Text: ASSESSING THE FEDERAL GOVERNMENT'S COVID-19 RELIEF AND RESPONSE EFFORTS AND ITS IMPACT (PARTS 1 AND 2)
[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
ASSESSING THE FEDERAL GOVERNMENT'S
COVID-19 RELIEF AND RESPONSE EFFORTS AND
ITS IMPACT (PARTS 1 AND 2)
=======================================================================
(117-24)
REMOTE HEARINGS
BEFORE THE
COMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
__________
THURSDAY, JULY 29, 2021 (Part 1)
THURSDAY, SEPTEMBER 30, 2021 (Part 2)
__________
Printed for the use of the
Committee on Transportation and Infrastructure
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Available online at: https://www.govinfo.gov/committee/house-
transportation? browsecommittee/chamber/house/committee/transportation
__________
U.S. GOVERNMENT PUBLISHING OFFICE
46-369 PDF WASHINGTON : 2022
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COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
PETER A. DeFAZIO, Oregon, Chair
ELEANOR HOLMES NORTON, SAM GRAVES, Missouri
District of Columbia DON YOUNG, Alaska
EDDIE BERNICE JOHNSON, Texas ERIC A. ``RICK'' CRAWFORD,
RICK LARSEN, Washington Arkansas
GRACE F. NAPOLITANO, California BOB GIBBS, Ohio
STEVE COHEN, Tennessee DANIEL WEBSTER, Florida
ALBIO SIRES, New Jersey THOMAS MASSIE, Kentucky
JOHN GARAMENDI, California SCOTT PERRY, Pennsylvania
HENRY C. ``HANK'' JOHNSON, Jr., RODNEY DAVIS, Illinois
Georgia JOHN KATKO, New York
ANDRE CARSON, Indiana BRIAN BABIN, Texas
DINA TITUS, Nevada GARRET GRAVES, Louisiana
SEAN PATRICK MALONEY, New York DAVID ROUZER, North Carolina
JARED HUFFMAN, California MIKE BOST, Illinois
JULIA BROWNLEY, California RANDY K. WEBER, Sr., Texas
FREDERICA S. WILSON, Florida DOUG LaMALFA, California
DONALD M. PAYNE, Jr., New Jersey BRUCE WESTERMAN, Arkansas
ALAN S. LOWENTHAL, California BRIAN J. MAST, Florida
MARK DeSAULNIER, California MIKE GALLAGHER, Wisconsin
STEPHEN F. LYNCH, Massachusetts BRIAN K. FITZPATRICK, Pennsylvania
SALUD O. CARBAJAL, California JENNIFFER GONZALEZ-COLON,
ANTHONY G. BROWN, Maryland Puerto Rico
TOM MALINOWSKI, New Jersey TROY BALDERSON, Ohio
GREG STANTON, Arizona PETE STAUBER, Minnesota
COLIN Z. ALLRED, Texas TIM BURCHETT, Tennessee
SHARICE DAVIDS, Kansas, Vice Chair DUSTY JOHNSON, South Dakota
JESUS G. ``CHUY'' GARCIA, Illinois JEFFERSON VAN DREW, New Jersey
ANTONIO DELGADO, New York MICHAEL GUEST, Mississippi
CHRIS PAPPAS, New Hampshire TROY E. NEHLS, Texas
CONOR LAMB, Pennsylvania NANCY MACE, South Carolina
SETH MOULTON, Massachusetts NICOLE MALLIOTAKIS, New York
JAKE AUCHINCLOSS, Massachusetts BETH VAN DUYNE, Texas
CAROLYN BOURDEAUX, Georgia CARLOS A. GIMENEZ, Florida
KAIALI`I KAHELE, Hawaii MICHELLE STEEL, California
MARILYN STRICKLAND, Washington
NIKEMA WILLIAMS, Georgia
MARIE NEWMAN, Illinois
TROY A. CARTER, Louisiana
CONTENTS
Page
Hearing held on Thursday, July 29, 2021, Part 1.................. 1
Summary of Subject Matter........................................ 2
STATEMENTS OF MEMBERS OF THE COMMITTEE
Hon. Peter A. DeFazio, a Representative in Congress from the
State of Oregon, and Chair, Committee on Transportation and
Infrastructure, opening statement.............................. 17
Prepared statement........................................... 19
Hon. Sam Graves, a Representative in Congress from the State of
Missouri, and Ranking Member, Committee on Transportation and
Infrastructure, opening statement.............................. 20
Prepared statement........................................... 20
WITNESSES
Hon. Michael E. Horowitz, Chair, Pandemic Response Accountability
Committee, oral statement...................................... 22
Prepared statement........................................... 23
Heather Krause, Director, Physical Infrastructure, U.S.
Government Accountability Office, oral statement............... 30
Chris P. Currie, Director, Homeland Security and Justice, U.S.
Government Accountability Office \\
Joint prepared statement of Ms. Krause and Mr. Currie........ 32
Hon. Eric J. Soskin, Inspector General, U.S. Department of
Transportation, oral statement................................. 42
Prepared statement........................................... 44
James Izzard, Jr., Assistant Inspector General for
Investigations, U.S. Department of Homeland Security, oral
statement...................................................... 53
Prepared statement........................................... 54
SUBMISSIONS FOR THE RECORD
Submissions for the Record by Hon. Thomas Massie:
Article entitled, ``Foreign Workers Living Overseas
Mistakenly Received $1,200 U.S. Stimulus Checks,'' by Sacha
Pfeiffer, NPR, August 5, 2020.............................. 66
Article entitled, ``IRS Says Its Own Error Sent $1,200
Stimulus Checks to Non-Americans Overseas,'' by Sacha
Pfeiffer, NPR, November 30, 2020........................... 68
APPENDIX
Questions from Hon. Salud O. Carbajal to Heather Krause,
Director, Physical Infrastructure, U.S. Government
Accountability Office.......................................... 93
Question from Hon. Salud O. Carbajal to Chris P. Currie,
Director, Homeland Security and Justice, U.S. Government
Accountability Office.......................................... 94
Questions to Hon. Eric J. Soskin, Inspector General, U.S.
Department of Transportation, from:
Hon. Steve Cohen............................................. 96
Hon. Stephen F. Lynch........................................ 96
----------
Chris P. Currie, Director, Homeland Security and Justice,
U.S. Government Accountability Office, did not deliver an oral
statement.
Hearing held on Thursday, September 30, 2021, Part 2............. 97
1Summary of Subject Matter98
STATEMENTS OF MEMBERS OF THE COMMITTEE
Hon. Peter A. DeFazio, a Representative in Congress from the
State of Oregon, and Chair, Committee on Transportation and
Infrastructure, opening statement.............................. 104
Prepared statement........................................... 105
Hon. Eric A. ``Rick'' Crawford, a Representative in Congress from
the State of Arkansas, opening statement....................... 107
Prepared statement........................................... 107
Hon. Eddie Bernice Johnson, a Representative in Congress from the
State of Texas, prepared statement............................. 203
WITNESSES
Paul P. Skoutelas, President and Chief Executive Officer,
American Public Transportation Association, oral statement..... 108
Prepared statement........................................... 110
Juan Manuel Ortiz, Director, Office of Emergency Management and
Homeland Security, City of Austin, Texas, on behalf of the
International Association of Emergency Managers, oral statement 115
Prepared statement........................................... 117
Michael J. Boskin, Ph.D., Tully M. Friedman Professor of
Economics and Wohlford Family Senior Fellow, Hoover
Institution, Stanford University, on behalf of himself, oral
statement...................................................... 124
Prepared statement........................................... 126
Wendy Edelberg, Ph.D., Director, The Hamilton Project, The
Brookings Institution, on behalf of herself, oral statement.... 130
Prepared statement........................................... 132
Gregory R. Regan, President, Transportation Trades Department,
AFL-CIO, oral statement........................................ 149
Prepared statement........................................... 151
SUBMISSIONS FOR THE RECORD
Definition of Social Justice, Submitted for the Record by Hon.
Nikema Williams................................................ 198
Statement of John Samuelsen, International President, Transport
Workers Union of America, AFL-CIO, Submitted for the Record by
Hon. Peter A. DeFazio.......................................... 203
APPENDIX
Questions to Paul P. Skoutelas, President and Chief Executive
Officer, American Public Transportation Association, from:
Hon. Frederica S. Wilson..................................... 209
Hon. Jenniffer Gonzalez-Colon................................ 209
Questions to Juan Manuel Ortiz, Director, Office of Emergency
Management and Homeland Security, City of Austin, Texas, on
behalf of the International Association of Emergency Managers,
from:
Hon. Frederica S. Wilson..................................... 209
Hon. Jenniffer Gonzalez-Colon................................ 213
Questions from Hon. Jenniffer Gonzalez-Colon to Michael J.
Boskin, Ph.D., Tully M. Friedman Professor of Economics and
Wohlford Family Senior Fellow, Hoover Institution, Stanford
University, on behalf of himself............................... 213
Questions to Wendy Edelberg, Ph.D., Director, The Hamilton
Project, The Brookings Institution, on behalf of herself, from:
Hon. Frederica S. Wilson..................................... 214
Hon. Nikema Williams......................................... 214
Hon. Jenniffer Gonzalez-Colon................................ 215
Questions to Gregory R. Regan, President, Transportation Trades
Department, AFL-CIO, from:
Hon. Frederica S. Wilson..................................... 216
Hon. Nikema Williams......................................... 216
Hon. Jenniffer Gonzalez-Colon................................ 217
ASSESSING THE FEDERAL GOVERNMENT'S COVID-19 RELIEF AND RESPONSE EFFORTS
AND ITS IMPACT
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THURSDAY, JULY 29, 2021
House of Representatives,
Committee on Transportation and Infrastructure,
Washington, DC.
The committee met, pursuant to call, at 11:02 a.m. in room
2167 Rayburn House Office Building and via Zoom, Hon. Peter A.
DeFazio (Chair of the committee) presiding.
Members present in person: Mr. DeFazio, Mr. Larsen, Mr.
Malinowski, Ms. Williams of Georgia, Ms. Newman, Mr. Graves of
Missouri, Mr. Webster, Mr. Rodney Davis, Mr. Weber, Mr.
LaMalfa, Mr. Westerman, Mr. Stauber, and Mr. Nehls.
Members present remotely: Ms. Norton, Ms. Johnson of Texas,
Mrs. Napolitano, Mr. Cohen, Mr. Johnson of Georgia, Ms. Titus,
Ms. Brownley, Mr. Payne, Mr. Lowenthal, Mr. DeSaulnier, Mr.
Lynch, Mr. Carbajal, Mr. Brown of Maryland, Mr. Stanton, Ms.
Davids, Mr. Garcia of Illinois, Mr. Delgado, Mr. Pappas, Mr.
