus Puerto Rico that are going to be participating in SIBs, State infrastructure banks.
I think the 10 original pilot States are involved, 12 additional States have already finalized agreements and there are 12 others that are working on revising their agreements. There are some other States, I think, that still have to do some legislative changes within their States in order to be able to utilize State infrastructure banks.
Mr. WOLF. Are they meeting the goal now?
Mr. ANDERSON. I don't know. We haven't gotten any information. I don't think it has progressed far enough yet in terms of the actual number of projects that they have started to finance with it. I know that they have drawn down some of the money. This is something that will probably be on our window to look at again in terms of follow-up review.
Mr. WOLF. What is the difference between the proposed funding for the State Infrastructure Bank Program and the Transportation Infrastructure Investment Program?
Mr. ANDERSON. I am not sure if I know the difference in that. Is that the one where they would use loans like they have with Alameda or is that a different thing?
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[The information follows:]
A primary difference is that State Infrastructure Banks will help states finance smaller state or local projects that have a revenue stream and are part of a state's transportation program. This is especially true during the early years of the SIBs when states have limited funds they can provide before they build up revenues to finance larger projects. The Infrastructure Credit Enhancement Program is envisioned to assist larger projects of national significance—projects of at least $100 million or 50 percent of a state's federal-aid apportionment. The program could finance projects that cross state boundaries or projects that would otherwise deplete a state SIB.
Mr. CHRISTOFF. The Transportation Infrastructure Enhancement Credit Program, last year was proposed as a loan program. This year, if I read the budget appendix correctly, they are asking for $100 million in grant money, to fund what they are terming transportation projects of national significance. This would be similar to Alameda corridor, even though that was a loan.
Mr. WOLF. So the difference is one is a loan and one is a grant?
Mr. CHRISTOFF. This year they are proposing it as a grant. Last year, they wanted it as a loan program.
Mr. WOLF. I wonder why they haven't fixed their own bridge, the Woodrow Wilson Bridge that they have owned for some years.
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Last year, before the committee you indicated that the Department of Treasury raised a number of concerns about tax exempt debt in relation to the transportation infrastructure investment credit. Specifically, the IRS restricts private involvement in tax-exempt debt. How have these program concerns been allayed, if at all, and how will they affect the overall program?
Mr. CHRISTOFF. I think they were allayed in the sense that what the administration is proposing this year is not a loan program. Treasury raised those questions last year on the Transportation Enhancement Credit Program when it was proposed as a loan program. This year it is saying this is a straight grant program. DOT would give the money directly to projects of national significance and not make it into a loan that would have to be tied to a project that has a revenue stream that would pay back the loan over years.
Mr. WOLF. So the States would clamor for that versus the other?
Mr. CHRISTOFF. Clamor for a grant? Well, all States clamor for grants. You don't have to pay back a grant.
DOT REORGANIZATION
Mr. WOLF. Over the past several years, GAO has indicated the opportunities for streamlining and downsizing at the Department by consolidating headquarters. What has the Department done over the past year to consolidate its field presence?
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Mr. ANDERSON. I don't think they have actually done any consolidation. They have issued a couple of interim reports and I understand they are supposed to be coming up to you shortly at the end of this month with a report on FHWA and proposal to go from nine regions——
Mr. WOLF. They have been talking about that for years.
Mr. ANDERSON. When we met with them the other day, it looks like they have made a policy decision to go from nine to four regional offices. But it looks like—it is not clear when it is going to happen and how much it is going to save because this report, they are going to be bringing to you at the end of this month, as we understand it, is not going to have a lot of the details worked out. They are going to plan to go back and in June work out—by June work out some more of the details.
Mr. WOLF. We are going to ask the Administrator. If he can't answer that, he ought to just leave the job. This has been going since the Secretary was the Federal Highway Administrator. If they can't do that, then they can't do anything. Frankly, from my own point of view, they have no credibility, none whatsoever.
I remember Mr. Slater mentioned it 4 years ago or 5 years ago. I think he mentioned it when Bob Carr was Chairman of this Subcommittee. The Coast Guard has done it, haven't they?
Mr. ANDERSON. The Coast Guard has done some streamlining, yes. Part of the problem, too, has been the turnover in leadership. I think, this is one of the reasons that they cited about why they have been delinquent in terms of getting a report to you.
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Mr. WOLF. We are going to ask you the rest of these, but this issue is something we know the answer to. The answer is they haven't done a good job; is that correct?
Mr. ANDERSON. They have not made any progress to speak of.
Mr. WOLF. How serious are they?
Mr. ANDERSON. I believe when I met with them——
Mr. WOLF. You can't say they are serious if they haven't done it. How serious have they been over the years?
Mr. ANDERSON. I don't believe there has been the push there to get it done. I think if you keep pushing, I think that that would help get it done. It is the closest we have seen in terms of some specifics in terms of the briefing that I got a couple of weeks ago. They have some meat on the bone. They are talking from nine to four regional offices. What is not clear is what is going to be the actual impact in terms of savings.
Mr. WOLF. Who would that be done by?
Mr. ANDERSON. They don't indicate. That is a part of the problem. That is one of the details to be worked out.
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Mr. CHRISTOFF. Over the next 4 years is what we were told.
Mr. ANDERSON. I think you have got some good questions for them.
FHWA COMPLIANCE REVIEWS
Mr. WOLF. GAO recently completed a review of the Federal Highway Administration's compliance reviews, which are used to determine whether each motor carrier is fit to operate safely. In this report, you concluded that the Federal Highway Administration needs to improve the way it selects motor carriers for safety reviews. Will you explain what your concerns were?
Mr. ANDERSON. Part of the problem here is that they rely on the States to report data to them on accidents that they can then use to target inspection resources and that sort of thing. A number of the States are slow in reporting the data and the data is incomplete. So they need a process to be instituted where they will get better data that they can use in the system. Jim, is there anything you want to expand on there?
Mr. RATZENBERGER. FHWA received about 74 percent of the data on accidents. The less data you receive on accidents, the less able you are to target inspections and compliance reviews. Specifically, what we recommended was that for those States that are not doing a very good job in reporting data, that FHWA identify why they are not doing it and start working with them to increase their data reporting.
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Mr. WOLF. That is what I was going to ask you. Why can't they? What is the barrier?
Mr. RATZENBERGER. It is a very decentralized system. For an accident, the report starts with a trooper at the scene of an accident. Often that trooper is more concerned with securing the scene, making sure that people head to the hospital and cleaning up the accident.
Mr. WOLF. People have died as a result of this. There have been a number here in my area on the beltway.
Mr. RATZENBERGER. Died as a result of——
Mr. WOLF. As a result of the nonreporting and the laxity in this.
Mr. RATZENBERGER. That is not something we would have looked at. The idea here is the better the data is, then FHWA can use that to go in and find those trucking firms that have the worst accident rates. FHWA can then go in and start cleaning up their operations.
Mr. WOLF. Is it your sense that there have been deaths as a result of this?
Mr. RATZENBERGER. Obviously, there have been a lot of deaths—there are 5,000 deaths every year as a result of accidents involving trucks.
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Mr. WOLF. There was one death in the district where the truck driver had 30 some violations. We know there have been deaths. There have. My wife and children drive on the road. Your family drives on the road. Everyone does. The number of accidents on the beltway with regard to trucks, sure there have been deaths. The lack of action on the part of the Federal Highway Administration has resulted in deaths.
I must say, you all have been almost too laid back today. I don't think you ought to be mean, but I think you ought to be candid. In some respects, you have almost testified today as if you are on the payroll of the Department of Transportation and not the GAO. Sure, these things have gone on and we have had a number of accidents. We have had a number of people killed on the beltway because of these things.
Mr. ANDERSON. Mr. Chairman, if I could, I would just like to address that comment. One of the things that we pride ourselves in is making sure that we gather the evidence to have a direct cause-effect relationship before we can draw conclusions and make recommendations. Some times as a lay person, you can say that, well, obviously there is something that has happened here. But we have to see the evidence in order to be able to relate it to a particular death or fatality or something like that. Clearly, these systems are designed to make the system safer, there is no question about that. When they don't work as intended, then the system is not as safe.
Mr. WOLF. We will just submit the rest of the questions. I do think that you have pulled your punches a little bit today with regard to the Department. I don't think anybody ought to ever be mean or be hurtful of anybody but by speaking out aggressively the way the IG has done, you actually help the Department.
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One of the positive things with regard to Ms. Garvey is that she is open to these things. Frankly, if I had a problem in my office, I would want you to come and tell me. If I get a complaint from a constituent that something is not being done, that is the only way I know. I can't be everywhere. The same applies here.
I think you do a disservice to the Secretary. Obviously the Secretary can't know everything that is going on throughout the Department. I really think you ought to be more aggressive and more forthright. I don't mean mean and I don't mean damaging people's reputations and saying things that aren't accurate, but I think you honestly have held back a little bit.
Anyway, I appreciate you all taking the time. I appreciate it very much. The hearing is adjourned.
BOSTON CENTRAL ARTERY/TUNNEL COST INCREASES
Mr. WOLF. Cost increases of what magnitude can be anticipated if the State is unable to hold to its construction cost goals?
[The information follows:]
While we cannot predict the total increase in the costs of all the project's construction contracts, cost increases of some magnitude seem likely. For example, as outlined in our March 1997 report, if recently awarded and yet-to-be awarded contracts experienced cost growth in the same 14 to 16.5 percent range being experienced by recent contracts that are 25 percent or more complete, it would add between $270 million to $400 million to cost of the project.
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The state's cost containment goals form the basis for its cost estimate and its finance plan. In July 1997, we recommended that Massachusetts decouple its cost containment goals from the project's cost estimate and revise that estimate to more closely reflect the state's actual experience with its cost containment program.
PROJECT COST MANAGEMENT
Mr. WOLF. Why doesn't FHWA have standards or requirements in place for States to follow in preparing costs estimates for projects? If they did, wouldn't it avoid many of the problems and discrepancies identified by the GAO in the Big Dig's finance plans?
[The information follows:]
While FHWA can best address why they have chosen not to adopt standards or requirements to date, certainly one contributing factor may be that cost management has not been an explicit statutory or regulatory goal of FHWA's oversight to date. FHWA has done little to ensure that cost management practices, such as assuring that states prepare early, accurate estimates of projects' costs and a plan to finance them, are considered as it oversees and commits federal funds to projects.
We believe that having the states prepare total cost estimates for projects would assist policy makers in understanding the full extent of the proposed federal, state, and local investment in these projects and assist program managers in accurately estimating the total financing requirements. In addition, as you have noted in your question, having uniform standards for how such estimates should be prepared would avoid the problems we have seen on the Central Artery/Tunnel and other projects. We have found that one reason why costs increase on large-dollar projects over time is that the initial cost estimates are not very reliable. They are preliminary estimates done in conjunction with the environmental assessment process and not designed to be accurate predictors of a project's total cost. Furthermore, the type of costs included in initial estimates can vary widely among states and projects.
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As you point out, we have raised a number of concerns over the past 3 years concerning how Massachusetts calculates costs for the Central Artery/Tunnel project; concerns that could have been avoided had FHWA promulgated uniform standards for preparing project cost estimates. For example, in 1996, Massachusetts estimated the total costs of the project at $7.8 billion because it reclassified over $1 billion in costs as off-budget ''support'' items, credited the project with proceeds from the development of future real estate, and excluded the effects of inflation after 1994. In 1998, we discussed the issue of whether $776 million in projected future interest costs should be included in the project's cost estimate. As we reported, in the absence of federal standards, Massachusetts' practice has been, according to state officials, not to include the costs of borrowing in its cost estimates for transit and highway projects. This is particularly significant because the state borrows nearly all the state funds it spends on transportation. In other words, the $1.1 billion expended by Massachusetts for the Central Artery/Tunnel project since the 1980s was borrowed funds. If the $776 million in future borrowing costs is included in the project cost estimate, should we then also include the interest costs that were incurred to borrow the $1.1 billion? These and other difficult questions point to the benefits that could be attained by having uniform standards for preparation of project cost estimates across states.
ALAMEDA CORRIDOR
Mr. WOLF. Another mega-project that you have reviewed for the committee is the Alameda Corridor project. Expected to cost $2 billion, this 20-mile dedicated rail link has not been fully designed and only limited construction has begun. What is the status of the project and what challenges does it currently face?
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[The information follows:]
The project is at the 20 percent design level with less than 5 percent of the project constructed. About 48 percent of the project's total funding has been obtained; the remainder is Los Angeles County Metropolitan Transportation Authority's (MTA) commitment to provide $218 million to the project and $866 million in revenue bonds to be issued in November 1998. Construction is scheduled to begin in February 1999.
The project's major challenges are to control costs, secure financing, and meet an ambitious schedule.
The project must take steps to control costs, since there are several issues that could increase the project's costs. For example, the 10-mile trench will be built in an industrialized area where many utility lines are buried. Relocating these lines could be costly, as could any delays in relocating them. Clearing hazardous wastes from the trench area could also increase the project's costs, as could removing underground water from the trench, and managing traffic along Alameda Street and its cross streets. To cover potential construction cost increases, the project has established contingency reserves that, as of December 1997, totaled about $221 million. Because the complete terms of the project's construction contracts will not be available until the fall of 1998, it is unclear whether these reserves are adequate to cover potential increases in the project's costs.
The project also faces the challenge of demonstrating to financial markets that the project is a good credit risk and obtaining all of the funds committed by a financially strapped MTA. The project plans to raise $866 million or more from revenue bonds that will be issued in late 1998. MTA currently plans to raise $68 million of its $218 million commitment by issuing revenue bonds that are backed by countywide sales taxes. MTA plans to secure $150 million of its $218 million commitment from state funds that would be passed on to the Alameda Corridor.
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The other major issue facing the project is whether it can adhere to its challenging schedule. This is a key concern because any delays in beginning operations in 2001, such as those associated with potential delays in constructing the trench, could postpone generating revenue that will allow the project to repay its bonds and the $400 million federal loan. Both the project and federal and local transportation officials agree that the project has an ambitious schedule, and many tasks must be completed before construction of the trench can start in February 1999. Time savings from design-build contracting, expected to be 1 year less than if separate contracts for design and construction had been let, could be less dramatic than anticipated.
Mr. WOLF. A major piece of the financing plan is $218 million from the Los Angeles MTA. These funds are to be raised by LAMTA issuing its own revenue bonds that are based on sales taxes. These revenues are currently below projected levels and have contributed in part to the cash crisis facing the LAMTA and the subsequent suspension of the rail projects. Is the MTA able to make good on its commitment to the Alameda Corridor project and comply with the bus consent decree?
[The information follows:]
Project and MTA officials say that MTA will fulfill its October 1997 agreement to make the $218 million in funds available to the project starting in 1999. However, several factors make this commitment the least secure part of the project's funding. First, MTA continues to face a serious fiscal crisis that has already required them to choose among planned projects. Second, MTA could have difficulty in providing its funding when the project needs the funds to pay for construction if the Corridor meets its schedule. Currently, MTA officials are expecting project delays that would allow them to provide their funds later than scheduled, when it may be easier for them to do so.
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Mr. WOLF. When do you anticipate that all financing mechanisms will be in place to proceed to construction?
[The information follows:]
The last major piece of the project's financing is $866 million in revenue bonds, which project officials now hope to issue by November 1998. The issuance of revenue bonds would not occur until final project costs are available. Total costs will not be known until the project receives contractors' proposals on the largest segment of the project, the mid-corridor trench section. These proposals are due by July 1, 1998.
Mr. WOLF. How will the IRS' ruling limiting the segments of the project that can be financed through tax-exempt revenue bonds affect the schedule and of the project?
[The information follows:]
The IRS ruling will not affect short-term project costs during construction. However, long-term costs will rise as the project's use of taxable bonds arise. For example, if the project chooses to use more taxable bonds than previously planned, higher interest and financing costs would raise the long-term costs of the project.
The project's schedule now assumes that revenue bonds will be issued by November 1998. If that date is delayed, the project's overall financing package would be delayed, and it is likely that the start of construction would also be delayed.
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Mr. WOLF. Has the FHWA required a finance plan for the Alameda Corridor project, and in your opinion, is one necessary?
[The information follows:]
We agree that adequate monitoring by FHWA requires a finance plan or similar document, particularly after the bond issue is completed and the project begins construction. Although FHWA has not expressly required a finance plan, FHWA has received periodic financial reports from the project, detailed financial planning information, and information on its projected revenue stream. When its financing package is complete, the project will have to make available a detailed final finance plan in order to proceed with its bond issue of about $866 million in late 1998. FHWA is now developing a semi-annual reporting schedule that will include a finance plan that FHWA can use to monitor the project's financial decisions.
BART AIRPORT EXTENSION
Mr. WOLF. BART's use of design-build contracting is intended to save time by expediting the project's design and construction. However, because these activities will be expedited, the project will incur expenses faster than it will receive funding, requiring BART to borrow funds to fill the gap between revenues and expenses. Borrowing costs will increase given the anticipated shortfalls between appropriations levels and the levels assumed in the finance plan and the full funding grant agreement. Given these circumstances, is it likely that this project will be a model for design-build contracting?
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[The information follows:]
The BART airport extension may prove to be a relatively unique project, rather than a model for design-build contracting for the following reasons: (1) the project has four separate design-build contracts, not one overall contract that would reduce administrative and overhead costs, (2) not all of the project uses design-build since the airport, not BART, is building the airport station and structures using traditional design-bid-build contracting, and (3) much of the project was already designed by BART, thereby reducing the advantages of combining design and construction under one contractor. In addition, the cost efficiencies which design-build contracting proponents cite are best realized when a sufficient revenue stream exists to pay construction costs as they become due. Securing a revenue stream sufficient to accomplish this is difficult for large-dollar ''mega-projects'' such as the BART airport extension.
LOS ANGELES RED LINE PROJECT
Mr. WOLF. Can you give the committee an update on the status of the North Hollywood segment? In your opinion, is it on budget and on schedule and are there any potential problems in completing this segment?
[The information follows:]
As of January 1998, the North Hollywood extension is scheduled for completion in May 2000, about 5 months ahead of the December 2000 date established in the full funding grant agreement. Construction on this extension is about 55 percent complete and most of the potential tunneling problems (e.g. tunneling through the Santa Monica Mountains) have already been addressed. According to FTA's PMO consultant, some slippage to the May 2000 date could occur but the December 2000 date in the grant agreement is achievable.
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NEW STARTS FUNDING REQUESTS
Mr. WOLF. Haven't these shortfalls been funded in many cases by borrowings and other bridge financing, the costs of which are borne by the local sponsors?
[The information follows:]
Yes, they have.
FHWA DISCRETIONARY GRANTS
Mr. WOLF. Your report indicated that the high level of consistency between the staff's recommendations and the Administrator's selections changed after fiscal year 1994. How and why?
[The information follows:]
Our analysis of the discretionary program's selection process revealed that FHWA used two different selection processes during the period we reviewed (fiscal years 1992–97). The process that FHWA used affected the extent to which the Office of the Administrator selected higher priority projects. Under the selection process FHWA used during fiscal years 1992–94, FHWA staff ranked projects in order of priority and recommended specific projects and funding amounts to the Office of the Administrator. During this period, the Office of the Administrator selected over 98 percent of all projects that the program staff recommended. Under the selection process used in fiscal years 1995–97, staff placed projects into priority categories ranging from most promising to not qualified. During this period, the percentage of the highest priority projects selected by the Office of the Administrator was 73 percent.
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According to officials in FHWA's Office of the Administrator, the new process was designed to provide the Office with more flexibility in making project selections. This flexibility was designed to allow the Office of the Administrator to take into account issues such as geographic distribution of funding and the interests of Members of Congress.
Mr. WOLF. Though the Office of the Administrator did not document the factors it uses in determining which project it ultimately selects for discretionary funding, what factors or rationale do you believe the Administrator used to select the final project awards? For example, was it evident that projects were funded in ''swing'' districts or States?
[The information follows:]
Because the Office of the Administrator does not document its project selection criteria or its justification for selecting any given project, we were unable to clearly identify the factors it used to supplement the staffs' analyses. However, subsequent to our review, we conducted further analysis of the final selections to determine the proportion of projects awarded to democratic and republican congressional districts during fiscal years 1995–97. Our analysis revealed that for 4 of the 5 programs (Discretionary Bridge, Interstate 4-R, Interstate Discretionary, and Ferry Boats and Facilities), the Office of the Administrator selected more projects and provided more funding to democratic districts. However, FHWA also received more requests from states for projects located in democratic districts. In contrast, in the Public Lands program, we found that FHWA awarded a greater number of projects and dollars to democratic districts even though FHWA received more requests for funding for projects in republican districts. For example, in fiscal year 1997, states requested funding for 48 projects ($93.5 million) in democratic districts and 55 projects ($148.7 million) in republican districts. Of the 28 projects FHWA selected for funding in 1997, 27 projects ($50.9 million) went to democratic districts, and 1 ($274 thousand) project went to a republican district.
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Mr. WOLF. In 1982, Congress directed FHWA to establish a rating factor for each candidate project. What is the benefit of these rating factors if they are not adhered to in determining final awards?
[The information follows:]
The only program for which FHWA developed a rating factor and that we reviewed was the discretionary bridge program. The other four programs we reviewed had no comparable rating factor. The benefit of the bridge rating factor is that it allows FHWA to screen out ineligible projects and help staff develop priority rankings. However, FHWA uses the bridge rating factor as one of several factors to select projects for bridge discretionary program funding. Another factor FHWA would use in the final selections would be the extent to which the bridge project received discretionary funding in prior years. Projects receiving prior year funding would most likely be selected for continued funding.
Mr. WOLF. In 1997 you report that just over half of the discretionary awards made by the Administrator came from the ''promising'' or ''most promising'' categories, and a growing number came from the ''qualified'' or lowest-priority category. In your opinion, is the Administrator making wise transportation investment decisions if he is relying more on his discretion rather than on staff's analyses and recommendations?
[The information follows:]
The discretionary programs allow the FHWA Administrator to use discretion in selecting eligible projects. All the projects that the Administrator selected in the programs we reviewed met the basic eligibility criteria—no statutorily unqualified projects were selected. Whether all the projects selected were wise transportation investments is unclear, because the Office of the Administrator did not document its criteria for making final selections or its justification for selecting any given project. FHWA's selection of lower priority projects in three of the five programs we reviewed raises serious questions about the relative merit of those projects.
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AMTRAK OPERATING SUBSIDIES
Mr. WOLF. What progress has Amtrak made, to date, in eliminating its need for operating subsidies by the year 2002?
[The information follows:]
It appears Amtrak has made limited progress in eliminating its need for federal operating support but Amtrak continues to rely heavily on federal support—both capital and operating—to make ends meet. In fiscal year 1997, Amtrak exceeded its goals for ridership, passenger revenues, and overall revenues and its net loss (total revenues minus total expenses) of $762 million was about the same as that of fiscal year 1996. However, its financial condition is still precarious. Betweeen fiscal years 1996 and 1997, the gap between Amtrak's operating deficit (net loss minus noncash items) and its federal operating subsidy continued to increase (from $82 million to $149 million); the amount of debt and capital lease obligations increased from about $987 million to $1.3 billion; and Amtrak's working capital position (the difference between current assets and current liabilities) deteriorated from a $195 million deficit to a $300 million deficit. In addition, as of September 30, 1997, Amtrak had to borrow $75 million to make ends meet. The propsects for fiscal year 1998 may also be dim. Based on results through the first quarter of fiscal year 1998, Amtrak was projecting its net loss could be about $820 million (compared with a $762 million net loss at the end of fiscal year 1997) and a cash flow deficit of about $200 million by the end of September 1998. Amtrak currently has a $150 million line of credit. While Amtrak's strategic business plans have helped reduce operating losses to some degree, Amtrak continues to face challenges in eliminating federal operating support by 2002.
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Reducing the need for federal operating subsidies is also heavily dependent on capital investment. The Taxpayer Relief Act of 1997 will make available to Amtrak in fiscal years 1998 and 1999 a total of $2.2 billion that may be used to acquire capital improvements. However, Amtrak's capital investment needs are great and go beyond the funds made available in the Taxpayer Relief Act. Amtrak has estimated that its federal capital funding requirements total more than $4 billion. These funds will be used for such things as completing the Northeast Corridor high speed rail project between New York and Boston, recapitalizing the Northeast Corridor to preserve its ability to operate in the near-term at existing service levels; and accomplishing other projects.
Mr. WOLF. What impact does the recent union agreement have on Amtrak's ability to be free of Federal operating subsidies by the year 2002?
[The information follows:]
Implementation of the recent agreement with the Brotherhood of Maintenance of Way Employees (BMWE) will likely make it harder for Amtrak to eliminate its need for federal operating subsidies by 2002. In fiscal year 1998 alone, Amtrak estimates this agreement can be expected to increase its labor costs between $3 and $5 million over that which was budgeted in its strategic business plan. If the terms of this agreement were extended to Amtrak's other unions, Amtrak believes its fiscal year 1998 labor costs would be about $30 million more than that budgeted. According to Amtrak, extending a BMWE type settlement to all of Amtrak's unions could cost between $60 and $70 million more per year than currently budgeted from fiscal years 1999 to 2002. This is net of any one-time payments, productivity increases, or efficiency gains negotiated with the unions. Given this scenario, it is clear that without offsetting revenue gains or cost reductions Amtrak's net losses could be much higher than planned further increasing the gap between Amtrak's operating deficits and federal subsidies. To make ends met, Amtrak may be required to borrow additional money or seek additional federal subsidies. In fact, based on Amtrak's first quarter financial performance, Amtrak is forecasting it may need to borrow about $200 million—about $100 million more than planned—by the end of fiscal year 1998, in part due to higher than expected net labor cost settlements,.
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Mr. WOLF. The Administration's 1999 budget request does not seek an operating subsidy for Amtrak, as opposed to the $344 million the Corporation received in fiscal year 1998. Given this scenario, will the President's budget request address Amtrak's financial needs or will it make the situation more precarious?
[The information follows:]
As noted in the budget, the President's budget would provide Amtrak with unprecedented amounts of capital funding. Not only will $2.2 billion be available over 2 years from the Taxpayer Relief Act but the Administration's budget would provide an additional $621 million in fiscal year 1999 to make capital improvements. As we have reported, capital investment continues to play a critical role in supporting Amtrak's business plans and ultimately in progressing toward and maintaining Amtrak's financial viability.
Although historic levels of capital would be provided, the President's budget could make Amtrak's long-term financial situation more precarious. Instead of providing a direct operating grant, the Administration anticipates that some portion of the $2.2 billion provided to Amtrak by the Taxpayer Relief Act of 1997 would be used to finance maintenance expenses of existing equipment used in intercity passenger rail service. These expenses have traditionally been considered operating expenses. While Taxpayer Relief Act funds may be used to pay for maintenance of existing equipment, using them to do so could have financial ramifications on Amtrak. In particular, it could reduce the amount of money available to Amtrak to (1) acquire new equipment and (2) acquire those capital improvements necessary to reduce costs and/or increase revenues.
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Both could affect Amtrak's long-term financial viability and/or ability to reduce federal operating support.
Mr. WOLF. Instead of operating assistance, the President's budget notes that up to $400 million, provided to Amtrak by the Taxpayer Relief Act of 1997, could be used for operating assistance. Do you believe that these funds can legally be diverted to operating assistance?
[The information follows:]
The President's budget would provide Amtrak with a capital grant of about $621 million and no operating grant. In addition, under the Administration's proposal, Amtrak would fund progressive overhauls and equipment maintenance, activities traditionally funded with operating grants, with funds made available by the Taxpayer Relief Act of 1997. The $2.2 billion made available by the act is to be used for ''qualified expenses.'' The act specifically defines the term ''qualified expenses'' to mean expenses incurred for ''(1) the acquisition of equipment, rolling stock, and other capital improvements, the upgrading of maintenance facilities, and the maintenance of existing equipment in intercity passenger service, and (2) the payment of interest and principal on obligations incurred for such acquisition, upgrading, and maintenance . . .'' (emphasis added).
We note that Amtrak's recently issued Legislative Report and Federal Grant Request for Fiscal Year 1999 proposes two alternatives for Amtrak funding, both of which would provide Amtrak with the flexibility to use its capital grant for preventive maintenance. According to Amtrak, either of the alternatives would help ensure that Taxpayer Relief Act funds are available for ''high rate of return capital projects.'' We have not evaluated the impact that the alternatives might have on Amtrak's long term operating or capital needs. However, regardless of the form of federal assistance, Amtrak is likely to continue to require substantial federal financial support well into the future.
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Mr. WOLF. Since capital funds will not be available until July 1, 1999, will the Administration's budget, if enacted, result in any short-term funding shortfalls?
[The information follows:]
Whether Amtrak will experience a short-term operating or capital funding shortfall as the result of receiving capital funds on July 1, 1999, cannot be determined at this time. In general, this will depend on Amtrak's general need for funds, its cash flow, and the timing of capital expenditures. Amtrak currently receives its federal capital funds in July of each year. Therefore, any capital expenditures Amtrak plans to make with the funds provided for in the Administration's fiscal year 1999 budget will likely have to be made in July 1999 or thereafter. However, Amtrak's short-term funding needs may be influenced by the availability of Taxpayer Relief Act funds. According to Amtrak, the second installment of Taxpayer Relief Act funds could be available to Amtrak as early as March 1999. Since the Administration anticipates that some portion of these funds will be used for maintenance of existing equipment used in intercity passenger rail service, Amtrak may be in a position to use these funds to meet any short-term funding needs it may have related to maintenance of equipment.
AMTRAK LABOR PROTECTION OBLIGATION
Mr. WOLF. What are the cost estimates associated with labor protection obligations and nonlabor protection obligations?
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[The information follows:]
Current labor protection arrangements for Amtrak's employees are contained in Appendix C–2 to the Basic Agreement between Amtrak and the railroads from which Amtrak assumed passenger service obligations. Among other things, Appendix C–2 provides 1 year of salary protection for each year of prior service, up to a maximum of 6 years' pay, for employees affected by a discontinuance of passenger rail service. Alternatively, affected employees could elect to receive a one-time lump sum severance payment. In a September 1997 draft analysis entitled ''Budget Implications of a Zero Federal Grant: Why Zero Isn't Zero,'' Amtrak estimated the total maximum theoretical 6-year impact of labor protection obligations attributable to a complete discontinuance of rail passenger service at $6 billion. Amtrak also estimated that the cost of its labor protection obligations would be $1 billion if all employees accepted the alternative one-time lump sum payment.
The Amtrak Reform and Accountability Act of 1997 eliminates these labor protection arrangements as of May 31, 1998, and requires that Amtrak and its employees negotiate any new arrangements. Therefore, after May 31, 1998, Amtrak's obligations to employees affected by a discontinuance of service, and the associated costs, will depend on the results of these negotiations.
Amtrak's September 1997 analysis also identified about $3 billion in ''pre-bankruptcy obligations'' such as those associated with the financing of Amtrak's equipment and facilities, leases, and claims for personal injuries. It identified another $1 billion to $5 billion in ''direct government budget and cash effects'' if Amtrak were to be liquidated, such as railroad unemployment and retirement tax losses. We have neither verified Amtrak's estimate of the costs of its labor protection and non-labor protection obligations nor independently estimated such costs. Further, any costs associated with a possible Amtrak liquidation would depend on uncertainties such as Amtrak's debt and financial obligations at the time of liquidation.
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Mr. WOLF. What do you believe is the Federal liability, if any, if Amtrak went bankrupt? What are the associated costs?
[The information follows:]
In our view, the United States would not be legally liable for Amtrak's obligations in the event of an Amtrak bankruptcy. The United States is neither a party to nor an explicit guarantor of Amtrak's contractual and financial obligations. Further, the United States has not implicitly guaranteed Amtrak's obligations. To the contrary, the governing statutes and case law make it clear that the United States has insulated itself from liability for Amtrak's financial obligations. In short, Amtrak's organic legislation provides specifically that Amtrak is not a department, agency, or instrumentality of the United States Government. Further, in various contexts, federal district courts and courts of appeal have relied on this explicit disclaimer of agency status to find that Amtrak should not be identified with the United States. Finally, in the 1995 case holding that Amtrak was part of the United States Government for purposes of the First Amendment, the Supreme Court clearly stated that the language in Amtrak's organic legislation would deprive Amtrak of the ability to incur financial obligations pledging the credit of the United States.
Amtrak has estimated that the net costs to creditors and others of a liquidation could be as much as $10 billion to $14 billion over a 6 year period. However, as we recently pointed out (see GAO/RCED–98–60), costs associated with an Amtrak liquidation are difficult to predict because they will depend on uncertainties such as Amtrak's debt and financial obligations at the time of liquidation, the market value of its assets, the proceeds from the sale of assets, and the extent to which other railroads decide to provide service currently provided by Amtrak. In our view, the United States would not be legally liable for these costs; rather, they would be borne by Amtrak's creditors and others. However, the United States may nonetheless assume some or all of these costs as a result of policy decisions concerning passenger rail service in the United States.
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FAA'S OVERSIGHT OF REPAIR STATIONS
Mr. WOLF. Your audit said, ''When there was evidence that problems had been found, evidence of corrective action was usually absent.'' If FAA doesn't specify what documentation is to be kept on safety deficiencies, how do they know, when they conduct follow-up inspections, that the problems have been corrected?
[The information follows:]
Prior to conducting follow-up inspections of a repair station, inspectors review the deficiency letter sent to the repair station to determine what areas need to be revisited. These follow-up inspections are typically conducted by the same inspector who performed the original inspection when problems were identified, and there may be some institutional knowledge along with this continuity.
The documentation problems we identified become more serious when the inspector has left the office, be it for a transfer, retirement or a position outside of FAA. Without accurate information on what has been identified in the past, a new inspector would not have ready access to previous inspection results. We found that records in both FAA files and the automated system provide incomplete documentation of inspection activities. In the event that no information on corrective actions has been indicated, an inspector would determine if deficiencies have been corrected. If, however, there is no indication of what those deficiencies were, the inspector would have to provide a comprehensive review of the facility to confirm that the repair station is operating in accordance with regulations.
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Mr. WOLF. Your report notes that both GAO and the IG have been reporting on FAA's shortcomings in documenting their inspection activities as far back as 1987. Why is this such an intractable problem?
[The information follows:]
FAA's guidance is limited in specifying for inspectors what documents to include in repair station files. The guidance points out generally that the kinds of documentation of inspections and surveillance activities include inspection reports and related correspondence, but the guidance does not specifically require that any document be included. The only explicit requirement is a single statement in the Airworthiness Inspectors' Handbook that the letter to the repair station describing all deficiencies should be included in the case file. Although guidance for FAA's automated record system is less vague, it does not specify what information should be included in that system.
According to FAA field office managers and supervisors, much of the value of inspection activity is not in finding and listing problems but in resolving the problems effectively. Inspectors place a much greater emphasis on fixes than on documentation; consequently, if time is scarce, documentation, which can be a labor-intensive and frustrating task, suffers first.
We, along with FAA inspectors and supervisors, identified key items needed for useful management reporting, including: (1) an indication that a repair station was inspected and the results; (2) an indication that all deficiencies were communicated to the repair station in a deficiency letter; and (3) an indication that the deficiencies were ''closed out'' when corrective actions by the repair station were determined to be acceptable by the inspector. In addition, FAA officials agreed that these key items were necessary in developing complete supporting information about the extent to which deficiencies were being resolved.
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Mr. WOLF. Your report expresses concern over ''the relatively limited amount of oversight that FAA gives repair stations compared with the oversight it gives air carriers . . . each repair station was to have a minimum of one facility inspection, while each air carrier was required to have many more.'' Why is there a different standard?
[The information follows:]
During our work, we did not assess why the standard for inspections differs between air carriers and repair stations. Each year FAA prepares guidance on inspections that are to be completed by its aviation safety inspector staff. This guidance is in the form of the National Flight Standards Work Program Guidelines (Notice N1800.136 for fiscal year 1997). Although this guidance addresses all areas under FAA's jurisdiction, it has continually emphasized inspection of air carrier operations over that of repair station operations. In fact, the number of required repair station inspections under the guidelines has not changed since at least 1989.
Mr. WOLF. Your interviews with FAA inspectors at European field offices found that, in Europe, inspectors spend about 80 percent of their time on surveillance and oversight of repair stations, whereas in the U.S., inspectors spend only about 30 percent of their time on surveillance—and this includes all types of facilities, not just repair stations. Why is there such a difference, and what could Congress do to help bring the level of domestic surveillance up to the level found at FAA's overseas offices?
[The information follows:]
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Inspectors assigned to flight standards district offices in the United States perform four principal functions: (1) routine surveillance; (2) certification of an airline's operation; (3) accident and incident investigations; and (4) safety promotion. Inspectors in the International Field Offices located in Europe are not faced with all of these functions. The primary focus of their work program is on the certification and surveillance of repair stations along with limited surveillance of US air carriers. They do not cover other responsibilities that domestic offices must handle—such as overseeing pilot and maintenance schools, agricultural aircraft, and certificate management of air carriers. Consequently, inspectors at the European offices are able to spend more time on the surveillance of repair stations than their U.S.-based domestic counterparts.