Lamb, Mr. Moulton, Ms. Bourdeaux, Mr. Kahele, Ms. Strickland,
Mr. Carter, Mr. Massie, Mr. Mast, Mr. Fitzpatrick, Miss
Gonzalez-Colon, Mr. Balderson, Mr. Johnson of South Dakota, Dr.
Van Drew, Mr. Guest, Ms. Van Duyne, Mr. Gimenez, and Mrs.
Steel.
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July 26, 2021
SUMMARY OF SUBJECT MATTER
TO: Members, Committee on Transportation and Infrastructure
FROM: Staff, Committee on Transportation and Infrastructure
RE: Full Committee Hearing on ``Assessing the Federal
Government's COVID-19 Relief and Response Efforts and Its Impact''
_______________________________________________________________________
PURPOSE
The Committee on Transportation and Infrastructure (T&I) will meet
on Thursday, July 29, 2021, at 11:00 a.m. EDT in 2167 Rayburn House
Office Building and via Zoom to hold a hearing titled ``Assessing the
Federal Government's COVID-19 Relief and Response Efforts and Its
Impact.'' The hearing will examine the federal response to the COVID-19
pandemic, efforts to provide oversight of that response, areas for
improvement, and the impact of pandemic relief efforts on the
transportation and infrastructure sectors and their workers.
The Committee will hear testimony from two panels. The first panel
will include federal government witnesses from the Government
Accountability Office (GAO), the Department of Transportation Office of
Inspector General (DOT OIG), the Department of Homeland Security Office
of Inspector General (DHS OIG), and the Pandemic Response
Accountability Committee (PRAC).\1\ The second panel will include
witnesses from the American Public Transportation Association (APTA),
the International Association of Emergency Managers (IAEM), the Hoover
Institution at Stanford University, the Hamilton Project at the
Brookings Institution, and the Transport Workers Union of America
(TWU).
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\1\ The CARES Act established the Pandemic Response Accountability
Committee (PRAC) as a committee of the Council of the Inspectors
General on Integrity and Efficiency (CIGIE), which is composed of
inspectors general from across the government. See https://
www.pandemicoversight.gov/our-mission/about-the-prac; CARES Act, Pub.
L. No. 116-136 (2020), Sec. 15010.
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BACKGROUND
In response to the COVID-19 pandemic, Congress and the Executive
Branch have taken a series of actions to protect the health and
economic security of American individuals and businesses. Congress
included $5.9 trillion dollars of relief and job protection measures in
the CARES Act, the Consolidated Appropriations Act of 2021, the
American Rescue Plan, and other legislation.\2\ Federal agencies,
including the Federal Emergency Management Agency (FEMA), the operating
administrations within the Department of Transportation (DOT), and the
U.S. Department of the Treasury (Treasury) are responsible for
administering and overseeing more than $200 billion in federal
assistance provided for transportation and emergency management.\3\
These agencies also conduct other pandemic response and recovery
functions. For example, FEMA helped supply states and localities with
personal protective equipment (PPE) and distributing vaccine and
testing supplies, as well as reimbursing for many activities tied to
response to the COVID-19 pandemic.\4\ Within DOT, the Federal Aviation
Administration (FAA), the Federal Transit Administration (FTA) and
other department components provided pandemic-related guidance and
support to their respective modes to help keep employees and passengers
on our nation's transportation systems safe.\5\
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\2\ CARES Act, Pub. L. No. 116-136 (2020); Consolidated
Appropriations Act, 2021, Pub. L. No. 116-260 (2020); American Rescue
Plan Act of 2021, Pub. L. No. 117-2 (2021).
\3\ U.S Department of the Treasury, ``Coronavirus Economic Relief
for Transportation Services (CERTS) Program,'' accessed on July 26,
2021, available at https://home.treasury.gov/
policy-issues/coronavirus/assistance-for-american-industry/coronavirus-
economic-relief-for-
transportation-services, and ``Airline and National Security Relief
Programs,'' accessed on July 26, 2021, available at https://
home.treasury.gov/policy-issues/coronavirus/assistance-for-
american-industry/airline-and-national-security-relief-programs;
Federal Transit Administration, ``Novel Coronavirus (COVID-19),''
accessed on July 26, 2021, available at https://www.transit.dot.gov/
coronavirus; National Railroad Passenger Corporation (AMTRAK) Office of
Inspector General, Governance: Amtrak Continues to Demonstrate Good
Stewardship of Pandemic Relief Funds, OIG-MAR-2021-009, (May 12, 2021),
available at: https://amtrakoig.gov/
sites/default/files/reports/OIG-MAR-2021-009%20Relief%20Act.pdf; GAO,
COVID-19: Continued Attention Needed to Enhance Federal Preparedness,
Response, Service Delivery, and Program Integrity, GAO-21-551, (July
2021), available at https://www.gao.gov/assets/gao-21-551-
highlights.pdf; Federal Aviation Administration, ``Information for
Airports about COVID-19,'' accessed on July 26, 2021, available at
https://www.faa.gov/airports/special_programs/
covid-19-airports; House Committee on Transportation and
Infrastructure, ``Chair DeFazio Applauds New Round of Aid for the Hard-
Hit Transportation Sector in Omnibus and COVID Relief Legislation,''
December 22, 2020, available at https://transportation.house.gov/news/
press-releases/chair-defazio-applauds-new-round-of-aid-for-the-hard-
hit-transportation-sector-in-omnibus-and-covid-relief-legislation-;
FEMA, 100 Days of FEMA and Our Partners in Action (April 30, 2021)
available at https://www.fema.gov/blog/100-days-fema-and-our-partners-
action.
\4\ FEMA, Pandemic Response to Coronavirus Disease 2019 (COVID-19):
Initial Assessment Report, (January 2021), available at https://
www.fema.gov/sites/default/files/documents/fema_
covid-19-initial-assessment-report_2021.pdf;
\5\ FTA, ``FTA COVID-19 Resource Tool'' (May 7, 2021), available at
https://www.transit.dot.gov/regulations-and-programs/safety/fta-covid-
19-resource-tool; and FAA, Coronavirus Guidance and Resources from FAA
(April 19, 2021), available at https://www.faa.gov/coronavirus/
guidance_resources/.
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OVERSIGHT OF THE FEDERAL RESPONSE_SUMMARY
The federal oversight community, such as GAO, PRAC, and
federal Offices of Inspectors General (OIGs), have been
monitoring agencies' use of COVID-19 relief and response funds.
These organizations also have assessed the federal government's
actions, policies, and programs to respond to COVID-19 to
identify problems, including cases of waste, fraud, abuse, and
mismanagement, as well as lessons learned and areas for
improvement.
Historically, federal oversight organizations have found
that large-scale federal relief programs can be vulnerable to
significant risk of erroneous payments, waste, and fraud.\6\
For example, GAO reported that the American Reinvestment and
Recovery Act of 2009 posed these types of risks because of the
need to spend funds quickly and because it increased funding
for existing programs to a degree that might have exceeded the
capacity of existing controls and oversight mechanisms.\7\
Similarly, the DOT OIG reported that significant infusions of
federal funding--such as the disaster relief funding provided
to FTA for transit agencies in the wake of Hurricane Sandy--can
create the risk of improper payments without appropriate agency
oversight plans and procedures in place.\8\ In light of these
and other risks, an effective federal response to COVID-19
fraud risks, according to GAO, should help ensure that federal
programs fulfill their intended purpose, funds are spent
effectively, and assets are safeguarded.\9\
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\6\ GAO, ``COVID-19: Critical Vaccine Distribution, Supply Chain,
Program Integrity, and Other Challenges Require Focused Federal
Attention,'' GAO-21-265, (January 28, 2021), available at https://
www.gao.gov/products/gao-21-265; PRAC, Update: Top Challenges in
Pandemic Relief and Response, (February 3, 2021), available at https://
www.pandemicoversight.gov/
media/file/update-top-challenges-pandemic-relief-and-response.
\7\ GAO, Recovery Act: Opportunities to Improve Management and
Strengthen Accountability over States' and Localities' Uses of Funds,
GAO-10-999, (September 20, 2010), available at https://www.gao.gov/
assets/gao-10-999.pdf.
\8\ DOT OIG, Initial Assessment of FTA's Oversight of the Emergency
Relief Program and Hurricane Sandy Relief Funds, MH-2014-008, (December
3, 2013), available at https://www.oig.dot.gov/sites/default/files/
FTA%E2%80%99s%20Oversight%20of%20the%20Emergency
%20Relief%20Program%20and%20Hurricane%20Sandy%20Relief%20Funds%5E12-3-
13_1.pdf.
\9\ Supra n. 4, GAO-21-265.
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Other challenges that the oversight community identified
include problems with FEMA's disaster-management capabilities,
interagency coordination, and incomplete reporting on the use
of pandemic relief funds. In its work on FEMA, GAO found a lack
of coordination with the Department of Health and Human
Services (HHS) and other federal partners on the procurement
and delivery of essential PPE, shortages in staff available to
be deployed to disaster areas, and inconsistencies in how FEMA
communicates with states and localities on the use of advance
contracting.\10\
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\10\ GAO, COVID-19: FEMA's Role in the Response and Related
Challenges, GAO-20-685T (July 14, 2020), available at https://
www.gao.gov/products/gao-20-685t and COVID-19: Federal Efforts Could Be
Strengthened by Timely and Concerted Actions, GAO-20-701, (September
21, 2020), available at https://www.gao.gov/products/gao-20-701.
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In addition, GAO criticized the Office of Management and
Budget's (OMB) issuance of a Compliance Supplement, as part of
the Single Audit Act, that is used to help auditors understand
a federal program's objectives, procedures, and compliance
requirements during audits of non-federal recipients of federal
funds, such as local and state governments and nonprofit
organizations.\11\ The 2020 Compliance Supplement was not
released by OMB until August 2020, after initial COVID-19
relief funds had already been dispersed to recipients. However,
GAO found the supplement to be incomplete and said the delay in
issuing it ``may lead to inconsistent reporting and affect
award recipients' development of corrective actions.'' \12\ GAO
warned that preparing and providing this guidance to auditors
in a timely manner was ``essential to help ensure that single
audits can be performed timely and enhance the federal
government's ability to help safeguard billions of dollars in
federal funds, including those provided under COVID-19 relief
laws.'' \13\ OMB issued an addendum to the Compliance
Supplement in December 2020, but it did not address all
concerns raised by auditors to conduct these single audits.\14\
In March 2021, OMB issued a memorandum to executive branch
agencies that outlines steps agencies must take to implement
sound financial management of the pandemic relief funding
resources, including complying with the requirements of the
Single Audit Act.\15\ The memorandum states that when OMB
issues its annual compliance supplement later this year, it
will include the topic of subaward reporting as a requirement
for all financial assistance programs that are reviewed under
the Single Audit Act.\16\
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\11\ GAO, COVID-19: Sustained Federal Action Is Crucial as Pandemic
Enters Its Second Year, GAO-21-387, March 2021, available at https://
www.gao.gov/assets/gao-21-387.pdf.