Without significant commitments to both FAA's inspector and inspector support staff, the level of surveillance for U.S.-based inspectors will not be able to meet the a level similar to what we saw in Europe, because of the difference in the scope of work responsibilities. In order to improve FAA's level of surveillance over domestic repair stations, we have recommended that FAA make greater use of teams at repair stations that have large or complex facilities, have higher rates of noncompliance, or meet predetermined risk indicators. By adopting a team approach to inspection of larger facilities, FAA would make a more effective use of its limited resources.
Mr. WOLF. Should we make further increases contingent on the FAA making some of the changes you recommend in your report?
[The information follows:]
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Placing such a contingency on additional FAA resources is not an option that we examined during our review of repair station oversight. FAA's inspection resources are limited, and FAA must determine how to use what they have in the most efficient and effective manner possible.
The recommendations that we have made in our report, particularly using teams at large, complex, or problem facilities; establishing reporting requirements for tracking inspection activities, and revising repair station regulations will provide some of the efficiencies that the FAA needs to improve its surveillance of repair station facilities.
Some of the FAA field offices we visited have developed new approaches to surveillance which place a greater emphasis on repair stations. In both Scottsdale and Seattle, inspector responsibilities have been shifted to allow more time to be spent at larger repair stations. In some cases, annual inspections at larger facilities will be conducted by teams. Both of these locations made these changes with limited increases in staff resources.
This approach provides a more thorough inspection of repair station facilities, and provides a better record of inspection activities, which can be used by FAA to further identify trends and weaknesses which, in turn, can be used in subsequent surveillance planning.
WIDE AREA AUGMENTATION SYSTEM
Mr. WOLF. Why doesn't the FAA just request these funds in the appropriations process like other programs and other Federal agencies would do?
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[The information follows:]
Requesting funds for buying or leasing communication satellites in the current year FY 1999 was not viewed by FAA as very realistic from a funding standpoint. Purchasing satellites would have required substantial funding from FAA's F&E appropriation—on the order of $100 million annually for at least two years and lease payments would have been on the order of $35 million to $50 million starting in fiscal year 1999. FAA officials said that this level of investment was not reflected in FAA's current capital investment plan and fiscal year budget request, and the agency would have to request decreased funding for other projects to fund the acquisition of communication satellites for WAAS.
CONTROLLER STAFFING REQUIREMENTS
Mr. WOLF. Does the FAA need to make further improvements in the way it determines how many controllers are needed?
[The information follows:]
Not at this time. FAA has begun to implement our recommendations to use actual information about controllers' age, years of service, and retirement eligibility date to better determine the number of controllers that need to be hired.
Mr. WOLF. Would you say the FAA's relationship with its labor unions is getting worse, better, or staying the same? Why?
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[The information follows:]
Over the years, FAA has had a good working relationship with its unions. However, over the past year, the relationship with the air traffic controller union has been strained due to lengthy contract negotiations. The controller union's (NATCA) contract expired in August 1997. During negotiations, the FAA and the union representative have had disagreements about issues such as restrictions that FAA places on the performance of union work during a controller's work shift and how the alternative work schedule is applied to the controller workforce.
YEAR 2000 PROGRAM
Mr. WOLF. Would you provide, for the record, a copy of your testimony on year 2000 computer issues before the appropriate committees?
[The information follows:]
Offset Fols. 2021 thru 2031 PUT HERE
FTA GRANT MANAGEMENT OVERSIGHT
Mr. WOLF. Your review indicates that FTA regional offices are not fully utilizing the TRIS system and that headquarters is not requiring data to be updated. In light of this finding, how is the FTA able to focus staff and financial resources efficiently and effectively if data is insufficient and unreliable?
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[The information follows:]
Because of the unreliability of the data in TRIS, FTA headquarters officials are not able to identify the full extent to which grantees are or are not complying with federal transit requirements nor assess the effectiveness of its oversight activities. In addition, because regional staff are not uniformly updating TRIS with information from its various reviews, FTA headquarters officials are not able to identify trends in getting grantees into compliance from one regional office to the next. As such, FTA cannot adequately determine whether additional, or a different mix of staff or other resources should be placed in one region over another.
Mr. WOLF. Given the lack of data and the reliability of that data in the TRIS system, does the FTA know fully the extent to which grantees are in noncompliance and placing Federal resources at risk?
[The information follows:]
No. Until FTA's regional staff uniformly provide data—on a current and continuing basis—from its triennial and other oversight reviews, FTA headquarters officials will not be able to accurately determine the extent to which transit grantees are or are not in compliance with federal requirements.
Mr. WOLF. Are there wide variations in grant management activities of the various regional offices? For example, are some regions doing better or worse than others?
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[The information follows:]
FTA regional staff are not consistently and uniformly applying established procedures in carrying out their oversight activities which causes variations in FTA's grants management oversight. For example, few regional staff are consistently updating TRIS or using TRIS to monitor unresolved noncompliance findings; however, staff in some regional offices have established their own monitoring systems. In addition, the adequacy of documentation being maintained by regional staff varied. In some regional offices we visited, we found instances in which we were unable to determine whether completed oversight reviews still had unresolved noncompliance findings due to the lack of documentation. In other instances, documentation was old and there was no evidence of recent contact with the grantee on resolving open noncompliance findings. In FTA's New York Regional Office—which oversees the most transit grant dollars—the lack of documentation was more serious and problematic. Most of the triennial review files we reviewed for fiscal years 1995 and 1996 at this regional office were missing back-up documentation, correspondence, and, in some cases, the triennial review report itself. In addition, the Triennial Review Coordinator was unable to produce any files for fiscal year 1994 triennial reviews that, according to FTA records, still contained unresolved noncompliance findings. This lack of documentation in FTA's New York Regional Office provided little confidence that adequate follow-up on open compliance issues is being conducted.
Mr. WOLF. In your opinion, is there a correlation between staff resources, time allocated to grants management activities, or the number of grantees in a given region? Do staffing adjustments need to be made in the regional offices?
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[The information follows:]
In 1992, we criticized FTA for inconsistent and unfocused allocation of oversight staff. At the time, we found that FTA regions varied dramatically in the number of staff and proportion of staff time they devoted to oversight. Despite FTA's assurance to address these concerns, we found that this condition still remains today. An internal task force in May 1993 recommended that FTA should consider doing a detailed study of staff allocations to determine how regional and headquarters staffs' oversight efforts should best be focused. The study was to include a determination of the regional staffing levels necessary to perform oversight functions. FTA ultimately did not follow through on this recommendation. According to FTA's Office of Oversight, these issues were to be addressed as part of FTA's 1995 reorganization. However, FTA's reorganization does not appear to have addressed the inconsistent and unfocused allocation of regional oversight staff. As a result, we believe there is still no strong relationship between the number of grants, the number of staff performing oversight, and the time spent on oversight from one regional office to another. Until such a study is completed, staffing adjustments will be difficult to address.
Mr. WOLF. What actions is the FTA taking in response to your findings?
[The information follows:]
FTA staff are currently reviewing our draft report and will be providing as with their comments over the next few weeks. We will be happy to discuss their comments on our findings with you and your staff at that time.
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RAIL SAFETY
Mr. WOLF. In 1995, FRA and Union Pacific developed a safety action plan focusing on this railroad's systemic hazards in rail facilities, rolling stock, equipment, and operations. FRA and Union Pacific had 2 years to fix a number of problems; however, during the summer and fall of 1997, Union Pacific Railroad has had a spate of recent accidents and 10 employees died. According to the railroad, this is more employee deaths than the railroad's combined total from 1991 through 1996. Do you believe FRA's rail safety program has worked effectively to reduce or eliminate certain problems within the industry?
[The information follows:]
FRA conducted SACP reviews of systemic safety problems at Union Pacific, Southern Pacific (which merged with Union Pacific in 1996), and CSX during calendar year 1995. As part of each SACP, FRA identified systemic problems and root causes of the problems at each railroad, and worked with the railroads to address these problems. However, if FRA did identify systemic problems at these railroads during the 1995 safety reviews, its reviews appear to have overlooked some critical safety problems that contributed to the collisions and fatalities that subsequently occurred in the summer of 1997. As a result, FRA spent additional resources sending 80 Federal and state inspectors to review CSX's operations. During these reviews, FRA found additional safety deficiencies at both railroads and made several recommendations targeted to improving railroad operations.
INNOVATIVE FINANCING PROPOSALS
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Mr. WOLF. The Administration has indicated that the transportation infrastructure investment program would support large, nationally significant projects. Why would these types of projects not be able to be supported by State infrastructure banks, either by single- or multi-State banks?
[The information follows:]
Most State Infrastructure Banks may not be large enough to finance an expensive infrastructure project. The Infrastructure Credit Enhancement Program is envisioned to assist projects of $100 million or more. SIBs will likely be targeted toward much smaller projects. The largest SIB, for example, is Texas', which in the fall of 1997 was capitalized at just over $100 million. Other states' SIBs are much smaller. The Credit Enhancement Program would likely be targeted at providing grants to a limited number of larger programs. For example, providing $50 million grants to two nationally significant projects.
Mr. WOLF. If these concerns are not addressed by proposing modifications in the Tax Code, does it make sense to start up this new program?
[The information follows:]
Changing the program from a loan program to a grant program appears to address Treasury's concerns. The IRS had two concerns about direct loans: that loans would imply a federal guarantee against default where no such guarantee existed, and that loans might increase the use of tax-exempt bonds, thereby resulting in less federal tax revenue.
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Mr. WOLF. In your opinion, are States clamoring for these new types of creative financing or are they more anxious to obtain greater apportionments and higher obligations limitations?
[The information follows:]
States are always seeking more money to meet their transportation needs. In general, states would rather have greater apportionments and higher obligation limitations. However, many states also are willing to take advantage of flexible financing mechanisms available through DOT's innovative initiatives.
DEPARTMENTAL RELOCATION AND REORGANIZATION
Mr. WOLF. DOT has begun to examine its organizational structure and has prepared two interim reports—one that examined restructuring FHWA's nine regional offices and a second that proposed collocating DOT field offices. Please elaborate for the committee the recommendations of these reports and any observations or concerns you can have about them.
[The information follows:]
The first interim report followed an FHWA task review of the FHWA's field office structure. It recommended that the agency retain all of its 52 division offices and restructure its nine regional offices by replacing them with four resource centers. The report further recommended transferring some functions currently performed by regional offices to headquarters or specific division offices and relocating most regional staff to the new resource centers, divisions, or headquarters. The report did not identify any long term savings resulting from this reorganization and projected that costs may actually increase over the short term as staff are relocated. Furthermore, the roles and responsibilities of the new resource centers are unclear. On one hand, many of the roles of the new resource centers, such as providing technical assistance and training to the division offices, are similar to the roles of the current regional offices. On the other hand, FHWA noted that most of the roles of the current regional offices could be delegated to FHWA's divisions or headquarters.
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The second interim report was issued after a department-wide review of the existing space inventory of over 530 field offices. It identified 160 field offices as potential candidates to be colocated at 50 sites over a 5-year period. The report estimated that this and other efforts would reduce by 19,356 square feet the amount of space needed by the Department over a 2-year period. The report did not estimate any budgetary savings resulting from these colocation opportunities, and officials said that the moves could increase costs in the short term as staff are relocated. DOT's review was limited to those field offices that provide customer service or technical assistance, thereby excluding about 70 percent of DOT's more than 1,700 field offices.
Mr. WOLF. The Department proposes new resource centers. How will these new resource centers differ from the existing regional offices? What duties will these new resource center perform and why can't these duties be devolved to the division offices?
[The information follows:]
It is unclear from FHWA's interim report, how the roles and responsibilities of the four proposed resource centers will differ from the nine existing regional offices. Many of the new resource centers' responsibilities are similar to the current responsibilities of the regional offices. In addition, FHWA's interim report notes that most of the current responsibilities of the regional offices could be delegated to either the division offices or headquarters. FHWA will not be making its final decisions on the new resource centers until June 1998.
Mr. WOLF. In your opinion, can we expect real reductions in staff or is the Department simply shifting the chairs on the deck?
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[The information follows:]
DOT and FHWA officials expect to shift staff with no significant reduction in FTE's.
Mr. WOLF. What are the short- or long-term costs or savings associated with these proposals?
[The information follows:]
No cost savings from DOT's colocation and FHWA's regional office restricting initiatives are expected. In contrast, it may cost up to $2 million for FHWA to close each regional office that it no longer needs. In addition, DOT projects that its colocation efforts will result in limited dollar savings in the short term and could require additional funding for the long term.
Mr. WOLF. Will these resource centers duplicate the work of the newly established metropolitan offices in Chicago, Los Angeles, New York and Philadelphia in your opinion?
[The information follows:]
Duplication is possible particularly in Chicago, should FHWA turn its current regional office into a new resource center while maintaining its Chicago metropolitan office. In addition, FHWA considers the Chicago metropolitan office to be a satellite office of its division office in Springfield, IL. Clarifying the role and responsibilities of all these offices is clearly needed.
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Mr. WOLF. Last year, Mr. Anderson, you noted that headquarters reorganization had ''totally fallen off the table.'' Where is headquarters reorganization today?
[The information follows:]
FHWA intends to begin headquarters reorganization efforts in June 1998, after its makes final decisions on its regional office structure.
TRUCK SAFETY FITNESS REVIEWS
Mr. WOLF. What can be done to assure States submit more complete and timely data to the Federal Highway Administration?
[The information follows:]
A key element in implementing performance-based criteria for targeting motor carriers for compliance reviews is ensuring that the Safetynet database contains complete, accurate, and timely data about each motor carrier's safety performance. Our November 1997 report entitled ''Commercial Motor Carriers: DOT Is Shifting to Performance-Based Standards to Assess Whether Carriers Operate Safely'' found that many states have made substantial improvement in improving the timeliness of inspection and accident data that they transmit to Safetynet. However, we also found that, during fiscal year 1997, five states submitted accident data to Safetynet more than 180 days, on average, after an accident occurred.
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The Office of Motor Carriers (OMC), in its draft response to our report, stated that the administration's National Economic Crossroads Transportation Efficiency Act proposed to increase funding for motor carrier information systems and analysis that would provide funding, for example, to purchase laptop computers. OMC also stated that it is working with the states to improve their data reporting by, for example, identifying institutional barriers to data collection, entry, and analysis. We plan to continue to monitor whether states' accident and inspection data are complete, accurate, and timely, as well as other actions OMC is taking to better identify motor carriers with safety problems for compliance reviews.
GOVERNMENT PERFORMANCE AND RESULTS ACT
Mr. WOLF. The GAO has been tasked to review the strategic plans of each of the government's 24 major agencies; strategic plans which are required under the Government Performance and Results Act. Please summarize for the committee your key observations of the Department of Transportation's strategic plan.
[The information follows:]
We reviewed a draft of DOT's strategic plan in July 1997 and subsequently reviewed DOT's formally issued plan that was submitted to OMB and the Congress on September 30, 1997. The September plan reflects significant improvements to the July draft plan. The three components of the draft plan that already met the requirements of the Results Act-mission statement, long-term goals, and a description of program evaluations—were improved by more closely following OMB guidance for preparing strategic plans. In addition, the September plan meets two of three additional requirements of the Results Act that the draft plan did not meet. It meets requirements to describe (1) a linkage between DOT's long-term goals and annual performance goals and (2) those key external factors that could significantly affect DOT's achieving its goals. The September plan, however, does not meet the act's requirement to describe strategies for achieving the goals. The plan does not describe the operational processes, skills, technology, and resources required to meet the long-term goals, as required by the Results Act.
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Mr. WOLF. While the Department of Transportation's strategic plan has been characterized as one of the best, it only received a rating of 75 percent—or the equivalent of a ''C'' on a grade school report card. What omissions did you find in the plan and what improvements are necessary to improve the overall quality of DOT's plan?
[The information follows:]
The plan does not describe the operational processes, skills, technology, and resources required to meet the long-term goals, as required by the Results Act. In addition, the plan could be improved by following OMB's guidance on strategic plans and providing additional detail when achieving a goal is predicated on a significant change in resource or technology levels. For example, we have reported that successful implementation of certain aviation security measures mentioned in the plan is contingent upon deciding who will finance the security improvements and developing the needed technology. The plan could be further improved by following OMB's guidance on including time frames for initiating or completing significant actions. The plan contains time frames for some significant actions, such as addressing the Year 2000 problem and obtaining reliable financial statements by fiscal year 2000, but it does not include time frames for other significant actions, such as completing air traffic control modernization and improvements to Amtrak's Northeast Corridor.
Mr. WOLF. Your report indicated that the strategic plan did not demonstrate a firm commitment to improve the oversight of highway and transit projects, which are continuing to incur costs increases, experience delays, and have difficulties acquiring significant funding commitments. The plan did not provide specific strategies or sufficient details to address these problems. What specific strategies and actions are necessary to improve DOT's oversight of highway and transit projects and how might these changes be reflected in the plan?
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[The information follows:]
We have suggested several options for improving the management of highway projects. One option-once an appropriate dollar threshold and definition for large-dollar highway projects is established—would be for states to prepare total cost estimates for such projects. We have found that one reason why costs increase on large-dollar projects over time is that the initial cost estimates are preliminary and not designed to be reliable predictors of a project's total cost. Another option would be to have states track progress against their initial baseline cost estimates. While cost growth has occurred on many large-dollar projects, the amount of and reasons for their increases cannot be determined because data are not readily available from FHWA or state highway departments. As a large-dollar project moves through its design and construction phases, another option would be to establish performance goals and strategies for controlling costs. A final option would be to establish a process for the federal approval of large-dollar projects at the outset. FHWA approves the cost of a large-dollar project in segments when those project segments are ready for construction. However, by that time, a public investment decision may have already been made because substantial funds will already have been spend on designing the project and acquiring property.
To improve the management of transit grants, we have found that FTA's existing oversight information system lacks complete, timely data; hence, the information cannot be used effectively by FTA's headquarters officials to manage and monitor grantees' compliance with FTA's requirements. The system is intended to track the resolution of oversight findings and has the potential to be a useful tool in monitoring compliance, identifying problems, and assessing the overall effectiveness of the oversight program in meeting performance standards.
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The highway issue could be addressed in DOT's strategic plan under discussions of strategies for achieving its goals and the transit issue could be included under a discussion of data issues.
Mr. WOLF. DOT is in the process of completing its performance plans which support its strategic plan. What review does the GAO expect to make of these performance plans?
[The information follows:]
We will be reviewing DOT's fiscal year 1999 plan to determine its adherence to the Results Act and OMB guidance. We will be briefing the requestors' staffs on our findings in early April 1998 and issuing a report shortly after.
"The Official Committee record contains additional material here."
Thursday, March 5, 1998.
U.S. COAST GUARD
WITNESS
ADMIRAL ROBERT E. KRAMEK, COMMANDANT
Introductory Remarks
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Mr. WOLF. Admiral, welcome to the open portion of the hearing.
I just want to say personally and publicly, I appreciate the good job you have done for the Coast Guard and also for the country. I was quite surprised to see the announcement of your retirement, but then I understand that the rotation comes along.
I wish you well. On behalf of the Committee and all the members of the Congress, we appreciate the good job that you have done. I think you have set a fine example. I wanted to publicly let you know we appreciate that.
Admiral KRAMEK. Thank you, Mr. Chairman.
Mr. WOLF. Mr. Sabo.
Mr. SABO. Again, welcome, thank you for your good work.
Mr. WOLF. You can begin; read the whole statement or submit it for the record.
BUDGET REQUEST
Admiral KRAMEK. I would like to submit the statement for the record and make a few brief comments, Mr. Chairman.
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The statistics of what the Coast Guard did this past year are well documented. We had a very, very productive year in all the missions that serve America. The budget before you I consider a current service budget, and the President's' budget asks for sufficient funds for the Coast Guard to continue our current services to the American public in all of our mission areas.
I ask for your support and approval of that. It will allow me to carry out my operations almost to the same levels as last year in every mission area.
As you know, and I met with you several years ago, you agreed that the Coast Guard should be able to streamline and reengineer itself in order to meet budget deficit reduction targets.
This year finally accomplishes that. We have saved close to 4,000 people. We are now the smallest we have been since 1965. From a uniform standpoint, we are smaller than the New York City Police Department.
We also have saved about $400 million a year in overhead operating expense money through efficiencies, economies, good-quality management programs and bringing on new acquisitions that this committee appropriated that I can man with less people, like our new buoy tenders being built at Marinette.
So we have completed our streamlining. The only downside is having to work very, very hard—many of the people in our stations work over 80 hours a week. Our target is 68 hours a week. I think we can meet that as new equipment is brought on line. In our acquisition, construction and improvements budget this year, we ask for sufficient resources to maintain our boat building contracts, but they are at minimum order quantities.
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My point is the faster we bring them on, the more money I save in the outyears in operations and maintenance and I can reduce the work load on my people down to a more tolerable level.
RECRUITING
I would like to make just some brief comments about tomorrow's Coast Guard, because the budget provided this year provides for tomorrow's Coast Guard both in recruiting and obtaining the people we need to do our work. We consider ourselves to be the premier maritime agency in the world. I feel we have gained that reputation. To do that you need the very best people, and to have the very best people you need to be an employer of choice. We are doing very well in obtaining people but it is very difficult. We have a robust economy, which is good; there is not a leaning among many young Americans to want to put on the uniform and go to work. My recruiters have to meet with over 100 qualified high school graduates to get 1 to join the Coast Guard—and we are better off than many other areas of the Armed Forces.
WATERWAYS MANAGEMENT NEEDS
So we are recruiting the young people who will serve us in the 21st Century. We are looking for the best. In the next 10 or 15 years—this country is still an island nation with respect to trade. Ninety-five percent of our imports and exports go by sea. It is a major Coast Guard initiative to make sure that our ports and sea lines of communications are properly linked in an intermodal way with other facets of transportation, all of which appear before your committee.
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This trade will triple in the next 15 years. I am very, very concerned about that because our ports and waterways are not up to that now. We do not have a world-class waterways management system. I believe we need one. The Coast Guard has taken the leader in pulling together all the Federal agencies that contribute to this: the Corps of Engineers, NOAA, local municipalities.
The Secretary of Transportation has agreed that transportation should take the leadership role in this. Next month, I will present to him an implementation plan on how to go about this. I don't believe we need a lot more resources to do it. I think we need better coordination amongst Federal agencies and then better coordination as one team in the Department of Transportation to make sure all the modes work together in an intermodal sense rather than as individual agencies.
Secretary Slater agrees with that. Why are we concerned? The size of the ships is a good concern. The container vessels will carry 6,000 to 8,000 containers. They draw a lot of water. They go fast. It is hard to do something with them when they are in trouble, which is a Coast Guard responsibility. We have to be sure they receive the proper training so they can do it safely. Six-thousand containers line up 20 miles long on the highway or on a railroad. So if this is not done right, we have problems.
Passenger vessels are another major concern—whether they be cruise ships which carry over 6 million U.S. passengers a year, high-speed ferries under development, or other passenger ships being developed in the United States. These passenger ships are becoming megaships. Ships used to carry 700 or 800 on a cruise. New ones being built will be 130,000 tons, bigger than aircraft carriers. They will carry 3,500 passengers, 1,500 crew, and newer ones on the drawing boards will carry 8,000 passengers.
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So when these types of things happen, Mr. Chairman, the role of the Coast Guard in making sure the maritime transportation system that provides for safety of the people, cleanliness of our oceans, and safety of the mariners gives us interesting challenges here in the next couple of years.
This budget provides research and development projects and acquisition projects and waterways management projects that are moving in that direction to satisfy these future needs.
FISHERIES
The stress on the waterways will be more—more people moving to the coast, more demand for Coast Guard services, a tremendous depletion in our fisheries. There were questions before in our closed session about the fisheries.
The United States has the largest exclusive economic zone in the world, 47,000 miles of coastline extending out 200 miles from the coast, and the greatest richness of fisheries of any Nation in the world.
Developing nations with huge populations, whether they be China, India, or Russia, depend on the sea for 40 percent of their protein. Fisheries around the world are hugely depleted. Some of the only remaining robust ones are in the United States' waters. When the Magnuson Act was passed in the 1970s, the Coast Guard was given the responsibility to patrol this huge fisheries area and make sure that we didn't have foreign incursions and that we didn't deplete it ourselves.
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I am very happy to report that our domestic fisheries are about as healthy as can be, considering all the closed areas. It terms of our own fishermen, we have 98 percent compliance with our fisheries laws.
We made 8,500 boardings last year and seized Korean vessels, Russian vessels, and Chinese vessels making incursions into our fisheries zones. So we have been very, very busy in this tremendous geographic area. You can imagine up in Alaska, the Aleutians, the Bering Sea and the north coast of Alaska, why it is so difficult doing this mission.
MIGRANT INCURSIONS
We talked about drug enforcement. That seems to be a continuing challenge for us. We are very busy. The migrant challenge is always there. Last night and yesterday we intercepted 4 different migrant incursions—3 from the Dominican Republic. We encountered over 60 Dominicans on 3 different boats, and one vessel with 18 Cubans trying to reach the United States.
So we are busy with our migrant role. Our role as a joint member of the Armed Forces in ''operations other than war'' has increased. We used to call it peacekeeping or, limited intensity conflict. ''Operations other than war'' are the Cubas, the Haitis, Bosnias, even Iraq—even though it is a major military contingency it is not a global war.
DEFENSE FUNCTION
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In these types of situations I allocate assets to the commanders-in-chief of various areas. As you know, we are provided again in this budget—the administration asked for over $300 million for the Coast Guard in defense function 054.
I ask that be approved by the Congress. The high endurance cutter CHASE is going to the Gulf of Arabia, because we do maritime interceptions and we don't want weapons and illegal material going to Iraq to further strengthen Saddam Hussein's regime. I have stood up a port security unit, ready to be recalled if necessary, as well as other assets. That is our normal role, to do Coast Guard type missions for the regional commanders-in-chief who then don't have to use high-value military assets to do that.
Forty of the navies in the world today are coast guards. We have been asked to help train them. There are questions: Why did I send a crew to the Baltic and the Black Sea last year? Well, I was going to train the Ukrainian Coast Guard, the Russians, Lithuanians, Estonians, the Latvians, the Bulgarians. In all this strategy it is better that they not be offensive in posture but, rather, defensive and be able to take care of their economic zone. The State and Defense Departments have felt we are the best investment and I am augmented with Nunn-Lugar funds, State Department funds; it doesn't come all out of my appropriation.
ACQUISITION NEEDS
This next 2 decades will be of knowledge and information technology. We are working hard to work smarter. Many of our acquisitions are systems to allow us to do that. It is very, very hard to use 50-year-old ships to pursue the types of missions we have. Recently, in enforcing the embargo against high seas drift net fishing, I had to chase a Chinese boat with a 12-knot buoy tender that was built in World War II. We intercepted the vessel south of Japan, and had to go 1,200 miles to Guam. We seized the ship, sold it at salvage, and the money went to the U.S. Treasury.
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The people were great doing this. The equipment I have is old, it is scheduled for replacement.
That is what our deep water acquisition is all about. It is acquiring a system of cutters, C4–I, command-control computers intelligence system totally compatible with all other Armed Forces, so I need less ships, less planes, and so we are intelligently working together to conduct all these missions that we have.
These are not just Coast Guard investments, Mr. Chairman. I feel this is a national investment for the United States. We are the only member of the Armed Forces that has law enforcement authority and that is why we have so many and such far-flung missions in this day and age. Because many of the things the Armed Forces do end up in law enforcement action at the end and we are usually the ones asked to pursue that.
Mr. Chairman, we had a most successful year with the funds provided last year, especially with the counternarcotics fund and the $35 million we used. I have given you briefings and you have seen our success with Frontier Shield in Puerto Rico and the Virgin Islands. We have had our best year ever, and with continued support by this committee we will continue to perform at that level. Thank you very much.
[The prepared statement and biography of Admiral Kramek follows:]
"The Official Committee record contains additional material here."
Mr. WOLF. Thank you very much. There is a vote on. We are going to recess for about 10 minutes and be right back.
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[Recess.]
USER FEE PROPOSAL
Mr. WOLF. Let me begin on the user fee proposal. This will be your final budget that you are going to present us, and in it, your operating budget would rise by a little over 2 percent and the reserve program remains flat. We have already spoken about that in my office. The capital program would go up 11.3 percent.
Could you explain a little about the priorities, and then could you also talk about the proposed language that you have with regard to user fees; how that fits in, what the user fee would be used for in the budget and what the impact would be if you did not get the user fee?
Admiral KRAMEK. This acquisition, construction and improvements portion of our budget, which is the recapitalization portion of our budget, is unique this year in that it is to be capitalized by the collection—partially capitalized by the collection of user fees for Coast Guard navigational services. I am working very, very hard right now to use existing user fee statutes to determine how we can charge direct users of our navigational services a fee—cargo vessels, as an example—for those services, in the amount of $35 million in the fourth quarter of 1999; and then the appropriations language, as a result of this committee, would permit those collections to be put in the Coast Guard acquisition, construction and improvements (AC+I) account to finance our shipbuilding and boat building projects. The Administration asked some, and I asked some, over $440 million for our AC+I funds.
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If the user fee somehow is not appropriate, not authorized, then I am at risk for $35 million in AC+I funds, so that I can't get the boats and the ships and the planes I need for our people. It is more dramatic in the year 2000, in that I am expected to collect $165 million from the these fees, which includes those user fees for navigational services, plus $25 million in domestic ice-breaking fees for the Great Lakes.
Mr. WOLF. I spoke to members of the authorizing committee just the other day, and they gave me every impression, or just said they were absolutely opposed, that they did not plan on going ahead with the user fee.
Admiral KRAMEK. I feel that we have existing statute and authority to go forward with the user fee, but it would be this committee's decision, and you would have to have report language, which would then allow that user fee to go to our acquisition, construction and improvement budget to offset those costs. Yesterday at my authorization hearing, members were concerned whether legally we could do that, and they were studying case law history. We are not far enough along right now, Mr. Chairman, to determine who exactly the users are, how we can collect it, how we can do this fairly for all those who use our waterways so that it would meet that user fee statute. My goal is to construct it so that it will meet that statute and it will be fair and that it will not be other than a fee for direct services, which would meet the intent of the statute.
USER FEE AUTHORITY
Mr. WOLF. The proposed bill language, which would give the Secretary the broadest authority possible to impose new fees, actually mandates the Secretary to establish and adjust user fees for any services provided, and requires it be done within 150 days of enactment. It would actually require the Secretary really to establish a new range of fees. Why are you requesting such blanket user fee authority?
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Admiral KRAMEK. I think because our waterways are complicated on the number of users. I think the language exempts, as an example, recreation vessels, fishing vessels. In sorting out who should pay and what they should pay for, it needs broad authority to determine whether it should be just for cargo and perhaps types of cargo, or maybe it should be tonnage of ships or size of ships, or maybe the types of ships that pose the greatest risk to our environment. All those things have to be considered.
This fee is often compared to what other nations have done—in particular, Canada. I don't think it can be compared, because in Canada they have passed a law that requires it. This is a completely different situation. So the Coast Guard has a lot of work to do to come up with a fee, I feel, that the committee would find acceptable.
USER FEE BASIS
Mr. WOLF. Would you explain what activities would serve as a basis for these fees and would you include amortization of capital equipment such as buoys and buoy tenders?
Admiral KRAMEK. I can't answer that question right now. We just started our study because we have now just gotten the pass back information from OMB which has asked us to do this, and we are not in it deeply enough to know that that is proper to do.
Mr. WOLF. Two last questions, then. Mr. Obey has to go to another meeting and I am going to jump ahead and recognize him. But how do you define commercial vessels? For example, if a fisherman goes out to sea, would you assess them for using the navigational lights and buoys?
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Admiral KRAMEK. No, we would not. The direction, as I understand it, and it is pretty thin, really focuses on cargo, not on fishing vessels, and not on recreational vessels. So I would say it does not include them.
USER FEE COLLECTION
Mr. WOLF. Would you need more people to collect the fees?
Admiral KRAMEK. It depends how you go to collect them. If you can recall, several years ago the Coast Guard was asked to come up with a recreational boat user fee. Congress passed it and rescinded it the next year. In that case, I think we used the Post Office to collect the fees. So there are other ways to do that. But certainly we would need an increase in staff which would be offset by the user fees to do it, but I think if we did it cleverly, we wouldn't need a large increase.
USER FEE AMOUNT
Mr. WOLF. Lastly, how did they arrive at the $35 million figure?
Admiral KRAMEK. I have no idea how they did that.
Mr. WOLF. Okay. Mr. Obey.
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MACKINAW REPLACEMENT
Mr. OBEY. Thank you, Mr. Chairman.
Good morning. Let me simply ask you about a parochial issue which concerns Mr. Oberstar and myself and a number of others along the Great Lakes. As you know, Congress provided $2 million last year for the Coast Guard to accelerate work on a replacement ice breaker for the 54 year old Mackinaw. If I stayed up around the clock looking through the administration budget to see where funding is to proceed with that, I couldn't find it in the budget presentation this year.
Can you tell me, did the Coast Guard make the decision not to request those funds or did OMB make that decision?
Admiral KRAMEK. I asked for funds to continue the project in 1999 and they were not provided in the President's budget.
Mr. OBEY. Well, Mr. Chairman, I simply recall what Silvio Conte used to say from time to time when discussing the OMB. I remember him once saying he thought it stood for the Office of Mindless Bumbling, and in this case, I think he has understated it. Won't this project come to a screeching halt if Congress does not provide the funds?
Admiral KRAMEK. I don't think it will come to a halt. I think it has the potential for some delay. I am required——
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Mr. OBEY. Well, excuse me for interrupting because I don't want to take a lot of the committee's time. But if you will take a look at the committee report from last year, you will see that the committee recommended the initial funding specifically so we would avoid any undue future delay. You are saying OMB's decision will certainly result in a significant delay.
Admiral KRAMEK. I am not certain of that. I am required to report to this committee, the alternative analysis that looks at either replacement or renovation of the Mackinaw—the bottom line to provide the tools we need to conduct heavy ice breaking on the Great Lakes. That report is on track. I looked at it this morning. I will send it to the Secretary on the 1st of April and then to OMB. It should be delivered to Congress in May. It will present the alternatives; whether you buy a new ship, renovate the old ship, have different types of vessels to accomplish this. Then funds will be required to go into the design phase. Those are the funds that have not been provided because they were not provided in the 1999 budget by the Administration. I have every intention of requesting them in my year 2000 budget, which goes to the administration in June, so that is only 1 month after the alternative analysis is due, and I can see some potential for several months delay. But I would hope it wouldn't be too long in the meantime.
I have done all that needs to be done to keep the Mackinaw in service until such time as we have a replacement. Right now she is programmed to stay in service until the year 2006, so I think we have enough time, just barely, to do all of this. It would be smoother if we had the funds in 1999, as requested, but I don't see it as fatal not to have them. The big test will be after the alternative analysis is reported to Congress, whether or not we get funds in the next year's budget.
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Mr. OBEY. What was the Coast Guard's request to OMB for this project?
Admiral KRAMEK. I believe it was $5.3 million.
DEEPWATER PROJECT FUNDING REQUEST
Mr. OBEY. Your 1999 budget includes $28 million for the deepwater fleet replacement analysis. You are proposing to begin the concept analysis phase to replace deepwater assets, much like the concept studies we provided $2 million for Mackinaw last year.
I guess just a rhetorical question: Why should I support funding to begin a major new multibillion dollar acquisition program when OMB has failed to request funding to continue an existing ongoing acquisition project that is critical to transportation and commerce and the Great Lakes? Why should I, given the competing needs around here, cast my vote to provide one penny for that under these circumstances?
Admiral KRAMEK. Well, I think you should cast your vote for the deepwater project because it is the exact same project that I asked money for last year for Mackinaw that this committee approved. It was for the alternative analysis, preliminary to doing a complete design. The deepwater project is a two-phase project that simply pays for three consortiums and one government contractor as a balance to that to do the same type of work we have underway for Mackinaw right now, for the replacement of Mackinaw right now. The build funds for that program pend the successful outcome of the $28 million investment, just like the build program for replacement or renovation of Mackinaw pends the successful outcome of the $2 million investment you have given us to do this study. It is the same type of thing. You mentioned the Mackinaw was 53 or 54 years old. You should support the deepwater project because my other ships are that old too, and it is not right to continue to try to operate ships built in World War II to do today's mission.
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Mr. OBEY. I think that is a perfectly reasonable answer. I just wish that OMB respected other people's priorities the way we are supposed to respect theirs.