\12\ Id.
\13\ Id.
\14\ Id.
\15\ Office of Management and Budget, Memorandum for the Heads of
Executive Departments and Agencies: Promoting Public Trust in the
Federal Government through Effective Implementation of the American
Rescue Plan Act and Stewardship of the Taxpayer Resources, (March 19,
2021) available at https://www.whitehouse.gov/wp-content/uploads/2021/
03/M_21_20.pdf.
\16\ Id.
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Regarding the use of relief funds, PRAC found that
agencies' initial reporting on the use of pandemic funds left
out important information required by the CARES Act, such as
identifying all subrecipients of the funding.\17\ PRAC
recommended that OMB issue guidance to agencies to direct them
to collect and report the missing information.\18\
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\17\ PRAC, MITRE Report: Transparency in Pandemic-Related Federal
Spending: Report of Alignment and Gaps, (November 2020), available at
https://www.pandemicoversight.gov/
media/file/transparency-pandemic-related-federal-spending-full-report.
\18\ Id.
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Another critical component of the oversight efforts of the
OIGs and PRAC is supporting federal agency personnel through
training and other assistance. For example, the DHS OIG has
provided training to program staff on how to identify cases of
waste, fraud, or abuse related to COVID-19 relief funding, and
PRAC has hosted a training session on identifying and
preventing loan fraud.\19\ PRAC also supports federal OIGs'
data analysis capabilities by providing them with non-public
data sets on selected pandemic relief programs and helping them
get easier access to data analytics contractors.\20\
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\19\ Committee staff briefings with DHS OIG on February 11, 2021,
and with PRAC on April 21, 2021.
\20\ Committee staff briefing with PRAC on April 21, 2021.
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GOVERNMENT ACCOUNTABILITY OFFICE
The CARES Act directed GAO to monitor and oversee the use
of funds made available to prepare for, respond to, and recover
from the COVID-19 pandemic.\21\ To date, GAO has issued eight
reports that assess efforts across the government and has made
87 recommendations to improve the COVID-19 response.\22\
However, federal agencies have only fully implemented 16 of
these 87 recommendations so far, but have generally agreed with
57, or 66 percent, of these recommendations and are in the
process of implementing those.\23\ GAO has examined, among
other things, the federal government's management of the
medical supply chain and its assistance to state and local
emergency management efforts; support provided to airports,
airlines, and other aviation companies through loans and
grants; and FTA's assistance to the nation's transit
agencies.\24\
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\21\ Pub. L. No. 116-136, Sec. 19010, 134 at 579-81.
\22\ GAO, ``COVID-19: Continued Attention Needed to Enhance Federal
Preparedness, Response, Service Delivery, and Program Integrity,'' GAO-
21-551, (July 2021), available at https://www.gao.gov/assets/gao-21-
551-highlights.pdf
\23\ Id.
\24\ See https://www.gao.gov/coronavirus and discussion on
following pages.
LFEMA Lacked an Adequate Plan and National Strategy for the
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Supply Chain of Critical Equipment
GAO reported in September 2020 that FEMA, along with HHS
and the Department of Defense, had taken steps to mitigate
supply chain issues that were leading to shortages in the
availability of PPE and testing supplies.\25\ Nonetheless,
there continued to be constraints around certain types of PPE
and testing supplies. For example, in the summer of 2020, some
states, nursing homes, and an association of nurses reported
PPE shortages, including N95 masks, nitrile gloves, and
gowns.\26\ Thousands of nurses reported that as a result they
were required or encouraged to re-use single-use N95 masks.\27\
GAO also found that states and public health laboratories
experienced ongoing shortages of testing supplies, including
swabs, reagents, and tubes, in the summer of 2020.\28\
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\25\ GAO, COVID-19: Federal Efforts Could Be Strengthened by Timely
and Concerted Actions, GAO-20-701, (September 21, 2020), available at
https://www.gao.gov/products/gao-20-701.
\26\ Id.
\27\ Id.
\28\ Id.
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In the midst of these supply constraints, GAO revealed that
FEMA, along with HHS, had not developed plans outlining
specific actions the federal government would take to help
mitigate remaining medical supply gaps needed to respond to the
pandemic, including through the use of existing Defense
Production Act authorities.\29\ Further, FEMA and HHS had not
worked with their federal partners to define roles and
responsibilities for managing the supply chain.\30\
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\29\ Id.
\30\ Id.
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GAO recommended that HHS, in coordination with FEMA, (1)
create such a plan and (2) document roles and responsibilities
for supply chain management.\31\ Creating a plan for continued
support of the COVID-19 pandemic, according to GAO, can help
inform a longer-term, comprehensive national supply chain
strategy, which in turn could help better position all
stakeholders for future public health events.\32\ GAO indicated
that ``transition planning efforts are underway'' by HHS, but
that they ``have not yet culminated in a written plan,'' which
GAO has suggested HHS should prepare ``immediately.'' \33\
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\31\ Id.
\32\ Id.
\33\ GAO, COVID-19: Federal Efforts Could Be Strengthened by Timely
and Concerted Actions, GAO-20-701, (September 2020), available at:
https://www.gao.gov/assets/gao-20-701.pdf
LStates, Territories, and Tribes Faced Challenges Managing
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Supplies and Navigating FEMA Reimbursement Programs
Officials from FEMA regional offices and states also
identified problems related to federal support programs for
pandemic supplies and other emergency expenses. According to
GAO, these challenges continue to hamper their efforts to plan
for and carry out their pandemic response plans.
LSome state officials described confusion about
the various federal programs available to pay for PPE and
testing supplies, including about reimbursement and cost share
responsibility, and concerns about potential duplication of
benefits.\34\ States had trouble confirming that the right
entities received correct and usable supplies when FEMA-
provided supplies were shipped directly to local points of
care, such as hospitals, laboratories, or nursing homes.\35\
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\34\ Supra, n. 8, GAO-20-701
\35\ Id.
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LSome tribal leaders who had trouble completing
administrative requirements for Public Assistance grants said
that no FEMA staff were available to assist them. Further, FEMA
failed to conduct sufficient outreach to tribes when
determining items eligible for reimbursement under the Public
Assistance program, even though such outreach is required by
FEMA's own policy.\36\
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\36\ Supra, n. 9, GAO-21-387.
In September 2020, GAO recommended that FEMA and HHS work
with federal, state, territorial, and tribal stakeholders to
devise interim solutions to help states enhance their ability
to track the status of supply requests and plan for supply
needs for the remainder of the COVID-19 pandemic response.\37\
More recently, in March 2021, GAO recommended that FEMA provide
timely and consistent technical assistance to support tribal
governments and that it adhere to its policy on tribal
consultation when developing new policies and procedures
related to COVID-19 assistance.\38\
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\37\ Supra, n. 8 GAO-20-701.
\38\ Supra, n. 8 and 9 GAO-20-701, GAO-21-387.
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DOT Needs a National Aviation Preparedness Plan
Since 2015, just after the 2014 Ebola outbreak in West
Africa, GAO has reported on the importance of DOT developing a
national aviation preparedness plan so safeguards are in place
to limit the spread of communicable disease threats and to
minimize unnecessary interference with travel and trade.\39\
Although DOT issued guidance to airports and airlines on
measures to mitigate the public health risks associated with
COVID-19, it has still not developed a preparedness plan for
future communicable disease threats.\40\ DOT has said that HHS
and DHS should lead such planning efforts since they are
responsible for, respectively, communicable disease response
and preparedness planning.\41\ However, both DHS and HHS have
said that they are not well positioned to develop a pandemic
preparedness plan for aviation.\42\ In February 2021, H.R. 884,
the National Aviation Preparedness Plan Act, was reintroduced
by Aviation Subcommittee Chair Rick Larsen.\43\ This bill would
require DOT, in coordination with HHS and DHS, to develop a
national aviation preparedness plan for communicable disease
outbreaks.\44\
---------------------------------------------------------------------------
\39\ GAO, Air Travel and Communicable Diseases: Comprehensive
Federal Plan Needed for U.S. Aviation System's Preparedness, GAO-16-127
(December 16, 2015), available at https://www.gao.gov/products/gao-16-
127; Air Travel and Communicable Diseases: Status of Research Efforts
and Action Still Needed to Develop Federal Preparedness Plan, GAO-20-
655T (June 23, 2020), available at https://www.gao.gov/products/gao-20-
655t; and COVID-19: Brief Update on Initial Federal Response to the
Pandemic, GAO-20-708, (August 31, 2020), available at https://
www.gao.gov/products/gao-20-708.
\40\ Id.
\41\ Id.
\42\ Supra, n. 8, GAO-20-708.
\43\ H.R.884, National Aviation Preparedness Plan Act of 2021.
\44\ Id.
LPayroll Support Program (PSP) Needs Better Compliance
---------------------------------------------------------------------------
Monitoring
As GAO reported in September 2020, standing up a new
financial assistance program in a condensed time frame posed
challenges both to Treasury and program recipients.\45\
Aviation industry associations told GAO that their members
experienced confusion about PSP eligibility and other
requirements, lack of direct contact at Treasury for answers to
time-sensitive issues and means to check on the status of an
application, and delays in PSP awards.\46\ Regarding these
identified challenges, Treasury officials said that they
published email addresses where applicants could direct
questions and communicated with more applicants, and redesigned
the application portal to be more user-friendly.\47\
---------------------------------------------------------------------------
\45\ Supra, n. 8, GAO-20-701.
\46\ Id.
\47\ Supra, n. 8 and 9, GAO-21-387, GAO-20-701.
---------------------------------------------------------------------------
Further, while PSP funds have benefited recipients, as
discussed in the following paragraph, certain factors added to
the risk of funds being used for purposes other than payroll
support.\48\ Some PSP recipients accessed other assistance
under the CARES Act that may overlap with PSP funds, such as
the Small Business Administration's (SBA) Paycheck Protection
Program (PPP), while others received PSP funds in excess of
their number of employees. GAO notes that while these actions
might be consistent with program requirements, they make it
more difficult to ensure PSP funds are used to only pay
employees.\49\ To help mitigate these risks, Treasury started
to monitor PSP recipients' compliance with program terms; but,
it has not finalized its monitoring plans, determined which
automated tests will be used, or identified factors or
thresholds from testing that trigger additional reviews.\50\
---------------------------------------------------------------------------
\48\ General Aviation Manufacturers Association, Protecting
Aviation Manufacturing and Maintenance Jobs, (March 10, 2021) available
at https://gama.aero/news-and-events/press-releases/protecting-
aviation-manufacturing-and-maintenance-jobs/; Airlines for America,
Statement from A4A CEO and President Nicholas E. Calio on the Passage
of the American Rescue Plan (March 10, 2021) available at https://
www.airlines.org/news/statement-from-a4a-ceo-and-president-nicholas-e-
calio-on-the-passage-of-the-american-rescue-plan/.