I have a number of other questions I will submit to you for the record on this subject as well as some questions on what the Chairman was pursuing with respect to the fees. And I would just suggest that in this case, with respect to the administration's request, I have been around here a long time and I understand that the administration often will cut programs that they fully expect Congress to provide the funds for so that they can pretend that they have, for the moment, funded other programs that are of a higher priority to the administration.
In the case of the fees, it seems to me that the administration needs to understand that it is not useful for them to send up something which people on both sides of the aisle or on both ends of the avenue regard as dead on arrival. I appreciate that many of those decisions are made above your pay grade. Thank you, Mr. Chairman.
DRUG INTERDICTION FUNDING
Mr. WOLF. Mr. Callahan.
Mr. CALLAHAN. Thank you, Mr. Chairman.
Admiral, in reviewing your budget, and I guess going back into past history, and I have expressed my concerns not only to you but to your predecessors, Admiral; you should feel embarrassed coming before the Congress and asking for a budget whereby 50 percent of the utilization of that budget for the next fiscal year is going to be used in enforcing fishery laws, when you admittedly have problems and have some areas of—blank areas in the Caribbean, and where resources would afford you the opportunity to stop drugs. You are advocating that nearly 50 percent of the time of Coast Guard cutter operations, 50 percent of the time of air flight carriers, and fisheries enforcement boardings to the tune of 13,000 projected for next fiscal year, would indicate to me that you are turning into the meter maid for the national fisheries. They come up every month with new regulations, pass them onto you to enforce, and the Coast Guard—and I know your problems with OMB—but when Barry McCaffrey, when the Secretary of Transportation, when you go to the President and they simply tell you that there is not enough money for your programs to be adequately funded because of budget constraints imposed by the Congress, that is not true. The President requested numerous other new programs, and for you to come—and I know the good soldier that you are and I know that the restrictions you have with respect to the organization and what the Secretary of Transportation instructs you to do—but you have got to realize that the Coast Guard is not a meter maid group of people.
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To spend 13,000, to have 13,000 boardings, private boats out fishing, it is ludicrous, when you admit that you have problems with resources available to interdict drugs. Now something is wrong, and something has got to be changed, and you cannot even have a sufficient number of drug interdiction monies unless you pass a user fee.
Well, we are going to create a user fee, we are going to allow you to assess the National Marine Fisheries a boarding fee. If they want you to enforce their rules and regulations which are not law, they meet every 2 or 3 months and they come up with an entirely new group of rules and regulations and they come to you and they say spend your resources enforcing the size of a fish that is caught off the coast of Alabama, that is wrong, Admiral, that is absolutely wrong. It is a disgrace to the Coast Guard.
If they want enforcement capability, let them take it out of their own hide. So why not let's impose a fee of $100 per boarding and assess the National Marine Fisheries. Wouldn't that be beneficial to you to have that money available if you are going to do nothing but enforce or spend half of your time enforcing those rules and regulations? I mean, would you think that it would be a fairer way to fund that if they paid for it and wouldn't they think twice before they promulgated some new rule indicating that the size of the shrimp—I mean the size of the fish this year, instead of being 13 inches, is going to be 14 inches, and they call you down to Tampa, just simply because a bunch of scientists from Yale or some place up in New England, who don't know anything about fisheries to begin with, tell you that, listen, Admiral, I know you have problems in the Caribbean, I know drugs are coming into the United States in horrible numbers, and I know you have got to spend some time in the Persian Gulf or the Middle East trying to protect the integrity of the national defense of this country, but forget about all of that.
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Admiral, that is wrong, and even though the good soldier that you are, you have got to step out in front and do something about that. The President found new monies for other programs. Why couldn't he find new monies and permit you to submit a budget to adequately fund drug enforcement?
We are not going to pass any new user fees, and if you will remember the situation of the recreational boat fee, I was the only one in America, I think, that paid the hundred dollars for my boat, and the only reason I did that is because I was taking one of your predecessors out for dinner one night on it and I didn't want to embarrass him.
We are not going to pass any legislation, or if there is any authorization in this bill that allows you to do it, I am not going to vote for the bill. Now I am going to vote, or I am going to offer an amendment to this bill to provide you with the resources you need for drug interdiction, but I am not going to get you more money or allow you to spend this amount of your budget, this percentage of your budget, on enforcing fishery laws.
So how much money do you need to have the most effective drug interdiction capability in the world, how much money do you need? Now we are talking about ships, and just give me a rough guess. We are talking about acquisitions, we are talking about manpower, we are talking about airplanes, we are talking about helicopters. How much money do you need, because whatever figure you give me, I am going to offer an amendment somewhere in this process, taking the money from some other agency, like the National Marine Fisheries, and giving it to you. So how much money do you need to have the best drug interdiction program that you could possibly conceive of? How much money? Just give me a $50 million guess.
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Admiral KRAMEK. This is the question that someone always likes to be asked but it is almost impossible to answer for you.
Mr. CALLAHAN. You have got to have some idea, Admiral.
Admiral KRAMEK. I will answer it this way. The President promulgated a 10-year strategy and a 5-year budget plan that was rolled out 3 weeks ago for the counternarcotics budget for the United States. It sets goals and targets in there. I submitted a budget to meet those goals and targets in fiscal 1999. I wasn't allocated all the money, although I felt they made a good argument.
Mr. CALLAHAN. How much money do you need? Just give me a hundred dollars, million dollars, guess then; do you need a billion dollars?
Admiral KRAMEK. Of course not.
Mr. CALLAHAN. Do you need $100 million?
Admiral KRAMEK. In order to carry out the targets and the strategy, I requested $98 million more than I was allocated.
Mr. CALLAHAN. So you think with $100 million you could more effectively have a drug interdiction program?
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Admiral KRAMEK. I could meet the strategy that has been allocated for me to carry out what my responsibilities are in fiscal year 1999 as part of the 10-year strategy.
DOMESTIC FISHERIES ENFORCEMENT
Mr. CALLAHAN. Wouldn't it make a little bit more sense to have less boardings of motor yachts out trying to catch snapper off the Gulf of Mexico, and utilize those resources as a part or in addition to the hundred million? Would that not make more sense to you, to have less boardings of private fishing vessels?
Admiral KRAMEK. I would say that in my personal opinion, drug law enforcement has a higher national security priority than fisheries enforcement. However, as you know, sir, I report to four different committees, and I would tell you that I am not sure the committees in the Senate, who have huge interests in proper enforcement of the fisheries, particularly in the Pacific and the coast of Oregon and Washington and the Bering Sea and the Pacific Ocean, where the tremendous economy of those regions depends on proper fisheries enforcement, that they may agree with that. I would say it takes a balanced approach.
Mr. CALLAHAN. We will allow Senator Stevens and others to worry about the Pacific and the coast of Alaska, but I remind you, you have three members of this subcommittee, all from Alabama, who are interested in this. I would remind you that the Chairman's counterpart in the Senate is from the State of Alabama, so let's just talk about the Gulf of Mexico where you are spending too much time boarding, and most of these boardings are in the Gulf of Mexico, they are not off the coast of Alaska, they are not off the coast of California, they are in the Gulf of Mexico.
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Admiral KRAMEK. Let me take a look at the Gulf of Mexico because there is an interesting statistic with our boardings in the Gulf of Mexico, and that is, the fishermen there have been so responsible as to produce a 98 percent compliance rate with fishery laws. That is astounding. That is astoundingly good. So perhaps as a reward for their good compliance, maybe we could do a little bit less. But I would say most of the boardings that are done there are done with small utility boats from stations, not from the type of equipment utilized down deeper in the Caribbean; but a transfer of funds could be made because of their great compliance rate with the existing laws. That is something worthwhile to look at.
Mr. CALLAHAN. Well, but the National Marine Fisheries are coming out with additional rules and regulations within 60 days that is going to require additional devices called birds, and shrimp nets, and they are coming out with additional quota regulations on the catch of snapper, so isn't that going to compound your problems——
Admiral KRAMEK. You are right, it is compounded, and it is more work than I can do. And I have asked my fisheries enforcement staff to meet with the Commerce Department because, quite frankly, I don't have the resources to enforce some of the new rules. And, as I mentioned in my opening statement, we have got the longest and largest exclusive economic zone in the world. Fisheries are important to our economy, they contribute $20 billion a year to the U.S. economy. And there are over 110,000 United States commercial fishing vessels, so there is a big industry we are talking about. It is an important industry. People's mortgages on their boats depend on them making a good catch. But if it continues to be depleted, everybody loses, including the consumer. Now the last time you and I have been down to the fish market to buy a pound of fish, it cost probably $10 or $15 a pound.
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PRIORITIZED BUDGET REQUEST
Mr. CALLAHAN. That is because 80 percent of them are coming from other countries. Eighty percent now are being imported, of our fisheries, maybe 90 percent of our shrimp, simply because, as you say, China and all those other countries do not have the programs we have. So, yes, we have created a huge market for imports.
My time is going to run out. But last year and the year before that, I suggested to the Coast Guard that they submit a budget to this committee prioritizing their monetary needs, and I am going to request once again that you submit next year a budget to this committee that prioritizes your responsibilities.
You tell us first how much you need for a full drug interdiction program, how much you need for navigational aids, how much you need for search and rescue, and how much you need for fisheries enforcement, and let us decide a priority. We can't do it giving you all the money, with you telling us how you are going to spend it, when you are being forced by the administration, I think, to police these environmental rules and regulations or these fisheries rules and regulations. Why do you all continue to refuse to submit a prioritized budget? Do you think the Congress would cut your drug interdiction request if you submitted it to the Congress?
Admiral KRAMEK. No, I don't think they would.
Mr. CALLAHAN. Then why will you not submit a budget saying this is how much money I need for the most effective drug interdiction policy possible?
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Admiral KRAMEK. I submit a prioritized budget like that to the Secretary and to the administration.
Mr. CALLAHAN. Why don't you insist that they send this to the Congress? Do you mean to tell me that you submitted to the President and to the Secretary and to OMB a prioritization, and they cut drug interdiction and did not cut fisheries enforcement?
Admiral KRAMEK. I would say that they—with the funds that were available, which was limited funds, they couldn't do it all. There is no question in my mind that in law, in regulation, in policy, the Coast Guard has about 15 to 20 percent more than it can do in any of these places, and that is why I am the administrator; to try to put the resources where they will do the best for all Americans, and the Americans that we serve.
There is a small pamphlet that is at your place, and that indicates what percentage we are spending in each mission this year and it is about 17 percent in fisheries but only 13 percent for drugs, so you are certainly right on that count. But that was a balance through the administration's budget process that we used to satisfy all stakeholders in America for our services, which far exceeds our capability to provide them all.
Mr. CALLAHAN. I understand. But, Mr. Chairman, rather than prolong this, I want to let you know that I already have a sufficient number of votes in this subcommittee to add another $100 million to the Coast Guard budget for drug interdiction, and I am going to submit it sometime in this process. It is not that I disagree with your professionalism in drafting the budget, I am just telling you that the Coast Guard is being shorted at the request of the administration, and as a result of that, people are dying by using drugs, and we would be derelict if we did not provide the United States Coast Guard with adequate facilities to fulfill what the Admiral is telling us he needs for the next fiscal year. So I don't know if it would be $100 million, Admiral, maybe it will be $200 million, and maybe I will try to take it from Amtrak like I did last year. And I didn't ask for a vote last year, Mr. Chairman, but I am going to have to ask for a vote this year.
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This submitted budget is inadequate to provide the needs of the United States Coast Guard for effective drug interdiction policy, and this committee would be irresponsible if they did not change that. If you want, Mr. Chairman, to rearrange this and say you are going to use X millions of dollars plus $100 million for drug interdiction, and less for fisheries, we will do it from within; but we, at some point in this process, are going to give the United States Coast Guard, at least my attempt is going to be to give them $100 million more for drug interdiction.
So I would appreciate, and I know your concerns about drug interdiction, Mr. Chairman, and I would appreciate your cooperation in instructing the staff to find a way. If we can limit the utilization of monies for these fisheries enforcement rules and regulations, and give the Commandant the authority to utilize that money instead, then let National Marine Fisheries give him the money for boardings, let National Marine Fisheries pay for the 16,000 hours of aircraft flight, let somebody else pay that.
This is not the priority that drug interdiction is, and I am sorry to take so long, Mr. Chairman, but I am very adamant about this, I am going to insist on it. I hope that this subcommittee will do it, so we won't have to take this type of fight to the floor. So I solicit your assistance in this and I am happy to hear the Commandant tell me that he could have a more effective drug interdiction program if he had another $100 million. Thank you.
DRUG INTERDICTION FUNDING
Mr. WOLF. In following up on that, we will look at everything. It is very easy for Members to be for this and then for something else. We are dealing in a zero sum game in everything we do, and in some respects, when the administration says they have a major war on drugs, and yet the additional funding is appealed all the way up to the President and it doesn't come through, clearly the Members are not going to support the user fee. That pretty much knocks out, if the math is accurate, 11 percent of your capital program, it pretty much goes by the board. So it is going to be very, very tough to do what you want to do, Mr. Callahan, but we will see.
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Where would you take the money out of the current Coast Guard to do what Mr. Callahan said, if you were given the authority to move it around?
Admiral KRAMEK. Well, there is no more slack. We just streamlined $400 million a year on 4,000 people, and as I mentioned in my opening statement, we are the smallest we have been since 1965.
I would look at other maritime law enforcement. At our migrant interdictions, what we are doing with trying to interdict Cubans, Dominicans, Chinese from entering the country illegally at the fisheries, those are the only two places that we should look to take it from, you know, not from search and rescue, not from maritime safety or those types of programs, from our maritime law enforcement area.
TRAINING CENTER PETALUMA
Mr. WOLF. Mr. Sabo.
Mr. SABO. Thank you, Mr. Chairman. On behalf of a colleague, I am asking some questions and I will have several questions for the record that I would like you to respond to and send them to me personally too, and that relates to the Coast Guard Training Center in Petaluma.
Admiral KRAMEK. Petaluma, California, right off of San Francisco, about 40 miles.
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Mr. SABO. My understanding is the closing of this training center was discussed in the last couple years, and decisions were made not to close it.
Admiral KRAMEK. That is correct.
Mr. SABO. It is the one training center for the Coast Guard that is on the West Coast, several on the East Coast. And our friends from California thought the issue had been decided, and apparently in the new budget, there is, again, an indication that that site might be under consideration for closing. Is that accurate?
Admiral KRAMEK. I am analyzing all of our training sites. I did 4 years ago when we streamlined and I found we had excess capacity. I consolidated and closed a lot of training infrastructure, not unlike the Department of Defense, where they needed to close bases and training infrastructure. As we have downsized 4,000 people, we need less infrastructure to train them. So in our analysis that we are doing—to make sure our classrooms are full and our instructors are all fully utilized—like you do with any school district, Petaluma is one of the four sites we are looking at. It has caused quite a stir out in California from the local people. But on the other hand, I have an 800-acre army communications station that I inherited that I am teaching people to do things there with, that I may be able to teach them to do things more efficiently somewhere else.
We are looking at the entire training picture, Mr. Sabo. Petaluma is one of four or five sites that is being considered. Everybody shouldn't get nervous until the analysis is done, which will take a few months. But I am obligated, like in this year's budget, to come up with $50 to $60 million worth of good management savings each year because the increase in the President's budget is less than the cost of inflation, and I can't pay the pay raise, the health care costs, or our current costs of doing business unless I continue to save. This is one of the areas we are looking at very closely, and Petaluma is involved as one of those entities.
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Mr. SABO. I will have a series of questions for the record. If you would respond both for the record and send me a copy of the answers that relate to how that study is being done.
Admiral KRAMEK. We will do that
Mr. SABO. Thank you, Mr. Chairman.
Mr. WOLF. Thank you, Mr. Sabo. Mr. Tiahrt.
DRUG INTERDICTION EFFECTIVENESS
Mr. TIAHRT. Thank you, Mr. Chairman.
I don't want to shoot the messenger. I think we are seeing that with Judge Starr today, and I think it is a barbaric practice, and I think your credibility and integrity and job performance is without question. So I want that clearly understood, that I think not attacking the messenger.
With that being said, I do want to say I am disappointed, not in the safety that you daily provide Americans, I think you are doing a great job, and not in the quality of the dedicated service; my disappointment, like Representative Callahan's, is in the drug interdiction efforts. According to a GAO report that you have shown us earlier that collectively with the Coast Guard and the Department of Defense and the Customs Service and the State Department and the DEA, there has been a dramatic decline in the Federal Government's efforts between 1992 and today, fiscal year 1992 and fiscal year 1998. We are at approximately two thirds of the funding levels, approximately three fifths of the shipdays for drug interdiction, approximately half of the flight hours for drug interdiction.
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Now, I am from Kansas and we are geographically the center of the 48 contiguous States. We don't see much of the ocean and we don't see much of the major waterways, but we do see the effects of drugs on our streets and in our schools and in our emergency rooms and in child abuse and in spouse abuse, and frankly we are sick of it.
My disappointment is in the level of drug interdiction. I would like to see the restoration as a first step, the restoration of funding back to the 1992 level. I don't think that that is enough, and it can't fall solely on the shoulders of the Coast Guard to restore that funding level, but you are the front line of our defense in many respects, and I think it is important that you have adequate ships. And I know we are decommissioning ships in the Navy; however, it seems like you always get the hand-me-downs. And just from my own family, I know my younger son does not like the hand-me-downs he gets from his older brother; yet that seems to be the pattern that often falls on the Coast Guard.
You should have the state of the arts with electronics and we have seen some advances with forward-looking infrared, and I appreciate what we can do to help that process along. But, you know, what is the next thing that would be effective? We need to know the next thing that would be effective.
Aircraft. I would like to see you look at something like the V–22, the Osprey. Some of these new aircraft can be very effective in interdiction efforts instead of just getting the hand-me-downs. Now, General McCaffrey has submitted this plan to cut drug abuse by, I believe, 50 percent by 2007.
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Admiral KRAMEK. Yes.
Mr. TIAHRT. Based on the last 5 years, if the next 5 is any indication, it is not going to be sufficient. Instead, we are seeing this focus on Forrest Gump and others who make a living by fishing, and, you know, they better straighten up because they are certainly increasing the amount of effort going to—well, what Sonny Callahan just explained in this oversight function that you have.
But in Wichita, Kansas we are concerned about drugs, we are concerned about the massive amount that comes over our borders and up our highways, and they are not as concerned as much about dolphins and their tuna as they are about drugs in the streets. And so I think that the Coast Guard budget as well as our Federal Government's budget should reflect that higher priority that every congressional district faces when it comes to drug and drug abuse, illegal drugs. But yet I really don't see that here. I see the increase in the fisheries enforcement and I see a reduction in drug interdiction.
So I don't want us to limp through this war on drugs, you know, we have had kind of a Vietnam mentality, as has been expressed by others, a Vietnam mentality in this war, where we don't have a clear objective and we are not getting to that clear objective. I think General McCaffrey's plan falls short of that clear objective that we should have of winning, the World War II-style victory plan for the war on drugs. Again, I am using the words of others. And I know it is three-phased, or as you said earlier to us, it was—education, treatment, as well as drug interdiction—and I believe that, and I know that is not all on the Coast Guard's shoulders; but, again, I want to emphasize, where it affects my district and the people in the central part of this country, that don't have the oceans at their front door or nearby and don't have access to the major waterways. We are concerned about drugs and we would hope your budgets in the future would reflect that, and I think that is probably the most important thing that we could do. That is not just money, and you can throw money in the wrong pocket and it will be wasted, as you know. We want to know what would be effective, as well as how much it is going to take to be effective. I think that comes in the areas of new technology. So I would ask that we have that type of information available. Rather than drag on a lot, I will submit some questions for the record and I would like to have responses on that.
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Mr. CALLAHAN. Will the gentleman yield?
Mr. TIAHRT. I would be glad to yield to the gentleman from Alabama.
Mr. CALLAHAN. You mentioned Forrest Gump, who is a constituent of mine. He is in Bayou La Batre, Alabama. The author of that book, Winston Bloom, is also a constituent of mine, he lives in Point Clear. Winston tells me that in his next book, because of all of these enforcement provisions and all of these rules and regulations promulgated by the National Marine Fisheries, he is going to have to move from Bayou La Batre to Shanghai in order to make a decent living because they don't have those types of enforcement regulations over there. So in the next book that comes out, Forrest Gump is going to be living either maybe in South Vietnam where he can fish for a living or shrimp for a living without all these onerous rules, or else he is going to have to be digging ditches somewhere in Alabama if he wants to earn a living.
So I thank you for bringing up Forrest Gump. He personifies my problem. This was the dream that he had, along with his friend who died, if you will recall, was to go and to have the ability to make a living shrimping off the coast of Alabama and live in Bayou La Batre, Alabama. Thank you for your time.
Mr. TIAHRT. Thank you, Mr. Chairman.
USER FEE PROPOSAL
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Mr. WOLF. Thank you.
OMB directives make it clear that a user fee should only be proposed where there is a direct link between the service provided and the fee proposed. Yet in this case, you are proposing to collect fees for operational services, then turn around and use them to defray the cost of new capital equipment. In other words, the bulk cargo ship, which pays you a fee for using navigational aids, would see you use those fees not to defray your expenses of providing that service, but instead to buy new equipment which may be wholly unrelated to the service he received. Doesn't this violate the principle of the user fees that has been established by OMB?
Admiral KRAMEK. I think if it is crafted properly, it won't violate the principle of user fee. As an example, the long-range aids to navigation system in the United States, which I manage, has over 50,000 floating aids to navigation, 45,000 private aids to navigation. Of the 50,000 floating aids to navigation, they are serviced by a service fleet of buoy tenders. These buoy tenders now are being replaced with shipbuilding contracts at Marinette Marine in Wisconsin. One contract—there are two contracts, another we are out on bids for now. The total replacement value of this fleet over perhaps 8 years—and it's about a third of the way finished now—is perhaps $1.2 billion. The cost of the service fleet, the cost of the vessel traffic systems—and you and I have had in past hearings long discussions on VTSs—in fact decided not to proceed with the national VTS system which, as you recall, Mr. Chairman, was about a $200 million price tag and it was suggested there would be user fees to pay for that which is what killed the project.
The direct cost of those navigation systems can be attributed to the users. They are part of the acquisition budget, so I can see a direct correlation between them. Eighty percent of the cost of the aids to navigation system are the service vessels, the ships we have to buy in order to do that. They are very unique, they are very different, it is very hard work to do that. So I think we can meet the intent of the rule in that sense, and it can go into the acquisition budget.
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DOMESTIC ICEBREAKING USER FEE
Mr. WOLF. What about user fees for the Great Lakes, for ice breaking?
Admiral KRAMEK. The debate there is what users benefit. The studies that are going on now, one of which I have recently submitted to the Secretary, look at who benefits. If in fact it is decided by the Administration and by Congress that perhaps only two or three or four industries directly benefit and nobody else does, then perhaps an ice-breaking user fee to target only them is appropriate. If they don't, then it can't meet the user fee statute.
That we are looking at very closely also, and that is part of what I have to do, 150 days or so after I have been told, and I have already started. So the test has to be made. We haven't completed the analysis to make that test. It has to do with inventory cost of taconite, steel and coal that would move during the winter. It is a very complicated transportation study. There are competing transportation industries, for instance. A lot of this can go by rail, but it is less expensive to go by sea. You have to break the ice for it to go by sea, and the cost of automobiles depends on this. It is not trivial, and so that is what we are looking at, Mr. Chairman.
CARIBBEAN SUPPORT INITIATIVE
Mr. WOLF. According to your justifications, the only new initiative in your operating budget for next year is the so-called Caribbean international support tender, which would be used to train and support foreign Coast Guards in the Caribbean. How was this program conceived? Was this in your original budget request to the Secretary and OMB?
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Admiral KRAMEK. Yes, in fact, it was even for a little bit more than that. However, we have been able to use excess defense equipment to reduce my request.
Mr. WOLF. Maybe we could take this out of Mr. Callahan's foreign operations budget.
Admiral KRAMEK. Well, I think it is a good force multiplier on what we are doing. I believe that nations should be responsible for their own sovereignty and exclusive economic zone and prevent illegal migration and drugs from entering their country. Right now that doesn't happen in the Caribbean. Their regional security forces are inadequate to meet the task. During the Caribbean summit, where the President went to Barbados, Secretary Slater and I accompanied him, we met with the leaders of all those nations. We have worked with these nations for years, the Coast Guard has, with search and rescue. We have a network of search and rescue in the Caribbean which we provide the international leadership for, so we are used to working with them.
So the President thought it was right for the Coast Guard to meet with all of them, to look at their regional security forces and decide with the National Security Council what they needed to do the job: 10 commissioned Coast Guard cutters, the 82 footers that are over 30 years old, and spare parts will be provided to them as defense excess equipment. The Defense Department will pay out of some of their funding for the operation and maintenance of these vessels.
Mr. WOLF. How much will that be for?
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Admiral KRAMEK. I think it is probably 2 or $3 million a year. The Coast Guard role in this is to provide the training for them to put together their little Coast Guards to maintain those vessels and to use them in a viable law enforcement role. So they go to our schools in Yorktown, Virginia, where we train them to be seamen and boatswains, mates and quartermasters. This 50-year-old ship will have a crew of Coast Guard personnel and 13 members from the foreign nations also, and it will go from port to port, a month at a time training them in how to use the boats, conducting joint operations with them, and training them how to communicate with us so that we don't have to operate there. I see it as a savings in the long run.
Mr. WOLF. How long would the program operate?
Admiral KRAMEK. I think forever.
Mr. WOLF. From a budgetary point of view.
Admiral KRAMEK. I think that the—I thought it was almost $4 million or so being asked for this year, those would be recurring funds.
Mr. WOLF. There would be a recurrence.
Admiral KRAMEK. Yes. My experience is when you train one of those countries and leave and go away for a year, the boats don't operate anymore, so the structure is incapable of maintaining that level of technical expertise necessary to do that operation.
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Mr. WOLF. So if you were going to put $4 million in this year, it was going to be $4 million for the foreseeable future?
Admiral KRAMEK. Yes, it is.
Mr. WOLF. So if we are not prepared to put it in next year, you should not put it in this year?
Admiral KRAMEK. That is correct.
Mr. WOLF. Your budget proposes to reduce international law enforcement training by $1.1 million and cut patrol hours for the HH–65 helicopter and the C–130 fixed wing aircraft. As a result, aircraft flight hours in support of antidrug missions would be reduced in 1999, leading to an estimated decrease in drug related seizures. Wouldn't restoring some of these reductions contribute more to the Coast Guard's mission achievement than providing $4 million for the Caribbean initiative, or do you think it is a fair trade off?
Admiral KRAMEK. I can't equate one to the other until the training gets accomplished and I watch them do that.
Mr. WOLF. But we are dealing with a very tight budget. We had a meeting yesterday of all the chairmen of the appropriations subcommittees. There is a supplemental which will have to be offset, except perhaps for the Bosnia part, I am not sure completely there, so every dollar does make a difference, particularly if you are trying to shift around and set priorities.
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So on a priority basis, if you were to match the interdiction versus this, knowing that nobody likes to make those choices, what would your choice be? Because basically what has happened, as you well know, the administration has pretty much said we are going to doctor this in such a way, the President will give a very good statement with regard to drugs, he will go on the radio on a Saturday morning and tell the American people of his total and complete commitment. There will be a lot of publicity surrounding it. I think General McCaffrey has done an excellent job. I personally think he is a good person for the job. But the average American doesn't know about OMB. Who is that? What is that? They are the people who call you over Friday afternoon at 6:30, before you come up the following day, to say, you can say this you cannot say that.
My sense is you are being more candid today than you would have been 4 years ago because you are getting ready to leave. I have watched this over the history of my service in Congress, and my service also for a cabinet officer. The closer you come to the end, when the person is leaving, and that I guess is just human nature.
The candor would be great earlier as well as later. But what they have pretty much said is let them do it up there, we have gotten all of our credits, we are going to make the case and do the public relations, but the fundamental underlying point, if you look at the flight hours—and we won't get into the classified briefing—it really isn't there, so it really is a choice. So there can be two very good programs, but you have to make a choice. Is this one, if you look at one or the other?
Admiral KRAMEK. I have already made the choice. The choice is in my budget presentation where I asked for the Caribbean initiative to be funded at the cost of reducing flight hours, so I have already made the choice.
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Mr. WOLF. But is that your choice or OMB's choice?
Admiral KRAMEK. It is my choice. It is my choice because internationally it is the right thing to do. We have the opportunity for this small investment to reap large benefits if, in fact, the regional security force operates the way we have envisioned it. If it doesn't, then it wasn't a good choice. In the choice of a zero sum game, like you said, that was my choice to make and I thought I would get more bang for the buck out of that than I would for some helicopter flight hours.
USE OF LETHAL FORCE AS A DRUG INTERDICTION OPTION
Mr. WOLF. On the drug interdiction question, how many people have been killed by gunfire on behalf of either the Peruvians, Bolivians or Colombians with regard to drug smugglers?
Admiral KRAMEK. I can't answer that but I will look into it and see if I can provide it for the record. There are different rules in different countries. The Peruvians will shoot drug-laden planes down. The Colombians choose to strafe them on the ground, once the crews have left the aircraft. We tell everybody to move aft, because we don't want to hurt anybody when we use disabling fire to bring a vessel to a stop, so there are different rules of engagement for every country.
Mr. WOLF. Does anyone with you know how many people, with your staff here, how many people have been killed in the last several years?
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Admiral KRAMEK. I don't think so. I would ask Captain Boyer if he would know. I don't think we keep track of that at that end. We don't have that.
Mr. WOLF. With regard to American fire, how many have been killed?
Admiral KRAMEK. None, to my knowledge. That is for Coast Guard. I mean, that may not be true for Customs or DEA.
Mr. WOLF. I am talking about Coast Guard, Navy.
Admiral KRAMEK. None.
Mr. WOLF. Why would it not be a good idea—and forget the convention, the international convention, I understand the potential problem—why would it not be a good idea for American military, both Navy and Coast Guard and Air Force, to open fire on either a ship or a plane that we clearly know is carrying drugs, because there have been a number of——
Admiral KRAMEK. If your premise is that you clearly know.
Mr. WOLF. Yes.
Admiral KRAMEK. That, in my opinion, as a member of the Armed Forces, it is not a good idea to use lethal force unless lethal force is being used in your direction, too. Proportionality, our whole nation is based on this, all our training is based on this, we use proportional force to bring something to a conclusion, short of lethal force to shoot somebody and kill them, unless we are actually threatened that way. That is true in Bosnia or Haiti or any other place on the war on drugs.
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Mr. WOLF. When a policeman is in pursuit of a murderer, they have the right to shoot at the individual. Is it not the same analogy here when you look at the number of young people and older people who are being killed by the drugs coming into the country?
Admiral KRAMEK. I think you can make an indirect comparison, but I think that would be your opinion, and that 10,000 people die from the use of drugs every year; but I think it would also have to be law—legislation would have to be passed to permit us to do that.
USE OF FORCE AND DETERRENCE
Mr. WOLF. In the briefing, you were showing where they knew they might be shot down, the success rate was higher.
Admiral KRAMEK. Very much higher, like 90 percent.
Mr. WOLF. So if the people operating the fast boats and planes coming out of Colombia knew that the United States military was prepared not only to fire a warning shot but shoot to hit the boat, hit the ship, hit the plane, that would have a positive effect?
Admiral KRAMEK. Studies show most of them wouldn't leave to begin with.
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Mr. WOLF. I have always felt that was the weakness of our policy. It really isn't a war on drugs when you go into the high schools and see the amount of drug use and the aching and the pain and the suffering taking place in families. We really don't have a war on drugs. I think it is a term politicians posture and like to use; but when it really comes down to it, very, very few people are prepared to do what they have to do.
There has been a reluctance in our government to actually go down and pick up the people. We know where the different operations are taking place in certain parts of South America. We actually know who the individuals are. We have the ability, like President Bush did with Noriega, to go and pick them up, and yet there has been a reluctance to even begin to get involved in that.
We also know that most of the governments we are dealing with are corrupt. Although they have some tremendously heroic men and women in the governments—in the Colombian government, the number of justices who have been killed and the number of military who have been killed and the number of attorneys general, it is a profile in courage. But we also know at the upper level, the political process in this country at times can be corrupt. We know that. So we also know that down in those areas, many, many times the political process is corrupt. When a cardinal can be assassinated in Tijuana, and nobody is arrested.
So I think until we are prepared to do those two things—it is very easy for Mr. Callahan to talk in terms of offering those amendments, and I hold a back seat to no one with regard to wanting to be tough and aggressive on drugs, but I think you also have to carry out—there are two other things. You have to be willing to go to the source country and deal with it in an aggressive way. This is a war.
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I think people ought to go into the emergency rooms and then talk to the moms and dads who have kids who have gotten so involved in this. Most of the crimes, perhaps 90 percent of the people down at Lorton prison are there because of drugs, or involved in drug use. It is a major issue. So until we are prepared to go to the source, and until we are prepared to also permit the military to shoot them down, I think it is a very, very weak response.
I may actually offer in this bill, and I don't think most of the Members will support it, but I will call them and hopefully they will, to change it to give you the permission and to give the Navy the permission to fire and to disable the plane and to shoot the plane down and to stop the boat in the water; not having to get on the phone and call the Commandant of the Coast Guard at his house and go back and forth in a liaison that will take 2 or 3 hours and spend the resources you spend.
If you could for the record, tell me how much money was spent on the one case where the individual was leaving and then you tracked him back, how much military with regard to Navy, Coast Guard, DEA, time on satellites, what that operation cost. What that actually cost in regard to resources, gasoline, time in the air, Coast Guard pay and all of it.
And I may very well offer, and frankly call the Congress' bluff on this issue, perhaps not the Congress because maybe the Congress would be very, very supportive, but call the administration's bluff. You have watched this thing. You had Mr. Brown, big hat, no cattle, nothing ever happened. The President went on television and said on MTV that he tried it but he never inhaled. You had the message being sent. You had the drug czar's office being dramatically cut, and yet you still have the Saturday morning speeches and the political posturing.
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[The information follows:]
While patrolling off the west coast of Colombia on the morning of September 27, 1997, the USS CALLAGHAN located a small, fast contact on radar. CALLAGHAN began a high-speed pursuit and after sunrise identified the contact as a black-hulled go-fast vessel with four outboard engines, flying no flag and carrying a large quantity of bales. CALLAGHAN launched its helicopter to assist in the chase. When the go-fast was overflown by CALLAGHAN's helicopter, the vessel began to dump the bales overboard. CALLAGHAN was unable to close the vessel and discontinued the pursuit to recover the bales, which totaled 3.3 metric tons of cocaine. A U.S. Navy's P–3 aircraft monitored the go-fast, but was unable to continue the effort due to low fuel.
The September 27 seizure did not involve any Coast Guard platforms, but did include the eight-person Coast Guard Law Enforcement Detachment (LEDET) embarked in CALLAGHAN. The following summarizes the personnel costs associated with this LEDET:
The Coast Guard did not have costs data for the other agency assist in this case.
Mr. WOLF. I have a number of other questions on the drug issue. I know you are leaving at 3:30, is that it?
Admiral KRAMEK. Three o'clock.
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APPROPRIATE USE FOR GOVERNORS ISLAND
Mr. WOLF. Fine. Let me go back to a couple others, but before I do, let me ask you about Governors Island. I was out on Governors Island and saw chiefs, Coast Guard chiefs. They tell me they were raking—I did not see them actually raking the leaves that day, but they said they had been out raking the leaves.
On the island, I saw a very historic building which you know about better than anyone, where President Reagan met with Gorbachev and Vice President Bush, and I sense it may have been the opportunity for President Reagan to introduce Bush to Gorbachev, to let them know that this is my successor and this is who you will be dealing with. Also, Mitterrand stayed in one of the buildings. The history that your people and the Library of Congress compiled for me of the number of people, interestingly enough, who served out there and also who served time in the brig out there is very, very interesting.
Coming from the grandson of an immigrant family, both came from Germany, my grandmother and my grandfather—looking out on Ellis Island. And you have been out on Ellis Island, which is—I mean, it is a special place to go and visit. I don't think it is visited enough, perhaps there is difficulty getting out there with the ferry, but you can go out there and spend a day and you get a greater appreciation of what this country is all about.
Then you go and look just off to the side and you see the Statue of Liberty, which was the symbol of the students in Tiananmen Square, which they made in a paper maché in 1989, and then we find out that some want to bring gambling out to Governors Island. My sense is that the Park Service should have an operation out there, perhaps move the boundaries of Ellis Island to also include Governors Island; also have the opportunity for consortiums of universities, and there are so many in the New York City area; also an opportunity for students who come from California a place to stay under a cooperative arrangement. And thirdly, provide 60 to 70 acres for parkland so moms and dads who live in the Bronx or wherever the case may be or come from California or North Dakota when they come can go out and see that.
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Do you think it is appropriate, with the history and the general picture out there, to have gambling out on Governors Island?