\49\ GAO, COVID-19: Urgent Actions Needed to Better Ensure an
Effective Federal Response, GAO-21-191, (November 30, 2020), available
at https://www.gao.gov/products/gao-21-191.
\50\ Supra, n. 9, GAO-21-387.
---------------------------------------------------------------------------
Separately, the Treasury OIG found that some air carriers
applying for PSP loans incorrectly calculated payroll amounts,
affecting the accuracy of the amounts awarded to these
recipients.\51\ Upon learning of the OIG's findings, Treasury
implemented measures to identify and correct PSP award
amounts.\52\
---------------------------------------------------------------------------
\51\ Department of the Treasury Office of Inspector General,
Interim Audit Update--Air Carrier and Contractor Certifications for
Payroll Support Program (March 31, 2021), available at https://
oig.treasury.gov/sites/oig/files/2021-04/OIG-21-025.pdf.
\52\ Id.
LAction Is Needed to Ensure Assistance to Aviation Industry
---------------------------------------------------------------------------
Is Equitable
Treasury's assistance to the aviation industry may have
disproportionately gone to large airlines.\53\ In its report on
the CARES Act loan program for aviation, GAO found that small
businesses were less likely to receive loans under this program
and that Treasury prioritized applications from large passenger
carriers.\54\ The Regional Airline Association expressed
concerns that Treasury delayed action on smaller airlines' PSP
loan applications, while approving applications for large air
carriers.\55\ Industry associations reported to GAO that for
applicants such as smaller air carriers and ticket agents, the
amount of time Treasury took to evaluate loan applications, as
well as other challenges, affected the number of loans
executed.\56\ To better engage the aviation community, GAO
reported that Treasury could have made greater use of DOT to
design the program, communicate with businesses, and help in
the application evaluation process or loan program, as many
eligible businesses have established relationships with
DOT.\57\ Looking forward, GAO made suggestions for better
ensuring equity among businesses of different sizes and types:
\58\
---------------------------------------------------------------------------
\53\ GAO, Financial Assistance: Lessons Learned from CARES Act Loan
Program for Aviation and Other Eligible Businesses, GAO-21-198
(December 10, 2020), available at https://www.gao.gov/products/gao-21-
198.
\54\ Id.
\55\ Regional Airline Association President Faye Malarkey Black
letter to Treasury Secretary Janet Yellen (March 11, 2021) available at
https://www.raa.org/wp-content/uploads/2021/03/20210311-RAA-Treasury-
Letter-PSP2-delays-PSP3-request_FINAL.pdf.
\56\ GAO-21-198.
\57\ Id.
\58\ Id.
---------------------------------------------------------------------------
LEstablish multiple programs, or multiple paths
within a program, to better accommodate businesses of varied
types and sizes.\59\
---------------------------------------------------------------------------
\59\ Id.
---------------------------------------------------------------------------
LCommunicate clear timelines and expectations for
borrowers to avoid frustration among applicants regarding the
loan application process and the time needed to make loans.\60\
---------------------------------------------------------------------------
\60\ Id.
---------------------------------------------------------------------------
Airport Grants
The CARES Act provided substantial additional funding for
airports through a program similar to the Airport Improvement
Program (AIP), and though FAA already had processes for
administering grants of this type, it nonetheless faced
challenges administering and monitoring the funding.\61\ To
address the increased workload of processing and monitoring
more grants under expedited timeframes, FAA hired staff,
streamlined the invoicing process to reduce workload, and
provided consolidated information to airports about
eligibility.\62\ According to FAA officials, FAA staff review
all reimbursement requests from airports to help ensure that
only eligible costs are reimbursed with CARES Act funding.\63\
---------------------------------------------------------------------------
\61\ CARES Act, Pub. L. No. 116-136 (2020), Federal Aviation
Administration, Grants-in-Aid for Airports; see also supra, n. 8, GAO-
20-701.
\62\ Supra n.42 and 9, GAO-21-191, GAO-21-387
\63\ Supra, n. 8, GAO-20-701.
---------------------------------------------------------------------------
FAA officials have also taken actions to oversee and
monitor compliance with workforce retention requirements. The
CARES Act required that most airports accepting grants must
continue to employ at least 90 percent of the number of
individuals employed prior to the pandemic.\64\ FAA's actions
include reviewing quarterly reports from airports, sending
letters to the airports that had not submitted the required
reports, and comparing airports' current workforce numbers to
those from March 2020 to ensure they meet the 90 percent
threshold.\65\ FAA told GAO that, as of January 2021, no
airports had requested a waiver from the workforce retention
requirements.\66\
---------------------------------------------------------------------------
\64\ CARES Act, Pub. L. No. 116-136 (2020), Federal Aviation
Administration, Grants-in-Aid for Airports.
\65\ Supra, n. 42, GAO-21-191; supra n. 9, GAO-21-387.
\66\ Supra, n. 9, GAO-21-387.
---------------------------------------------------------------------------
Grants to Transit Agencies
In all, FTA received nearly $70 billion in COVID-relief aid
for transit agencies.\67\ According to GAO, FTA has not
experienced any notable challenges with administering the $25
billion in grants from the CARES Act or overseeing recipients'
use of the funds, due to the funds being provided through
existing programs that have well established procedures for
administration and oversight.\68\ FTA officials told GAO that
FTA continues regular outreach to recipients through industry
calls, and regional staff are in regular contact with
recipients.\69\ These officials also told GAO that they updated
the oversight guidance for the grant programs with information
on CARES Act requirements, and that FTA plans to oversee the
funding through its existing review programs.\70\ In addition,
daily reports on CARES Act obligations and disbursements to
transit agencies are sent to the FTA Office of the
Administrator, ensuring that the agency's leadership is both
engaged and well informed on these issues.\71\
---------------------------------------------------------------------------
\67\ Federal Transit Administration, Novel Coronavirus, (last
accessed July 21, 2021) https://www.transit.dot.gov/coronavirus.
\68\ Supra n. 11, GAO-21-387; supra, n. 42, GAO-21-191; supra n. 8,
GAO-20-701.
\69\ Supra, n. 42, GAO-21-191.
\70\ GAO-21-191.
\71\ Supra, n. 8, GAO-20-701.
---------------------------------------------------------------------------
Similarly, transit agencies appear to have had little
difficulty with the CARES Act-funded grants. Officials from 22
transit agencies GAO interviewed for its November 2020 report
said they had not experienced challenges related to the
distribution of CARES Act grants from FTA, and officials from
all but one of these transit agencies said they had not faced
challenges getting help from FTA during the awards process.\72\
Early on, some transit agencies had trouble understanding the
expanded list of activities eligible for CARES Act funding. In
response, FTA provided technical assistance through webinars,
guidance on its website, and support from regional staff.\73\
---------------------------------------------------------------------------
\72\ Supra, n. 42, GAO-21-191.
\73\ Supra, n. 8, GAO-20-701.
---------------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION OFFICE OF INSPECTOR GENERAL (DOT OIG)
The DOT OIG identified several key risk areas in DOT's
oversight of CARES Act funding. These areas, some of which are
described below, are based on previous OIG work on DOT's
implementation of funds for economic stimulus or emergency
relief, such as the American Recovery and Reinvestment Act of
2009.\74\
---------------------------------------------------------------------------
\74\ DOT OIG, Memorandum from the Office of Inspector General of
the U.S. Department of Transportation to the Secretary of
Transportation: Information: Key Potential Risk Areas for the
Department of Transportation in Overseeing CARES Act Requirements (June
17, 2020) available at https://www.oig.dot.gov/library-item/37926.
LImproved Monitoring and Increased Outreach Can Help
---------------------------------------------------------------------------
Prevent Waste, Fraud, and Abuse
The DOT OIG observed that the volume of CARES Act funds and
the speed with which they are disbursed puts these funds at a
higher risk for improper payments, fraud, waste, and abuse.\75\
For example, the CARES Act provided $10 billion for airports,
much more than the approximately $3 billion in annual funding
for airports that FAA normally oversees.\76\ Further, the OIG
has found weaknesses in DOT's financial management systems,
resulting in incomplete and inaccurate expenditure data20.\77\
Implementing procedures for tracking funds and detecting
improper payments could help DOT better ensure effective
stewardship of its funds.\78\ The DOT OIG also suggested that
DOT mitigate these risks by increasing its outreach and
education efforts to enhance understanding among DOT staff,
grantees such as airports and transit agencies, and their
contractors on how to recognize and prevent potential fraud to
the appropriate authorities.\79\
---------------------------------------------------------------------------
\75\ Id.
\76\ Supra, n. 42, GAO-21-191; CARES Act, Pub. L. No. 116-136
(2020), Federal Aviation Administration, Grants-in-Aid for Airports.
\77\ DOT OIG, Quality Control Review of the Independent Auditor's
Review of DOT's DATA Act Implementation (October 29, 2019), available
at https://www.oig.dot.gov/sites/default/files/
DOT%20DATA%20Act%20QCR%20Final%20Report%5E10-29-19.pdf.
\78\ DOT OIG, June 2020 memorandum, available at https://
www.oig.dot.gov/sites/default/files/
OIG%20Memorandum%20to%20the%20Secretary%20-
%20Key%20Risk%20Areas%20for%20DOT
%20in%20Overseeing%20CARES%20Act%20Requirements.pdf.
\79\ Id.
---------------------------------------------------------------------------
LAirport Grants Require Effective Risk-Based Oversight
The DOT OIG identified some aspects of CARES Act funding
for airports that FAA should focus its management and oversight
activities on, including the following:\80\
---------------------------------------------------------------------------
\80\ Id.
---------------------------------------------------------------------------
LFAA will need to ensure that recipient airports
comply with the workforce retention requirements of the CARES
Act.
LThe CARES Act authorized the federal share of
approved project costs to be increased to 100 percent,
eliminating the local share of the costs. As a result, FAA
could face risks related to controlling project costs, since
localities are less incentivized to do so.
LBecause FAA is overseeing a vast number of grants
with its limited resources, it should follow a risk-based
oversight approach and ensure that its existing risk
assessments are sufficient given new program requirements and
restrictions.
In February 2021, the DOT OIG initiated an audit of FAA's
award and oversight of CARES Act airport grants. The audit's
purpose is to assess whether FAA's policies and procedures for
awarding and overseeing CARES Act grants are sufficient to
protect taxpayer interests.\81\
---------------------------------------------------------------------------
\81\ DOT OIG, New Audit Announcement: Audit Initiated of FAA's
Award and Oversight of CARES Act Funds (February 19, 2021), available
at https://www.oig.dot.gov/library-item/38296.
---------------------------------------------------------------------------
LPrudent Oversight of Pandemic Waivers Is Needed
To account for conditions caused by COVID-19, the CARES Act
allows DOT to temporarily waive certain existing federal
requirements, such as some for the state highway safety
programs that the National Highway Traffic Safety
Administration (NHTSA) administers.\82\ The DOT OIG noted that
it will be vital for DOT to monitor the use and impact of these
waivers.\83\
---------------------------------------------------------------------------
\82\ DOT OIG, June 2020 memorandum, available at https://
www.oig.dot.gov/sites/default/
files/OIG%20Memorandum%20to%20the%20Secretary%20-
%20Key%20Risk%20Areas%20for
%20DOT%20in%20Overseeing%20CARES%20Act%20Requirements.pdf.
\83\ Id.
---------------------------------------------------------------------------
The DOT OIG has other audits under way that it expects will
identify ways that the operating administrations can improve
their COVID-19 responses. These include reports on FTA's
financial management system that support CARES Act funding and
its management of Hurricane Sandy emergency funding.\84\
---------------------------------------------------------------------------
\84\ DOT OIG, Audit Initiated of FTA's Hurricane Sandy Funding
Progress (January 15, 2020) available at https://www.oig.dot.gov/
library-item/37684; Audit Initiated of Security Controls for FTA's
Financial Management Systems That Support CARES Act Funding (November
12, 2020), available at https://www.oig.dot.gov/library-item/38114.
Although the Hurricane Sandy report is not expected to explicitly
address pandemic relief funding, DOT OIG officials told Committee staff
in an April 2020 briefing that they expect the report's findings to be
relevant to pandemic relief funding because FTA uses the same systems
and procedures to manage both funding sources.
---------------------------------------------------------------------------
Amtrak's Use and Accounting of Funds
Amtrak received more than $3 billion, a total of $1.7
billion in COVID-19 relief funds, including $1.7 billion in
March 2021.\85\ In April 2020, the Amtrak OIG began an audit of
the use of pandemic relief funds appropriated to support Amtrak
services and its state and commuter rail partners.\86\ The
Amtrak OIG issued reports in August 2020 \87\ and December
2020.\88\ In May 2021 it issued another report stating that
Amtrak ``continues to be a good steward of the funds Congress
has provided'' but also that Amtrak could be more transparent
in its communications and reporting, and made recommendations
for improvement.\89\
---------------------------------------------------------------------------
\85\ See: Department of Transportation, ``U.S. Transportation
Secretary Elaine L. Chao Announces $1 Billion for Amtrak in Response to
COVID-19,'' DOT Press Release, (April 10, 2020), available at: https://
railroads.dot.gov/newsroom/press-releases/us-transportation-secretary-
elaine-
l-chao-announces-1-billion-amtrak and National Railroad Passenger
Corporation (AMTRAK) Office of Inspector General, ``Governance: Amtrak
Continues to Demonstrate Good Stewardship of Pandemic Relief Funds,''
OIG-MAR-2021-009, (May 12, 2021), available at: https://amtrakoig.gov/
sites/default/files/reports/OIG-MAR-2021-009%20Relief%20Act.pdf
\86\ Amtrak Office of Inspector General, Governance: Observations
on Amtrak's Use of CARES Act Funds (August 5, 2020) available at
https://amtrakoig.gov/sites/default/files/reports/
OIG-MAR-2020-013%20CARES%20Act%20Review.pdf.
\87\ Id.
\88\ Amtrak Office of Inspector General, Governance: Final
Observations on Amtrak's Use of CARES Act Funds (December 15, 2020)
available at https://amtrakoig.gov/sites/
default/files/reports/OIG-MAR-2020-013%20CARES%20Act%20Review.pdf.
\89\ Amtrak Office of Inspector General, Governance: Amtrak
Continues to Demonstrate Good Stewardship of Pandemic Relief Funds (May
12, 2021) available at https://amtrakoig.gov/
sites/default/files/reports/OIG-MAR-2021-009%20Relief%20Act.pdf.
---------------------------------------------------------------------------
DEPARTMENT OF HOMELAND SECURITY OFFICE OF INSPECTOR GENERAL (DHS OIG)
LInvestigating and Preventing Fraud against the Government
The DHS OIG has opened at least 120 potential fraud
investigations \90\ since the start of the pandemic and has
uncovered numerous fraud schemes.\91\ According to DHS OIG
officials, ongoing investigations include those related to
theft of public funds, hoarding of scarce materials, and
fictitious or fraudulent claims against the government.\92\ For
programs within FEMA's purview, the two focus areas for these
investigations, according to DHS OIG officials, have been
unemployment insurance fraud and misrepresentations regarding
PPE.\93\ For example, the DHS OIG investigated a Virginia
businessman who fraudulently attempted to obtain a multi-
million-dollar PPE contract from FEMA.\94\ As part of his
scheme, the individual falsely stated to procurement officials
from FEMA that he was in possession of large quantities of PPE,
including N95 masks. Based on the false statements, FEMA
awarded the individual's company a contract valued at
$3,510,000, though according to FEMA, the funds were not
provided to this individual.\95\ The individual pleaded guilty
in February 2021 of making false statements to federal agencies
and faces up to 35 years in prison for these and other related
charges.\96\
---------------------------------------------------------------------------
\90\ E-mail from DHS OIG staff to T&I staff, July 23, 2021.
\91\ Committee staff briefing with DHS OIG, February 11, 2021.
\92\ Id.
\93\ Committee staff briefing with DHS OIG, February 11, 2021.
\94\ United States Attorney's Office, Eastern District of Virginia,
CEO Pleads Guilty to Defrauding Multiple Federal Agencies (accessed on
March 9, 2021) https://www.justice.gov/
usao-edva/pr/ceo-pleads-guilty-defrauding-multiple-federal-agencies.
\95\ Id.
\96\ Id.
---------------------------------------------------------------------------
The DHS OIG is working with FEMA and other DHS components,
as well as with its federal partners such as SBA, the
Department of Veterans Affairs, the Federal Bureau of
Investigation (FBI), and the U.S. Secret Service, to identify
and prevent fraud. Further, the DHS OIG provides training to
FEMA employees on tools they can use to prevent and detect
fraud. DHS OIG officials said that this training is updated
regularly to reflect new types of fraud schemes investigators
are finding.\97\ However, the DHS OIG's previous work indicates
that training for FEMA employees is not always effectively
implemented. In 2019, the OIG assessed FEMA's compliance with a
statutory requirement that it provide training on the
prevention of waste, fraud, and abuse in federal disaster
relief assistance programs.\98\ The OIG found that most of
FEMA's employees had not completed this required annual
training and recommended that FEMA establish monitoring and
enforcement mechanisms to ensure training requirements are
met.\99\
---------------------------------------------------------------------------
\97\ Id.
\98\ DHS OIG, FEMA Must Take Additional Steps to Demonstrate the
Importance of Fraud Prevention and Awareness in FEMA Disaster
Assistance Programs (July 24, 2019), available at https://
www.oig.dhs.gov/reports/2019/fema-must-take-additional-steps-
demonstrate-importance-
fraud-prevention-and-awareness-fema-disaster-assistance-programs/oig-
19-55-jul19.
\99\ Id.
LDHS OIG Is Reviewing FEMA's Role in Pandemic Response and
---------------------------------------------------------------------------
Preparedness
The DHS OIG has previously found FEMA's management of
disaster relief grants and funds to be inadequate and reported
last year that improving FEMA's grant management would be one
of DHS's top challenges in responding to the COVID-19
pandemic.\100\ The DHS OIG has identified a pattern of FEMA
management failures in overseeing procurements and reimbursing
procurement costs, and it continues to see systemic problems
and operational difficulties.\101\ At times, according to the
DHS OIG, FEMA has not followed procurement laws, regulations,
and procedures, nor has it ensured disaster grant recipients
and subrecipients understand and comply with these
authorities.\102\
---------------------------------------------------------------------------
\100\ PRAC, Top Challenges Facing Federal Agencies: COVID-19
Emergency Relief and Response Efforts, (June 17, 2020), available at
https://www.oversight.gov/sites/default/files/oig-
reports/Top%20Challenges%20Facing%20Federal%20Agencies%20-%20COVID-
19%20Emergency
%20Relief%20and%20Response%20Efforts_1.pdf.
\101\ DHS OIG, FEMA Contracting: Reviewing Lessons Learned from
Past Disasters to Improve Preparedness, Testimony before U.S. House of
Representatives Committee on Homeland Security (May 9, 2019), available
at https://www.oig.dhs.gov/sites/default/files/assets/TM/2019/oigtm-
daig-aud-katherine-trimble-050919.pdf.
\102\ Id.
---------------------------------------------------------------------------
The DHS OIG has several ongoing audits related to how well
FEMA is carrying out its responsibilities related to the COVID-
19 pandemic. These audits are examining the following issues:
\103\
---------------------------------------------------------------------------
\103\ DHS OIG, Ongoing Projects (accessed on May 12, 2021) https://
www.oig.dhs.gov/reports/ongoing-projects.
---------------------------------------------------------------------------
LHow FEMA managed and distributed medical supplies
and equipment in response to COVID-19;
LTo what extent FEMA followed federal and
departmental procedures and guidelines for awarding COVID-19
contracts to prospective vendors under unusual and compelling
circumstances; and
LHow effectively FEMA has supported and
coordinated federal efforts to distribute PPE and ventilators
in response to the COVID-19 outbreak.
PANDEMIC RESPONSE ACCOUNTABILITY COMMITTEE (PRAC)
Congress established the PRAC in the CARES Act ``to promote
transparency,'' ``ensure coordinated, efficient, and effective
comprehensive oversight by the Committee and Inspectors General
over all aspects of covered funds and the Coronavirus
response,'' and ``prevent and detect fraud, waste, abuse, and
mismanagement.'' \104\ The PRAC is comprised of 22 federal
inspectors general, has its own dedicated staff, and works
closely with inspectors general across the government to
identify the most pressing challenges in managing and
overseeing pandemic relief funds in several areas.\105\
---------------------------------------------------------------------------
\104\ CARES Act, Pub. L. No. 116-136 (2020), Sec. 15010
\105\ PRAC, Update: Top Challenges in Pandemic Relief and Response
(February 3, 2021) available at https://www.pandemicoversight.gov/
media/file/update-top-challenges-pandemic-relief-and-response.
---------------------------------------------------------------------------
LPreventing and Detecting Fraud against Government Programs
With the unprecedented amount of disaster response funds
appropriated to support the country's pandemic response, the
opportunities for defrauding government programs have
significantly increased, according to the PRAC.\106\ The work
conducted by OIGs to date indicates that one of the primary
fraud risks associated with the administration of pandemic
response funds stems from the failure to ensure that
information from applicants is accurate.\107\ This can result
in payments to individuals who are not in fact eligible for
program benefits; it can also result in outright fraud, such as
in the case of the N95 mask fraud scheme that the DHS OIG
uncovered.\108\
---------------------------------------------------------------------------
\106\ Id.