Admiral KRAMEK. No. I have lived there for 4 years. I was the Mayor of Governors Island. And no. It is historic, it has been historic since before we were a nation. The house I lived in was built in 1709. It was the oldest standing house in New York. And all those things you said are true, in particular, in the shadow of the Statue of Liberty and overlooking Ellis Island where my family came from also. So no, I don't think it is appropriate.
PRESIDENTIAL ADVISORY COUNCIL
Mr. WOLF. Good. Next we will move to Coast Guard roles and missions study. Your justifications indicate that a Presidential Advisory Council will review the Coast Guard's missions in early 1998. What is the council and who is on it? Who appoints it, what is the makeup?
Admiral KRAMEK. I just met with the Secretary last Friday evening and gave him a proposal on the structure of the council and how it should be done. The proposal is—and the proposal has not been approved by OMB yet, but it has been approved by the Secretary. The proposal is that a Presidential Advisory Council, designated by the Secretary, of Federal government employees which would include the Departments of Defense, Commerce, Justice and others, all of whom we do business with and serve in one way or another, would prepare a report on the Coast Guard's roles and missions in the deep waters of the world and the United States that this system is required to operate in. In other words, what are the missions that affect us? Cruise ship safety isn't one, but certainly fisheries, certainly drug enforcement, certainly our contribution to the Department of Defense, are all part of that.
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That commission would then conduct a mission validation study. They would be given 6 months to do this. Then the Secretary would submit that to the President, and I assume that OMB would be the President's agent for accepting this report. That report is necessary as input to phase 2 of the deepwater procurement.
The money that I am asking for this year accomplishes all that is required of Phase 1. Phase 2 does not require funding. In Phase 2, whoever wins the design competition would then go on to do detailed specification and contract costs. In fact, all three contractors who do the design competition could go on, as an input to Phase 2. They need verification of the Coast Guard's roles and missions that are given to us in law or by policy—the things we have been asked to do—to verify that for now and the next 20 years, those will still be important.
Mr. WOLF. Who would serve on it, for instance? Can you just give us an example?
Admiral KRAMEK. All I did was put respective agencies down.
Mr. WOLF. Just give us the people.
Admiral KRAMEK. I would assume people like perhaps the Deputy Secretary might even be the head of it, the Assistant Secretary for Fisheries in Commerce, the Assistant Secretary of Defense for Special Operations and Counternarcotics in the Department of Defense would be a member of it. It would be that level.
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DEEPWATER PROJECT FUNDING REQUEST
Mr. WOLF. The justifications indicate that the council's review will place special emphasis, as you just said, on deepwater missions of the Coast Guard in order to help shape the deepwater capability replacement analysis project. This program is budgeted at $28 million for fiscal year 1999, which makes it the fourth largest item in your budget. Why would you be requesting so much for this project if the details await the recommendations from the advisory council to review what the Coast Guard needs?
Admiral KRAMEK. We have a good idea, Mr. Chairman, of the validation of our missions already. You know, we know pretty much what we have to do by law. It needs to be verified; it should be verified. I would give you one example. The Coast Guard is tasked with enforcing the U.N. moratorium on high seas drift net fishing in the north Pacific Ocean, between Midway and the Aleutian Islands, and we have a treaty with Canada and with Japan to do that together. And I think that this commission wants to validate that, and that if they do, then we have to continue to do that. If they don't, and say we shouldn't be doing it, that will affect the number of ships and planes and people that we currently use. And so as input to how many we need and where we need the system, I think the study is pointed in that direction. The $28 million is used as, and I think in a very economic proportional way, a competition between major consortiums in this country that have already put their hats in the ring. For instance, Avondale Shipyard is teaming with Boeing, McDonald Douglas, and J. J. McMullen, Incorporated as one of the teams. There are six or seven other national teams over our major aviation and shipyard contractors that are going to compete, and the three winners of that competition will each receive about $6 million or $7 million to spend over the next 18 months to develop the concept design of the system. The study will then tell the winner how many and where.
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Mr. WOLF. This is the last vote for the day. Let me go vote and I will come back. You are leaving at what time?
Admiral KRAMEK. We were going to leave for the airport by about a quarter after 2, in order to meet Chairman Livingston.
[Recess.]
STAFFING ESTIMATE
Mr. WOLF. That is the last vote so we will have a little time.
Your budget justifications indicate you have discovered a, quote, ''structural error'' in your estimates of Coast Guard staffing. Apparently your systems failed to update your staffing estimate for actions taken by Congress or internal management decisions, which had the effect of reducing staffing. As a result, you now conclude you have significantly less staff resources than you thought. For example, your corrected staff estimate for fiscal year 1997 is 1,727 staff years less than you estimated last year. Can you explain how this error went undetected for so long?
Admiral KRAMEK. It is the way we structured our budget, Mr. Chairman. Before we structured our budget only based on programs, and the accountings we made on personnel were based on what we asked for and not what we actually received. We corrected that with the help of your staff this last year. They pointed it out to us. I feel that we are now on—have a good system to account for that, and our 1999 budget reflects the amount of money we need to hire the personnel to run the Coast Guard.
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Mr. WOLF. So it is in place now, it won't happen again?
Admiral KRAMEK. It is in place this year; that is correct.
DEFENSE-RELATED ACTIVITIES
Mr. WOLF. According to your fiscal 1999 program and financing schedule, the Coast Guard plans to obligate $69,135,000 in fiscal year 1999 for defense readiness activities. How then can the President's budget request an earmark of $309 million for defense-related activities?
Admiral KRAMEK. It depends on what you do. I could give you a list of what I would call national security missions that we are doing that will total $700 or $800 million. Whether or not they are exactly defense related or not is another matter.
As an example, it is totally defense-related when I send a ship and I am asked to send a ship to the Gulf of Arabia to enforce the embargo on Iraq. It is less defense related when I am asked to train the Colombian and Venezuelan components of their navy, which they call Coast Guards. In those cases, those funds wouldn't be attributed to that. They would probably be attributed to drug law enforcement, as an example.
Defense-related activities are when I have a ship or plane actually operating for the Department of Defense. The Defense Department pays for all the weapons I have on all of my ships, all of our bullets, all of our guns, and all of our defense-related communications systems. We clearly use, and each year I have to certify to the Department of Defense, over $300 million in national security defense types of expenditures.
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COAST GUARD IN THE DEPARTMENT OF DEFENSE
Mr. WOLF. You know, I know I am in a minority in the Congress on this next question, but wouldn't it make more sense for you to be in the Department of Defense?
Admiral KRAMEK. It is a question that is often asked.
Mr. WOLF. I have asked it before. I know it has been asked. I think it is easier to get the necessary resources if you were in DOD, and although you are the only military agency that has a police role, if you will, it just seems to me, frankly, if I were in charge, which I am not, I would take the Coast Guard out of DOT. I would take the FAA out of the Department of Transportation, too. I think it becomes an orphan child. I think the decisions—and we won't get into that for lack of time—are political, and therefore the thing just kind of gets shoved down. Secretary Pena went through this game several years ago with vacuum tubes, and he would go on television about vacuum tubes and the Speaker would talk about vacuum tubes. It was kind of a game. But the FAA never had the leadership. It was vacant. If you recall, you have been over there when Mr. Hansen walked out and nobody was minding the ship. They are going to have a year 2000 problem on their computers, which you are going to read about wherever you are 2 years from now, and I hope you are some place good. But the same thing holds true, really, for the Coast Guard. Do you have any feelings about that?
Admiral KRAMEK. I have some opinions and strong opinions, and I will say it is something we have closely looked at. And the officer who is going to relieve me of this job, Vice Admiral Jim Loy, is here today. He is my chief of staff. He and I have looked at this a lot, especially 4 years ago when Secretary Pena himself mentioned to me he thought we might be better off in some other department; why weren't we?
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I think it is good to take a look at the 1990 GAO study that was done to answer the question of Congress on this. Their conclusion was we are best in the Department of Transportation, and I guess that is why we are still there.
If you would have to do this with a clean sheet of paper, based on that budget book, our budget and brief, you might decide the Justice Department would be the department that we would be better off in, and that 40 percent of our total costs and operations are in support of law enforcement type missions.
In fact, just 2 years ago, the person who received the Department of Justice award for doing most of the Department of Justice was a rear admiral in charge of the 7th Coast Guard district, because of the migrants, the drugs, the fisheries and the environmental crime and all that that was being committed there. The fact of the matter is I don't believe we would be better off in the Department of Defense. Secretary Perry has suggested that to me. General Shalikashvili has suggested that.
Mr. WOLF. The Secretary suggested you would be better off, or would not?
Admiral KRAMEK. He wanted a discussion and we discussed going to the Department of Defense with both he and General Shalikashvili. Quite frankly, I don't think we would stand well there. The Department of Defense has a $255 billion budget, the Coast Guard is $4.3 billion.
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The Department of Defense exists today, and their budget allows them to be ready to carry out national security missions, but then in order to do it, they have to have a supplemental to go to Bosnia, a supplemental to go to Iraq. The Coast Guard, when you appropriate the money as our Chairman, I can't recall the last time we came back and asked you for anything substantial as a supplemental. With what you have given us, we buy ships, operate ships, inspect for safety. We do it all with everything, ''one stop shopping.'' I think we are a unique agency of government.
Somebody had the foresight over 50 years to put us together from a law enforcement standpoint, lifesaving standpoint, a steamboat inspection standpoint, and perhaps in the future, maybe even more ocean-type responsibilities. In Japan, for instance, the Japanese Coast Guard has hydrographic charting responsibilities.
Mr. WOLF. Where are they? Where is the Japanese Coast Guard?
Admiral KRAMEK. In a department, Minister of Transport. But parochially we set them up in 1949. We were part of Treasury then.
Mr. WOLF. Yes, I know. Where are most Coast Guards?
Admiral KRAMEK. Most Coast Guards are either a component of their navy or in their Minister of Transport, either one or the other. In intermodalism today, Mr. Chairman, I strongly believe the Department of Transportation is the right place for us. When I, in my opening comments, related about our maritime trade tripling, we are still an island nation. The things that the Coast Guard does for our transportation system are growing, not reducing in size. They are more important from an economic commerce standpoint. I feel we are in the right place, doing what we are doing as a unique agency. It was Secretary Pena's thought for a short time that perhaps we should be independent. I don't share that view. We need a Cabinet Secretary, we need chairmen of appropriations and authorizations committees who can properly hear what we have to do. We are different and I think we are treated a little different. We comprise 50 percent of the people in the Department of Transportation but only have 10 percent of their budget, and that puts us in another interesting position. But we are also the leaders for the Department in things like strategic planning, quality management, leading the charge in the National Performance Review.
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Mr. WOLF. Maybe we should put the Department of Transportation in the Coast Guard.
Admiral KRAMEK. I wouldn't be so bold as to suggest that.
OVERSEAS HOUSING AUTHORITY
Mr. WOLF. The military construction appropriations bill proposes the establishment of an overseas housing authority which would be funded through increases in individual housing allowances. Does the Coast Guard agree with this concept and will you participate in it, or have you even looked at it?
Admiral KRAMEK. I would like to look at that further and provide it for the record.
[The information follows:]
The Coast Guard is aware of the Army's proposed 5-year pilot project to transfer up to five overseas housing installations from appropriated funds to non-appropriated funds. The proposal would increase housing allowances to personnel assigned so they can pay rent. The Coast Guard supports the Department of Defense's privatization efforts, but with few Coast Guard personnel assigned overseas, the Coast Guard's overseas housing need can be met through commercial leases. There are no plans to participate in this proposal.
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Admiral KRAMEK. I will say that we had housing authorities which were new last year, brought about by Senator Mikulski's interventions in the Senate. And we are just starting to take advantage of those things, where contractors will build housing and then lease it to us for long-term leasing. It is called 801 authorities, and there are some other vernacular associated with it. We are just starting to become involved in that now.
PERFORMANCE PLAN—1999
Mr. WOLF. The Coast Guard has submitted its annual performance plan, as required by the Government Performance and Results Act, and obviously I think you should be commended for a lot of good work. But you would think of goal setting as a way of pushing oneself—I mean, I ran in the Boston Marathon one year and I set a goal that was far beyond where I was. And one year, on a lark promised I would run in a marathon, and I couldn't believe it, and I set a tremendous goal, but I just forced myself. And by setting the goal—we are all goal oriented. But many of the 1999 performance goals the Coast Guard has set are the same, and in some cases actually less, than already achieved.
Do you really think you have been aggressive enough in setting the goals? In some respects, some of them will be easy to achieve because you are already there. Should you have been more aggressive, or should you look at that with the idea that if I said I am 190, I want to go down to 178?
Admiral KRAMEK. There are two things you see in our budget; one is goals and one is targets. I feel our strategic goals are the right ones. I feel they are aggressive enough. They are more than I can ever achieve in fisheries enforcement or drug enforcement or perhaps even migrant interdiction. More achievable perhaps in the marine safety area; very achievable in search and rescue, and there are some reasons for that, because we drop everything when somebody says, ''May Day. We need help.''
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That is why the statistics show how achievable it is, because it is less a matter of choice and more what you absolutely have to do to save someone's life. But the things that don't look very challenging I would call targets, not goals. And the targets are very much influenced by what we expect to get in the budget, and the targets work both ways. The targets for drug law enforcement make a lot of Members unhappy because it doesn't look like we are doing enough, but the reality is there isn't any more to do it with, so it doesn't make any sense to set a target so extremely high that you can never reach it. Rather, I agree, it always should be a little bit more, maybe even 5 or 15 percent in some cases, in order to give you the incentive to do that.
I think, overall, our goals do that. Also, you reach a steady state in performance goals. As an example, in our performance goals to reduce oil spills, wouldn't it be nice if we brought that to zero, but it is impossible because 80 percent of accidents happen because of people, not because of the equipment, the machinery, or the safety of the navigation system. So you try to bring it to a level that is sustainable, that meets the public's interest.
So in some of those cases, our goals will level out. Search and rescue is like that now. Ninety to 93 percent of the lives we are able to save when we are called for help. To make it more than that would take an extraordinary investment in more stations and more communications. It is a goal that we found on working with our customers—because we asked them, we are a quality organization, what they want—they are usually concerned with the 7 or 10 percent that we are not going to save, but one that has met satisfaction in the public domain. So we set our goals based on discussing these with our customers and on what is realistic and what we can achieve. And I think for the first time Congress—this is the first hearing, the first question I can recall recently, and I really applaud you for that, asking us what do you think about these goals, that this is the first year we have put them forth. I think 5 years from now, most of our hearings will be based on what those goals are and what your objectives were and did you meet them, rather than on how much money you have in each one of these accounts.
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USE OF PERFORMANCE MEASURES
Mr. WOLF. Also, some of the strategies identified are somewhat vague. For example, under the goal to eliminate crew member fatalities on commercial vessels, your strategies are, and I quote, to promote fishing vessel safety activity, enforce applicable laws and regulations and conduct the merchant marine licensing program. These are not quantifiable measures, and you are already doing them in the normal course of your routine activities.
Are the performance plans designed to promote more specificity so the agencies can measure how you are doing, so the Congress can measure, or are they more to drive you to meet them? One says this is the thing that is going to drive me; the other says this is to see how I am doing.
Admiral KRAMEK. They are both. In fairness, it is very difficult to make up some of these goals. It takes a while to survey your customers. In this particular case, let's use fishing vessel safety, I think that is a darn good example. About 4 years ago it was identified as the most dangerous industry we have in terms of lives lost for people working in that industry, and it was on the number one hit list, if you will, for the National Transportation Safety Board for the Coast Guard to do something about it, and our goal was to at least bring it down to a much less dangerous industry, on par with other types of industry of like type. In order to do that, we saw we needed to have better safety features on the vessels, the people needed to be trained more, we wanted to license the masters. And we proposed a whole bunch of legislation which was soundly defeated by Congress, because the fishing vessel industry doesn't want to be regulated, period.
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Mr. WOLF. Nobody does.
Admiral KRAMEK. They were, though, they were—and I need to give them a lot of credit—very cooperative in having us work together in a partnership, and I have partnerships with them now. We tell them what they need to know about stability and loading their crab boats and how to put out fires and things of that nature, and they have set up their own schools and we have them come to our schools and we train them and we train together. They were happy now, after the fact, that from the safety standpoint, we were able to legislate that they needed life rafts, that they needed firefighting equipment, that they needed certain exposure suits, because the level of deaths in that industry has been reduced by about 50 percent. So these things are measured within the degree of what Americans will subject themselves to.
The same thing is true for the cruise ship industry. We have a partnership with them. There has only been one death in 10 years, even with these thousands of passengers per ship, 5 to 6 million passengers on board them last year. So we try to work on what the goals should be. This was our first effort at it. I think they will improve.
I want to say one thing about measurement. It is not simple. A year ago, I had to train 6,000 Coast Guard personnel in measurement in order to measure ourselves on how we do these types of things and put things together based on cycle time and repeatabilities. The normal recruit that you get in doesn't know very much about this, but he is the person out there boarding and doing the inspections, and they have to know about this. So it takes a while for the system to be developed. I think it will be a very good system to run the government, and we will have much better performance measures and be able to measure ourselves in the future. That is our first cut at what you are saying.
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COCAINE SMUGGLING SUCCESS RATE
Mr. WOLF. I have a number of questions on drug interdiction, which receives so much attention. According to your performance plan, you will measure the success of your antidrug effort by trying to reduce the smuggler success rate. You define this as the amount of cocaine transported aboard a noncommercial vessel into the U.S., expressed as a percentage of all the cocaine that would be transported if the Coast Guard was not present to deter or seize it. What methodology will you use to calculate this unknown amount of cocaine? How do you do that?
Admiral KRAMEK. Well that doesn't sound too very astute, but this is the way it works. Remember earlier in our closed session we talked a little bit about the supply and the demand. The demand for cocaine in the United States is about 240 to 300—scientists disagree exactly what it is, but it is in that range—metric tons of cocaine a year.
Mr. WOLF. Does that remain relatively stable?
Admiral KRAMEK. That has gone down a little bit, but only because the amount of users has gone down by about 40 percent in the last 10 years. Therefore the demand for it has gone down. The amount of supply is very, very flexible. Three or 4 years ago—the supplying countries can produce up to 700 or 800 tons a year, twice as much as we need. This last year, we think only 430 tons were shipped because of the disruption in Peru.
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What we were able to achieve in the transit zone, we seized like 103,000 pounds of cocaine just by ourselves in the Coast Guard. The goals are to reduce the amount—long-term goal is to reduce the amount of cocaine entering the United States below the demand level of the United States. But you have to take it in steps to get there. It is based on scientific studies.