\107\ Id.
\108\ Id.
---------------------------------------------------------------------------
Data Transparency and Completeness
Another key challenge that PRAC identified was a lack of
detailed data on pandemic relief funds, which is needed to
inform funding and oversight decisions as well as to provide
full transparency on the use of these funds.\109\ Even before
the pandemic, inspectors general reported that the ability of
agencies to track and report financial data was insufficient to
meet agency needs and was a top management and performance
challenge.\110\ According to the non-profit Project on
Government Oversight, ``[r]obust oversight and reporting are
especially important given the ongoing public health and
economic emergencies that these relief funds were intended to
help mitigate.\111\
---------------------------------------------------------------------------
\109\ Id.
\110\ PRAC, Top Challenges Facing Federal Agencies.
\111\ Project on Government Oversight, Administration Seeks to
Minimize Transparency of Coronavirus Relief Funds (May 13, 2020)
available at https://www.pogo.org/analysis/2020/05/administration-
seeks-to-minimize-transparency-of-coronavirus-relief-funds/.
---------------------------------------------------------------------------
The CARES Act and related legislation included detailed
reporting requirements for agencies to help ensure transparency
and accountability in their use of pandemic relief funds.\112\
In April 2020, OMB issued guidance directing agencies to use
existing reporting processes to meet the CARES Act
requirements, with only minor modifications.\113\ These
existing processes, established pursuant to the Federal Funding
and Transparency Act of 2006 as amended by the Digital
Accountability and Transparency Act (DATA Act), include making
information on all financial awards of more than $25,000
publicly available on USASpending.gov.\114\ OMB's guidance
stated that no additional reporting by agencies or recipients
should be necessary to meet the requirements of these sections
of the CARES Act.\115\
---------------------------------------------------------------------------
\112\ PRAC, Top Challenges Facing Federal Agencies.
\113\ OMB, Implementation Guidance for Supplemental Funding
Provided in Response to the Coronavirus Disease 2019 (COVID-19) (April
10, 2020) available at https://www.whitehouse.gov/wp-content/uploads/
2020/04/Implementation-Guidance-for-Supplemental-Funding-Provided-in-
Response.pdf.
\114\ https://www.usaspending.gov/about, accessed on June 3, 2021.
\115\ Supra, n. 95, OMB, Implementation Guidance.
---------------------------------------------------------------------------
However, PRAC found that the data federal agencies had been
reporting, as initially directed by OMB, did not satisfy all of
the requirements in the CARES Act, in part because the act
required more extensive reporting for certain awards.\116\ For
example, the CARES Act explicitly directed agencies to collect
new data on funding awards of $150,000 or more, including the
name and description of the project or activity that received
funding, the estimated number of jobs created or retained, and
detailed information on subcontracts and subgrants.\117\ The
information agencies report to USASpending.gov leaves out some
of this required information, including job creation numbers,
detailed project descriptions, and sub-award loan information,
making it difficult to track the recipients of funds and the
impact of the federal government's efforts.\118\ PRAC also
found problems with the accuracy of the agency-reported data,
including potentially incorrect award amounts and mismatched
location information.\119\ GAO, likewise, has reported on
challenges related to the accuracy, completeness, and
timeliness of the data contained on USASpending.gov, which
limit users' ability to appropriately interpret the data.\120\
---------------------------------------------------------------------------
\116\ PRAC, MITRE Report.
\117\ CARES Act, Pub. L. No. 116-136 (2020).
\118\ PRAC, MITRE Report.
\119\ Id.
\120\ Supra, n. 34, GAO-20-708. See also GAO, Data Act: Quality of
Data Submissions Has Improved but Further Action is Needed to Disclose
Known Data Limitations, (November 8, 2019) available at https://
www.gao.gov/products/gao-20-75.
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Some federal OIGs have also found problems related to the
reporting of CARES Act data.\121\ The General Services
Administration (GSA) OIG cited control weaknesses as a
potential impediment to accurately reporting CARES Act
spending, referencing a November 2019 audit that found errors
in how GSA reports certain data to USASpending.gov.\122\
According to the GSA OIG, GSA will need to address these errors
to ensure that its CARES Act reporting is accurate.\123\
Similarly, the DHS OIG reported that key DHS financial systems
do not comply with federal requirements, and that this
potentially will impact financial planning, payments, and
internal controls related to CARES Act funding.\124\
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\121\ PRAC, Top Challenges Facing Federal Agencies.
\122\ GSA OIG, Audit of the Completeness, Accuracy, Timeliness, and
Quality of GSA's 2019 DATA Act Submission, (November 1, 2019),
available at https://www.gsaig.gov/sites/default/files/audit-reports/
A190040_1.pdf.
\123\ GSA OIG, Top Challenges Facing The General Services
Administration: COVID-19 Emergency Response and Relief Efforts (June
23, 2020) available at https://www.gsaig.gov/sites/default/files/
management-challenges/GSA%20Top%20Challenges.pdf.
\124\ PRAC, Top Challenges Facing Federal Agencies.
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OMB has taken steps to ensure that agencies submit data
that better meets the requirements of the CARES Act.\125\ In
June 2020, OMB issued a set of frequently asked questions to
expand upon and clarify its April guidance memorandum.\126\
And, in August 2020, it issued a Controller Alert directing
agencies to improve the quality of award description
information in USASpending.gov.\127\
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\125\ PRAC, MITRE Report.
\126\ OMB, CARES Act and M-20-21 Recipient Frequently Asked
Questions (June 24, 2020), available at https://www.cfo.gov/wp-content/
uploads/2020/07/M-20-21_FAQ_07312020_
UPDATED.pdf.
\127\ OMB, Controller Alert: Award Description Data Quality for
Financial Assistance Awards (August 2020) available at https://
www.cfo.gov/wp-content/uploads/2020/08/CONTROLLER_
ALERT_AUGUST_2020_FA_Award_Des.pdf.
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``Multi-Dipping''
PRAC and others have identified the risk of recipients
receiving funding from multiple federal programs for the same
purpose (i.e., ``multi-dipping'').\128\ The Special Inspector
General for Pandemic Recovery (SIGPR) reported that several
airlines received payments from both the Paycheck Protection
Program and the Payroll Support Program, a potential case of
multi-dipping.\129\ SIGPR cautioned that the existence of
programs resulting in multiple forms of financial support to a
single individual or entity creates an increased risk of fraud
and abuse.\130\ In January 2021, PRAC initiated work on
pandemic relief funds received by tribal governments, and it
expects to be able to identify CARES Act programs where multi-
dipping has occurred.\131\
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\128\ Id.
\129\ SIGPR, Initial Report to Congress (August 3, 2020) available
at https://www.sigpr.gov/sites/sigpr/files/2020-09/SIGPR-Initial-
Report-to-Congress-August-3-2020_0.pdf.
\130\ Id.
\131\ PRAC, Multi-Dipping of Pandemic Response Funds Provided to
Tribal Government (January 29, 2021) available at https://
www.pandemicoversight.gov/oversight/reports?f%5B0
%5D=submitting_organization%3APandemic%20Response%20Accountability%20Com
mittee.
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IMPACT OF FEDERAL COVID-19 RESPONSE AND RELIEF EFFORTS
The policies and programs the federal government has
implemented over the course of the pandemic have had multiple
challenges, as discussed on the previous pages, but also many
benefits, as is described below. States and localities received
assistance to help vaccinate their residents.\132\ Businesses
and public sector agencies retained workers that they otherwise
would have laid off.\133\ The nation's transportation systems
continued to operate safely, providing transportation for
essential workers and others.\134\ Moreover, the economy as a
whole is beginning to recover as the economy opens back up with
gross domestic product expected to show a substantial increase
this year after plunging at an annual rate of 31.4 percent in
Q2 2020.\135\ However, there are concerns about the effect of
inflation on this recovery.\136\
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\132\ FEMA, 100 Days of FEMA and Our Partners in Action (April 30,
2021) available at https://www.fema.gov/blog/100-days-fema-and-our-
partners-action.
\133\ General Aviation Manufacturers Association, Protecting
Aviation Manufacturing and Maintenance Jobs, (March 10, 2021) available
at https://gama.aero/news-and-events/press-releases/protecting-
aviation-manufacturing-and-maintenance-jobs/, Amalgamated Transit
Union, Relief on the way for transit and working families with American
Rescue Plan (March 10, 2021) available at https://www.atu.org/media/
releases/atu-relief-on-the-way-for-transit-and-working-families-with-
american-rescue-plan.
\134\ Id.
\135\ Congressional Research Service, COVID-19 and the U.S. Economy
(May 11, 2021) available at https://crsreports.congress.gov/product/
pdf/R/R46606.
\136\ Rachel Siegel, Biden Says Fed `should take whatever steps it
deems necessary' to respond to inflation, Wash. Post. (July 19, 2021),
available at https://www.washingtonpost.com/us-policy/2021/07/19/biden-
powell-inflation-economy/.
LFEMA's Assistance to States, Localities, Tribes,
---------------------------------------------------------------------------
Territories, and Individuals
The COVID-19 pandemic posed an unprecedented challenge to
the disaster response capabilities of states, localities,
tribes, and territories. As the lead federal agency for the
COVID-19 response, FEMA has undertaken expansive efforts to
help them, as well as to assist individuals suffering from the
economic hardships of the pandemic.\137\ Since January 2020,
FEMA has taken the following actions, among others:
---------------------------------------------------------------------------
\137\ FEMA, 100 Days.
---------------------------------------------------------------------------
LProvided more than $4.75 billion in support of
vaccination efforts in communities across the country.\138\
---------------------------------------------------------------------------
\138\ Id.
---------------------------------------------------------------------------
LWorked with its federal, state, and local
partners to establish 1,732 new community vaccination
centers.\139\
---------------------------------------------------------------------------
\139\ Id.
---------------------------------------------------------------------------
LCoordinated with HHS to deliver, as of September
2020, 249 million N95 masks, 1.1 billion surgical masks, 46.7
million eye and face shields, 432 million surgical gowns or
coveralls, and more than 28.6 billion gloves.\140\
---------------------------------------------------------------------------
\140\ Id.
---------------------------------------------------------------------------
LProvided funding to nonprofits, faith-based
organizations, and government entities that provide shelter,
food, transportation, COVID-19 testing and medical care to
their communities.\141\
---------------------------------------------------------------------------
\141\ Id.
---------------------------------------------------------------------------
LObligated, as of the end of September 2020, $42.6
billion as a supplemental benefit for unemployment insurance
benefits.\142\
---------------------------------------------------------------------------
\142\ FEMA, Pandemic Response to Coronavirus Disease 2019 (COVID-
19): Initial Assessment Report. FEMA's Lost Wages Assistance (LWA)
program was unprecedented because it was instituted as a new program
despite another discrete Stafford Act section on disaster unemployment
assistance (Sec. 410). FEMA failed to provide the Committee with a
legal justification memo explaining why or how LWA was administered as
it was despite section 410.
---------------------------------------------------------------------------
LIn January 2021, the federal cost share for a
majority of eligible FEMA assistance for all COVID-19 related
Emergency and Major Disasters was expanded to 100 percent and
made applicable to costs of eligible activities from the
beginning of the pandemic incident period on January 20, 2020,
to September 30, 2021.\143\
---------------------------------------------------------------------------
\143\ FEMA, FEMA Statement on 100% Cost Share (February 3, 2021)
available at https://www.fema.gov/press-release/20210203/fema-
statement-100-cost-share.
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Aviation Industry
As a result of the pandemic, air passenger demand fell far
below prior years and, according to some industry analysts, a
return to pre-pandemic traffic levels might not occur until
2023.\144\ The number of passengers going through
Transportation Security Administration (TSA) checkpoints
increased throughout the spring of 2021 but was still far below
pre-pandemic levels. In June 2021, for example, TSA traveler
throughput was 26 percent lower than in June 2019.\145\ As a
result of this decline in passenger demand and other factors,
U.S. passenger airlines are projecting pre-tax losses of $18
billion this year, according to Airlines for America.\146\
Similarly, Airports Council International-North America (ACI-
NA) expects that U.S. airports will lose at least $40 billion
by March 2022 because of the prolonged decline in commercial
aviation traffic.\147\
---------------------------------------------------------------------------
\144\ GAO, COVID-19 Pandemic: Preliminary Observations on Efforts
toward and Factors Affecting the Aviation Industry's Recovery, GAO-21-
412T (March 2, 2021) available at https://www.gao.gov/assets/gao-21-
412t.pdf.
\145\ See, e.g., TSA, TSA Checkpoint Travel Numbers, (last accessed
July 19, 2021). https://www.tsa.gov/coronavirus/passenger-throughput.
\146\ Statement of Mr. Nicholas E. Calio, President and Chief
Executive Officer, Airlines For America, ``COVID-19's Effects on U.S.
Aviation and The Flight Path to Recovery'' before the United States
House Committee on Transportation and Infrastructure Subcommittee on
Aviation, (March 2, 2021) available at https://
transportation.house.gov/imo/media/doc/Calio%20Testimony.pdf.
\147\ Airports Council International, Airports Council Applauds
Passage of $8 Billion in COVID-19 Relief for Airports (last accessed
July 19, 2021), available at https://airportscouncil.org/press_release/
airports-council-applauds-passage-of-8-billion-in-covid-19-relief-for-
airports/
---------------------------------------------------------------------------
The PSP was created to prevent layoffs in this hard-hit
sector. Congress has appropriated $63 billion to this program,
which provides financial assistance to airlines, manufacturers,
and other related businesses for employee wages, salaries, and
benefits.\148\ According to the General Aviation Manufacturers
Association, PSP has allowed companies to keep highly skilled
workers in the industry and supported some of the smaller
companies that needed assistance to maintain operations.\149\
Airlines were able to preserve the jobs of flight attendants,
pilots, mechanics, gate agents and others, according to
Airlines for America.\150\
---------------------------------------------------------------------------
\148\ House Committee on Transportation and Infrastructure, Chair
DeFazio Applauds Inclusion of T&I Provisions, Including Payroll Support
Program Extension, in House Democrats' Latest COVID-19 Relief Package,
(September 29, 2020), available at https://transportation.house.gov/
news/press-releases/chair-defazio-applauds-inclusion-of-tandi-
provisions-including-payroll-support-program-extension-in-house-
democrats-latest-covid-19-relief-package; U.S. Department of the
Treasury, Airline and National Security Relief Programs (accessed on
May 7, 2021) https://home.treasury.gov/policy-issues/coronavirus/
assistance-for-american-industry/airline-and-national-security-relief-
programs.
\149\ General Aviation Manufacturers Association, Protecting
Aviation Manufacturing and Maintenance Jobs, (March 10, 2021) available
at https://gama.aero/news-and-events/press-releases/protecting-
aviation-manufacturing-and-maintenance-jobs/.
\150\ Airlines for America, Statement from A4A CEO and President
Nicholas E. Calio on the Passage of the American Rescue Plan (March 10,
2021) available at https://www.airlines.org/news/statement-from-a4a-
ceo-and-president-nicholas-e-calio-on-the-passage-of-the-american-
rescue-plan/.
---------------------------------------------------------------------------
Congress also appropriated about $20 billion in grant
assistance to help airports respond to the COVID-19 pandemic,
including funds for operating expenses, debt service, and other
expenses.\151\ The additional grants are helping airports
offset some of the financial damage from the abrupt, unexpected
drop in air travel that resulted from precautions to limit the
spread of COVID-19, according to ACI-NA.\152\
---------------------------------------------------------------------------
\151\ GAO, COVID-19: Sustained Federal Action Is Crucial as
Pandemic Enters Its Second Year, GAO-21-387 (March 31, 2021) available
at https://files.gao.gov/reports/GAO-21-387/index.html.
\152\ Airports Council International, Airports Council Statement on
CARES Act Grants (last accessed July 19, 2021) available at https://
airportscouncil.org/press_release/airports-council-international-north-
america-statement-on-cares-act-grants/.
---------------------------------------------------------------------------
Transit Agencies
COVID-19 and the resulting shelter-in-place orders,
business closures, suspension of tourism, and increasing
unemployment and increasing numbers of employees working from
home significantly decreased public transit and commuter rail
ridership.\153\ Nationally, transit ridership in 2020 was down
a historic 79 percent at the start of the pandemic compared to
2019 levels.\154\ Transit agencies anticipate long-term
consequences from the COVID-19 pandemic, including reduced
demand for service, increased operating costs, and limited
state and local funding.\155\ According to the American Public
Transportation Association (APTA), when the economy does begin
to recover, transit agencies will still be challenged with
severe fiscal constraints as a result of physical distancing
requirements that reduce vehicle capacity, increased costs of
facility and vehicle cleaning and disinfection, and decreased
ridership due to the dramatic increase in telework.\156\
---------------------------------------------------------------------------
\153\ Abby Vesoulis, The Future of American Public Transit Depends
on Congress, Time (December 17, 2020) available at https://time.com/
5921917/mass-transit-covid-congress/.
\154\ American Public Transportation Association, The Impact of the
COVID-19 Pandemic on Public Transit Funding Needs in the U.S. (January
27, 2021) available at https://www.apta.com/wp-content/uploads/APTA-
COVID-19-Funding-Impact-2021-01-27.pdf.
\155\ Supra, n. 9, GAO-21-387.
\156\ American Public Transportation Association, The Impact of the
COVID-19 Pandemic on Public Transit Funding Needs in the U.S. (January
27, 2021) available at https://www.apta.com/wp-content/uploads/APTA-
COVID-19-Funding-Impact-2021-01-27.pdf.
---------------------------------------------------------------------------
The CARES Act and subsequent pandemic relief funding have
provided about $69.5 billion in grant assistance to help
transit agencies manage these fiscal constraints.\157\ Federal
relief funds also allowed transit agencies to keep critical
service running, avoid layoffs, and provide workers and riders
with COVID-19 protections.\158\ As a result, some transit
agencies across the country have restored previously reduced
service or have cancelled plans to further cut service.\159\
Transit agencies have also used the funds to mitigate the
spread of COVID-19, including through enhanced cleaning and
sanitation and social distancing.\160\ Further, restoring
transit service is expected to help the nation's economic
recovery, such as in New York City, where the economy depends
on trains and buses to carry riders to businesses, including
theaters, retail stores, and restaurants, that have been
crippled by the pandemic.\161\
---------------------------------------------------------------------------
\157\ This includes $25 billion from the CARES Act, $14 billion
from the Consolidated Appropriations Act, 2021, and $30 billion from
the American Rescue Plan. See https://www.transit.dot.gov/coronavirus.
\158\ Amalgamated Transit Union, Relief on the way for transit and
working families with American Rescue Plan (March 10, 2021) available
at https://www.atu.org/media/releases/atu-relief-on-the-way-for-
transit-and-working-families-with-american-rescue-plan.
\159\ New York Times, Transit Got $30 Billion in Stimulus Aid. What
Does That Mean for Riders? (March 15, 2021) available at https://
www.nytimes.com/2021/03/15/nyregion/biden-stimulus-public-
transportation.html.
\160\ Supra, n. 9, GAO-21-387.
\161\ New York Times, Transit Got $30 Billion in Stimulus Aid. What
Does That Mean for Riders? (March 15, 2021) available at https://
www.nytimes.com/2021/03/15/nyregion/biden-stimulus-public-
transportation.html.
---------------------------------------------------------------------------
Other Transportation Sectors
Operators of motorcoaches, school buses, and passenger
vessels have also suffered the financial effects of lower
demand for their services due to the pandemic. For example,
though passenger ships operating exclusively inside the United
States have begun to resume operations, virtually the entire
U.S. domestic commercial passenger fleet, including overnight
excursions, day charters, and tours, was forced to shut down
for a year.\162\ Companies operating commuter shuttle buses and
private bus charters also were forced to suspend service due to
lack of passengers, and some went out of business entirely,
according to the American Bus Association.\163\
---------------------------------------------------------------------------
\162\ Letter from Passenger Vessel Association to Speaker Nancy
Pelosi (April 8, 2020) available at http://www.passengervessel.com/
downloads/letters/2020-CARES-ACT-2-Speaker-Pelosi.pdf; The Maritime
Executive, American Coastal and River Cruising is Resuming (March 16,
2021) available at https://www.maritime-executive.com/article/american-
coastal-and-river-cruising-is-resumming.
\163\ American Bus Association, New Report Details Motorcoach
Industry's Dire Situation (August 10, 2020), available at https://
www.buses.org/news/article/new-report-details-motorcoach-industrys-
dire-situation.
---------------------------------------------------------------------------
The Coronavirus Economic Relief for Transportation Services
(CERTS) Program was created to support companies such as
motorcoach, school bus, passenger vessel, and pilot vessel
companies that were affected by the COVID-19 pandemic.\164\
Under the program, up to $2 billion in grants is made available
to eligible companies that certify they have experienced an
annual revenue loss of 25 percent or more as a direct or
indirect result of COVID-19.\165\ Grant funds administered
through the CERTS program are primarily used to cover payroll
costs but may also be used to cover the acquisition of
services, supplies, and the cost of operating and maintaining
equipment, among other things.\166\
---------------------------------------------------------------------------
\164\ U.S. Department of the Treasury, Coronavirus Economic Relief
for Transportation Services (CERTS) Program, available at https://
home.treasury.gov/policy-issues/coronavirus/assistance-for-american-
industry/coronavirus-economic-relief-for-transportation-services.