It is based on a Rockwell study right now which shows that if you have a certain presence in the transit zone, some of it you will seize and some will be deterred by your very presence. I have sent this model to ONDCP, to General McCaffrey, and I suggested it be the model that all Federal agencies be measured on, that we should all have the same measure of effectiveness. ONDCP has let a study for quite a bit of money to have these things validated.
I think our goal is the right one right now. It needs to be validated. I can say 2 years ago we didn't have a goal, it was just to go out there and do the best you can, and I think it is in total consonance with the long-term goals in the strategy we talked about this morning, the 1998 strategy. It is in synchronization with that, if not a little more rigorous than the overall national goals.
Because the goals and the strategy will say, and I would commend it to your staff to look at this, because I called my staff in the other day and said wait a minute, our performance goals don't meet the goals of this new strategy. They said, ''Read the rest, Admiral,'' and the rest said the goal over 10 years to reduce flow and demand by 50 percent can't be achieved by the Federal budget alone. It has to be achieved by the participation of teachers, families, churches, schools, coalitions, all working together we can achieve this goal. The federal budget is only one portion of it.
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So I feel the portion we put in there is correct for our agency on what the art of the possible is within the constraints of the budget and the priorities of the people.
Mr. WOLF. Speaking of the art of the possible with regard to the budget, 10 years from now when you are 68 and we open up this hearing again and you are able to see how wise you were, like Solomon, how successful do you think we as a country will have been? I am not just talking about the Coast Guard, but you have an overall capacity to look at other areas. Where do you think we will be?
Admiral KRAMEK. We will be the world's leading economic power.
Mr. WOLF. I am talking about solely with regard to drugs.
Admiral KRAMEK. Oh, with drugs. In 10 years, if we follow the plan that General McCaffrey put down—and I helped make that plan, as other people in this room did, along with the Commissioner of Customs and the head of the DEA and Janet Reno and Donna Shalala and Bill Riley and all these other folks that work so hard on it—we will have met our 50 percent goal. I think that is totally achievable in 10 years and we will have less than 3 million drug users in the United States. If we want it to be less than that, we have to work harder on it and put more effort on it. If we want to do it in half the time, that might be possible from an interdiction standpoint; it may not be possible from an education, social and treatment standpoint.
In other words, this is something that takes a lot of diverse interests working together, but in a 5- to 10-year period I think it is totally achievable if you keep it on the front burner. Americans have to have the will to win, and if it is not on the front burner and the President and a bipartisan Congress are not talking about it all the time and making it an issue and keeping it right up front, I don't think we will be successful.
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Mr. WOLF. So you are basically saying you doubt we will be successful because the chances of us keeping—we have already fallen behind, based on the numbers?
Admiral KRAMEK. I think there were reasons for that, though. I mean, we have all jacked ourselves up not to let that happen again. We saw some successes during the Reagan years and the Bush years and then everybody said, ''Wow, we are doing really good'' and then didn't do anything more for about 4 years. That is what all the graphs of both demand and resources and everything we have talked about look like to me.
Mr. WOLF. I think it is harder now because it has gotten deeper, and overall, I think people are somewhat suspicious of the commitment, and I also think it is also not only a dollar thing, it is a spiritual thing. You have more child abuse, more spouse abuse, more teen pregnancies, more teen suicides, more teen violence, more families breaking up, and so it is not only economics. You cannot track that report only on the economic spending. It is on so many others, and on those other indicators, they are almost all, but for perhaps maybe one, going the wrong way and going fairly rapidly, at a rapid rate.
I spoke to a young lady the other day who had a nephew who committed suicide, a good boy, and they went into his room and they pulled out his writings, and the drug culture had pretty much wrapped itself around that boy and had taken him away, with the music. One night I was getting home late, I had been at an event and I heard, I forget the guy's name, Marilyn Manson, something or another, I forget what, but he was being interviewed. The whole drug culture has kind of come in and captured many of these children.
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I don't think many of you, or any of you, spend the time that I spend with young people, not only going in and talking to them but just listening. That is not as a criticism; many people are busy. I know Secretary Riley is coming out to my district next Monday, going into Chantilly High School, talking about class sizes and things.
But really, there is something happening out there among society. You can put all the money in for interdiction and you can do all these other things, and if the social fabric is not restored and if the spiritual aspects are not looked at, my sense is we have already slipped from the plan. You acknowledged that the difference, and correct me if I am wrong, was $98 million less than what you asked for for the Coast Guard. Is that correct?
Admiral KRAMEK. That is right.
Mr. WOLF. We have already slipped in this year, we have fallen further down, and there is nothing in that with regard to families staying together and those other things. So really I am not as optimistic. But it will be interesting to see, and you did qualify it where you said if we stick to it.
Admiral KRAMEK. If we stick to it. Because, you know, you have hearings from all the Transportation agencies. The Secretary's number one goal is safety. That is the Coast Guard's number one goal, is safety. Why is it safety? Look at the lives lost in transportation accidents.
There are 10,000 lives a year lost due to drug abuse in the country. Isn't it worthwhile to do as much or more than we are doing about that? We can save more lives that way than probably on some of our safety systems in the transportation sector. There is talk of going on the blood alcohol count to point 08, and that will save 500 or 600 lives, and I think we should do that.
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Mr. WOLF. I do too, but you will find——
Admiral KRAMEK. We can save more if we do more on the war of drugs.
DRUG INTERDICTION FUNDING
Mr. WOLF. You find Members wrapping themselves in States' rights issues and saying we cannot do that, and clearly the reason is because the liquor lobby is coming up here and plying the place with certain activities and therefore there will be a reluctance. There are a few Members who will say they want to be very active and deal with this issue and will not be there in support of it.
I guess the point I was trying to make about the question is to ask you, and you did say the condition was ''if.'' We have already failed your ''if,'' and in addition, I think what has been left out of the drug strategy is the whole spiritual aspect in keeping families together.
Let us move on. I am really trying to get you out of here on time. We have a couple of other questions.
On drug interdiction, last year you requested a $34 million increase in antidrug activities above the fiscal year '97 base of $319.7 million. It was stated these additional funds were needed to beef up the war on drugs. But you actually spent far more in '97 on antidrug activities, $471.4 million. This is $151.7 million more than you thought at the time of your budget submission. So this was obviously due to intelligent borrowing you took from different things and things like that. Will you explain how you were able to absorb that so effectively and how you view the opportunities, not just for this year but for the following years?
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Admiral KRAMEK. It was really the first year of the President's new budget strategy, and General McCaffrey, he put together a 5-year budget plan with goals. That was my first year, on asking you for that, and we did a lot of demonstration projects like Frontier Shield.
Some of that was done with the money you appropriated from this committee, some was done with money I received from ONDCP, and some of it I took away from migrants. Some of it, which would make Mr. Callahan very happy, I took away from fisheries, to demonstrate that we could get a lot of bang for the buck with this investment, and I think our statistics demonstrated that. I think we had a 1,000 percent increase in some of our performance figures, 300 percent in others. We have seized more drugs than we ever seized before. I feel we had a dramatic impact on the welfare and safety of the people of Puerto Rico and the Virgin Islands, as an example.
I actually honestly believed that this year would be the second year, and I would be funded and the Administration would ask for me to continue those programs, and I wasn't. And so I am disappointed in that, but that happens to be a fact. And so, in other words, I was already moving in that direction because I thought that that would be sustained. I was not correct in that, so I need to go back to the 1996 levels, which is where I am at, plus the few extra dollars that we got.
Mr. WOLF. The frustration, as I listened to everything today was, you appealed.
Admiral KRAMEK. As well as the Secretary.
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Mr. WOLF. Secretary Slater appealed. He apparently talked to the President of the United States, who is the boss, basically, and yet it was rejected, and yet you get the Saturday morning show. And so it is big hat, no cattle. It is like the guy who lives in Texas in a condominium on the 13th floor, but wears a cowboy hat and Levis and drives a red pickup truck with a gun rack on the back, but he lives in a condominium and he doesn't have any cattle.
Admiral KRAMEK. In real terms over what was appropriated last year and what was asked for this year, it is almost a 9 percent increase. It is all in the acquisition, construction and improvements portion of the budget.
Mr. WOLF. But we are talking about with regard to the drug interdiction.
Admiral KRAMEK. We are talking about just with regards to drug interdiction, and OMB felt that was enough, compared to all of the things they had to pay for, so I was not able to stay on the slope that I was on.
Mr. WOLF. You missed my point. The point was the accountability was to the President of the United States. I am one of two or three Members of Congress—I got the idea from former Congressman Stuart Udall—I send out my voting record to every house in my district telling them how I voted on every issue, abortion, gun control, every issue, because I have an obligation for people to know.
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The same thing is, I think we have an obligation to know what is the President's position on all of these issues. And apparently he made that decision not to fund this, and I think from an intellectual, honesty point of view, when that decision is made, I think there has to be an explanation why. But to then go out and give the impression all this activity is going on, to say that we are meeting the plans and doing the necessary things and we have a war on drugs, I think you lose a little bit of confidence. It is the big hat, no cattle thing.
STREAMLINING PROGRAM
Over the past 3 years, the Coast Guard has implemented a streamlining program which has resulted in reduced staff and consolidated field offices. About a year ago, you began indicating that this was all the streamlining that was envisioned. For example, in an interview in an Alaskan newspaper last August, you were quoted as saying that the reduction in Coast Guard size that marked the 1990s has gone about as far as it is going to go. Is this an accurate reflection of your view?
Admiral KRAMEK. From the streamlining studies that we did, we stopped short of reengineering because that was too risky, but the answer is no. We had to find $50 or $60 million more dollars of savings this year; we suspect we are going to have to find that again next year. I already know Admiral Loy as Chief of Staff has already had our programs submit to him what they intend to come up with as management savings. The training infrastructure is a good example on what we talked about a little before concerning Petaluma.
Mr. WOLF. I was going to get to that.
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Admiral KRAMEK. We streamlined our training infrastructure one time four years ago. It is time to look at it again. There are new methods of teaching, using computers, using the Internet. There are new simulators we have. We have 4,000 less people, we have too much training infrastructure, so it is time to streamline that again.
What I was referring to in the interviews with the Kodiak, Anchorage and Juneau newspapers is, based on where we were and what we had cut down to, we couldn't just keep giving the Coast Guard new missions which I was starting to get. Fisheries is a good example. I no longer had any capacity, any flexibility to do any of that, and so we had to look at putting in amendments or deltas to our budget.
In last year's budget I was asked to do more on drug law enforcement. I asked you for the funds and you provided it. This year I am asked to do the Caribbean initiative as a new initiative and I hope that those funds will be provided. That is why our budget is a current services budget based on what I consider to be the most efficient organization, which is what we streamlined to.
ACQUISITION FUNDING AND USER FEES
Mr. WOLF. Where do we get the capital program money, the 11 percent? If there is no user fee, where would you make up that?
Admiral KRAMEK. I don't know where they thought the chairman of this committee would get it from.
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Mr. WOLF. That is a good answer.
Admiral KRAMEK. On the other hand, on the other hand, just as an interested observer, I observe what both houses of Congress are doing with ISTEA and the transportation bills, and there is talk of $20 billion more, $30 billion more. We are not talking about $20 billion more or $30 billion more here, we are talking about a few pennies in comparison, but responsible nonetheless to achieve a great deal, so I would hope the chairman of this committee as well as other committees would take that into account.
Mr. WOLF. Admiral, we will do that and make every effort. Let me just say, I completely and totally agree with you. Senator Byrd is trying to get additional money for a road which half the people in the area of West Virginia do not even want. They are going to take a pristine area and destroy it, and with just a portion of that money you could do the necessary efforts, but do you think many Members of Congress want to stand up to Senator Byrd?
You probably wouldn't find a lot of people down at the Department of Transportation who want to stand up to Senator Byrd, or a lot of the different administrators who will want to say no. There was a time when Senator Byrd was going to move the CIA out of my congressional district into West Virginia, and I couldn't get anybody in the Bush administration to speak out because they were afraid to speak out. And now you have a Democratic administration with a Democratic Senator, and people won't want to speak out.
But I completely agree with you. You are 100 percent right. Some of that money in the Appalachian Regional Commission could be taken. But now if we had a motion to take money from the Appalachian Regional Commission, which maybe I will offer, boy, you will find people bailing out and saying I don't want to deal with this. I mean, I don't want to have to take on this person and that person. You are exactly right. They can make speeches about the men and women using drugs and all, but nobody wants to challenge it.
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So when you look at the money that is spent, and I won't say wasted because I don't have the right to say it is wasted, but certainly the priorities you are asking for are much greater and much higher in the national interest for all of us, whether we be from one State or whether it be for the West Coast or Maine or wherever, or living in the Caribbean or wherever the United States flag flies. I think those priorities are much higher than some of these others.
And I don't understand when I look at the additional money that I see they are talking about, and then they say it is going to be within the caps. Mr. Sabo and I were talking about it when we went to the first vote. Where do you get it? Where do you go? And there will be a vote and somebody will say, yes, we want more money for X, but then they won't say, well, this cuts veterans or this cuts cancer research or this cuts health care or this cuts defense, and so I completely agree with you.
The problem is this place operates on fear, and fear is a very intimidating factor, something I hope never to get and never to have. It is better to go and try and get wiped out, and sometimes you will find you aren't even wiped out and you are successful. Senator Byrd never moved the CIA out to his district. There is a road that they wasted, called Route 9, they still have going out there.
So it is better to try, but I completely and totally and emotionally and in every other way agree with what you are saying. And I have to understand from your vantage point, and your men and women who are out there freezing and doing whatever they are doing, and hanging out in the Caribbean waiting, must feel that. ''You mean they spent that for that, when I am living in this base housing in an area that is not very good, working 60 to 80 hours a week?'' I think you are exactly right.
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Anyway, let me just recognize Mr. Sabo, and then I will just end with a couple of other questions.
Mr. SABO. I don't even need to start. I think I agree with you.
Mr. WOLF. You have no questions?
Mr. SABO. No.
Mr. WOLF. We have some streamlining questions, but I know you are waiting to go, so you just can answer them for the record. You are going with Rich, too, right?
Admiral KRAMEK. Is he going to ask all these questions on the plane, too?
LORAN CLEAN UP AND REMEDIATION
Mr. WOLF. This one here, the global positioning system, the FAA is now trying to decide whether or not the GPS satellite navigation system will require a land-based backup and whether the backup should be the existing VOR system, Loran, or some other equipment. The Coast Guard currently operates the Loran system. We understand that you will incur about $80 million dollars in clean-up and remediation cost if Loran is discontinued. Is that accurate?
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Admiral KRAMEK. That is accurate. I think what I would like to do, either for the record or send up to your committee, a new little briefing and study that was given to me the other day that puts all of this in perspective, because you not only have to look at it today but you have to look from now until the year 2000, to 2008, and then from 2008 to the year 2015, and really look at what the remediation cost and the investment cost would be if this nation decided to use Loran as a backup system to GPS.
This is a leadership issue. I am recommending to the Secretary that the Administrator of FAA, the Assistant Secretary for Policy and myself get together and advise him very soon, in a month or so, exactly what tact we should take here, because it is an affordability issue of not just—it is an affordability issue of, in my view, hundreds of millions of dollars if we are going to maintain a backup system, which has some great desirability by a lot of the aviation and maritime users of the system.
[The information follows:]
The briefing, entitled ''What is the Future of LORAN–C; An Update,'' was provided to the subcommittee under separate correspondence on April 30, 1998.
"The Official Committee record contains additional material here."
LORAN COST-BENEFIT ANALYSIS
Mr. WOLF. Your costs, should they be considered in the FAA's cost-benefit analysis and the trade-off?
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Admiral KRAMEK. Yes, it needs to be with the Department of Transportation, and a radio navigation plan cost-benefit analysis, not just FAA or Coast Guard.
Mr. WOLF. Are they considering your cost at the FAA?
Admiral KRAMEK. They have, but I don't think they see the complete picture, and that is why I think it is time for the Secretary to look at this top down, which I am suggesting to him. I will tell you at the meetings I have recently had, I have had the FAA there participating, as well as the policy shop.
I think now we have finally seen what the right picture is. People have changed their minds because of what customers want. Two years ago it looked like a very good idea from a balanced budget perspective, now that we had the global positioning system, to go with that and to terminate Loran C by the year 2000. It caused an uproar among the noncommercial aviation community and the maritime industry, especially fishing vessels and all that, saying you are supposed to use all means at your disposal.
There were a lot of things that weren't considered in that initial input into balancing the budget. I think we need to look at all the things now on the investments it would take to keep Loran C, as well as the clean-up costs if you terminated it.
I was at St. Paul Island in the Pribilofs, north of the Aleutians this summer to visit our Loran station. I think I may have been the first Commandant ever to go, but certainly the first one in the last 25 years. There is nothing there but a few Indians running a fishing business and our Loran station, and tremendous environmental problems concerning what to do with waste and all the fuel. It would cost us several million dollars to remediate that site over the years because our standards are so much higher today than they were years ago.
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The total picture has to be looked at, and I think we have to make an informed economic decision.
YEAR 2000 ISSUE
Mr. WOLF. The last question I have, and I will recognize Mr. Sabo to see if he has anything final, is on the year 2000, the computer issue. FAA is really having a hard time. I think the advantage you have is that they didn't have an administrator for really over a year, and I think they are in trouble. I don't think they can make it. Are you okay? Are you confident?
Admiral KRAMEK. We are okay. We put together a good program. We had about 78 systems that needed to be corrected. We already corrected over 25 of them. We have a plan for each system now that needs to be taken care of, that will cost us approximately $8 million, will be done 6 months before the deadline.
Mr. WOLF. When did you start?
Admiral KRAMEK. I started over a year ago, maybe a year and a half ago. I also did one other thing. We have gone out to industry that we relate to.
This February, for instance, in New York, we had all the maritime users together to educate them to the problem, because even if we solve all of our problems, the customers we interface with could have problems and therefore the system, the maritime system won't work. I was surprised at how little they knew about it, so I put together an outreach plan for the entire maritime industry. I have shown that to Deputy Secretary Downey. He has instructed all the other modes, including FAA, to use our outreach as a model and show them how we have done that.
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So I am satisfied we know exactly where we are going, but we do have an interrelationship with industry and we have to show a lot of attention to that. It is more than just the Federal Government cleaning their own house on this, it is the industries we relate with.
Mr. WOLF. In closing, then, I will say this is probably the last time you will appear before the committee, and I want to thank you for your candor and, I think, for the outstanding job you have done, and wish you well in the future.
"The Official Committee record contains additional material here."