\165\ Id., and Guidelines for the Coronavirus Economic Relief for
Transportation Services (CERTS) Grant Program (May 6, 2021), available
at https://home.treasury.gov/policy-issues/coronavirus/assistance-for-
american-industry/coronavirus-economic-relief-for-transportation-
services.
\166\ U.S. Department of the Treasury, Coronavirus Economic Relief
for Transportation Services (CERTS) Program and Guidelines for the
Coronavirus Economic Relief for Transportation Services (CERTS) Grant
Program (May 6, 2021), available at https://home.treasury.gov/policy-
issues/coronavirus/assistance-for-american-industry/coronavirus-
economic-relief-for-transportation-services. According to the CERTS
guidelines Treasury published on May 6, 2021, to be eligible for
payments under this program, companies must be established or organized
in the United States or pursuant to federal law and must have a
majority of employees in the United States, among other things.
Further, passenger vessel companies must carry out their principal
business using one or more passenger vessels of the United States (as
each is defined in 46 USC Sec. 2101) that (a) are for hire with a
capacity of 6 to 2,400 passengers and (b) have U.S. Coast Guard (USCG)
issued Certificates of Inspection (COI).
---------------------------------------------------------------------------
These federal relief efforts have been critical to the
nation's economic and public health recovery from COVID-19.
They helped to get needed supplies to states and local
governments and financial relief to transportation workers and
U.S. businesses impacted by the pandemic. However, the federal
oversight community has identified various instances of abuse
by individual recipients of these funds and areas where federal
agencies can improve their oversight of the government's
pandemic relief and response efforts. The hearing will provide
an opportunity for Members to discuss both the oversight of the
government's COVID-19 relief efforts and the impact of those
actions on the transportation industry and its workers.
WITNESS LIST--Panel I
LThe Honorable Michael E. Horowitz, Chair,
Pandemic Response Accountability Committee
LMs. Heather Krause, Director, Physical
Infrastructure Issues, Government Accountability Office
LMr. Chris Currie, Director, Homeland Security and
Justice Issues, Government Accountability Office
LThe Honorable Eric J. Soskin, Inspector General,
Department of Transportation
LMr. James Izzard, Assistant Inspector General for
Investigations, Department of Homeland Security
WITNESS LIST--Panel II
LMr. Paul Skoutelas, President & CEO, American
Public Transportation Association (APTA)
LMr. Juan Ortiz, Director of Homeland Security and
Emergency Management, City of Austin, Texas--on behalf of the
International Association of Emergency Managers (IAEM)
LDr. Michael J. Boskin, T.M. Friedman Professor of
Economics and Senior Fellow, Hoover Institution, Stanford
University
LDr. Wendy Edelberg, PhD, Director, The Hamilton
Project, The Brookings Institution
LMr. John Samuelsen, Transport Workers Union of
America (TWU)
Mr. DeFazio. I call the Committee on Transportation and
Infrastructure to order.
As I did yesterday, during yesterday's markup, I am reading
an announcement from the Office of the Attending Physician.
The physician has once again imposed a requirement that
Members, staff, and all others physically present in an
enclosed House of Representatives-controlled space--i.e., this
room and others like it--and the floor of the House will be
required to wear masks, unless speaking.
I view this as a safety issue, therefore an important
matter of order and decorum. I assert my responsibility to
preserve order and decorum with respect to the wearing of
masks. The chair would greatly prefer that all present simply
uphold the decorum of the committee by complying with
reasonable safety standards recommended by the Attending
Physician, and respectful of all the occupants of the room.
With that, the committee will come to order.
I ask unanimous consent that chair be authorized to declare
recess at any time during today's hearing.
Without objection, so ordered.
As a reminder, please keep your microphone muted while
speaking, blah blah blah. If you make noise, I will shout at
you.
To insert a document into the record, please email it to
[email protected]
With that I would go to my opening statement, which I put
somewhere. Oh, who took it? Yes, here we go, OK.
Today we will hear about the impact the Government's COVID-
19 relief funding has had on the transportation sector and its
workers who were heavily hit. Many transportation workers died.
Many, many more became ill. But they kept the trains, the
planes, and the buses running during this, and the light rail,
anything that is related to transportation. And obviously,
ridership went down. But they provided essential transportation
to many, many critical workers during that time. And the
economy would have been way worse off without their incredible
sacrifice.
So today we are here to look at the Government's response,
and see that these Federal funds have been utilized efficiently
and effectively. The pandemic, obviously, has had a huge and
ongoing impact, and Congress took unprecedented steps to deal
with that.
The Federal oversight community, which will be our first
panel, has been tracking this economic aid to determine if it
has been used appropriately and to identify ways to ensure it
is used as productively as possible. The oversight--I forgot I
can take my mask off while I am talking--the oversight
community has also worked to identify weaknesses in agencies'
management of COVID-19 relief programs and to ferret out
individual cases of fraud, which, in this sector, are quite
rare, not so much in the Paycheck Protection Program or
unemployment programs, but in this it was rare, relatively
rare.
Our hearing today will examine both these issues: oversight
of the funds and the impact of the aid on the industry's
stakeholders. There are always going to be individual bad
actors attempting to defraud or financially abuse a program or
take advantage of a crisis. And some programs may have had poor
management or ineffective leadership. And that is what we want
to hear: the oversight community can identify loopholes, or how
people might have been enabled to commit fraud, and make
recommendations to improve the management of those programs.
In some cases, Federal agencies, many that are outside our
committee's jurisdiction, have not moved quickly enough to
close these oversight gaps, and to learn the lessons from past
national emergencies. GAO, for instance, has issued 87 COVID-
19-related recommendations since the pandemic began, and only
16 have been fully implemented.
Despite these issues, the economic relief was necessary.
Governors, mayors, local officials, labor organizations, and
business associations, have all applauded the support Congress
provided through legislation. It helped to slow the spread of
the virus, thwart the loss of American jobs, and bolster the
economic security of the U.S. and small businesses.
Unfortunately, we may never know how successful these
efforts were, because Government agencies failed to track the
number of jobs that were saved. I look forward to hearing from
our Government witnesses about how to increase transparency on
this front, hopefully retrospectively, but certainly in the
future. This won't be our last national crisis. Who knows what
the next one will be?
I also look forward to hearing ideas to enhance
accountability, improve Federal crisis planning and emergency
management programs, and strengthen transparency of Government
expenditures. While I believe the COVID-19 relief funding was
absolutely critical in addressing the dire economic situation
and public health catastrophe, I also commend the oversight
community for identifying problems, highlighting cases of
ineffective management, and spotting cases of waste, fraud, and
abuse to improve the management of Federal programs to help
Americans impacted by COVID.
There are several questions I hope will be addressed by the
panel: What recommendations do you have to help the
Government's coordinated response to national public health and
other emergencies, particularly for the Federal Emergency
Management Agency?
I would note that we are not touching on aviation today,
but the Department of Transportation was ordered, under the
Obama administration, to develop an emergency response plan to
deal with pandemics. We are still waiting.
And secondly, how can we improve reporting and transparency
related to the use of Federal disaster assistance funds?
How can we learn from the Federal oversight community's
identification of problems in the Federal response to the
COVID-19 pandemic to improve the response during the next
national crisis?
And from the standpoint of transportation stakeholders, our
second panel, what worked well, in terms of the Government
response to helping them confront the crisis, and how can we
help support transportation workers and the critical
transportation infrastructure we all depend upon in order to
mitigate the impact of future national public health
emergencies?
Thanks to all of you for being here today, and I yield to
the ranking member for his opening statement.
[Mr. DeFazio's prepared statement follows:]
Prepared Statement of Hon. Peter A. DeFazio, a Representative in
Congress from the State of Oregon, and Chair, Committee on
Transportation and Infrastructure
Today we will hear about the impact the government's COVID-19
relief funding has had on the transportation sector and its workers,
and the challenges in overseeing the government's response efforts and
ensuring that these federal funds are managed efficiently and
effectively.
The onslaught of the COVID-19 pandemic has had devastating
consequences for our nation and the world. In the United States it has
infected more than 34 million Americans and resulted in the deaths of
more than 600,000 individuals. The federal government was called upon
to respond to this public health crisis in a way that was unprecedented
on a national scale for such a prolonged period of time, and it
continues to do this work on a daily basis across our country.
The pandemic also wreaked havoc on our economy, decimating the
financial livelihood of many American workers and businesses,
particularly in the transportation sector. Congress took unprecedented
actions to help cushion the economic blow to workers, families, and
small businesses.
The federal oversight community has been tracking this economic aid
to determine if it has been used appropriately and to identify ways to
ensure it is used as productively as possible. The oversight community
has also worked to identify weaknesses in agencies' management of
COVID-19 relief programs and to ferret out individual cases of fraud.
Our hearing today will examine both of these issues: the oversight of
these funds by federal Offices of Inspectors General and the U.S.
Government Accountability Office and the impact of this aid to
transportation industry stakeholders.
Challenges do exist. There will always be individual bad actors
seeking to defraud or financially abuse a program or federal agency
whose mission is to serve the public and the nation. Some programs may
also be impeded by poor management and ineffective leadership. The
oversight community has been keeping tabs on these funds, identifying
these fraudsters, and making recommendations to improve the management
of federal COVID-19 relief actions and programs.
But in some cases, federal agencies, many outside our committee's
jurisdiction, have not moved quickly enough to close these oversight
gaps and to learn the lessons from past national emergencies. The
Government Accountability Office, for instance, has issued 87 COVID-19
related recommendations since the pandemic began and only 16 of those
have been fully implemented.
Despite these issues, COVID-19 economic relief was necessary.
Governors, mayors and local officials, labor organizations and business
associations have all applauded the support Congress provided through
legislation that helped to slow the spread of the COVID-19 virus,
thwarted the loss of American jobs, and bolstered the economic security
of U.S. small businesses. Unfortunately, we may not know how successful
these relief efforts were because government agencies failed to track
the number of jobs that were saved. I look forward to hearing from our
government witnesses about how to increase transparency on this front.
I also look forward to hearing ideas to enhance accountability, improve
federal crisis planning and emergency management programs, and
strengthen transparency of government expenditures in the future.
While I believe the COVID-19 relief funding was absolutely critical
to addressing the dire economic situation and the public health
catastrophe, I also commend the oversight community for identifying
problems, highlighting cases of ineffective management and spotting
cases of waste, fraud and abuse to improve the management of federal
programs to help Americans impacted by the COVID-19 pandemic.
There are several questions I hope our panelists will help us
understand today.
What recommendations does the oversight community have to
helping improve the government's coordinated response to national
public health and other emergencies, particularly for the Federal
Emergency Management Agency (FEMA)?
How can we improve reporting and transparency related to
the use of federal disaster assistance funds?
How can we learn from the federal oversight community's
identification of problems in the federal response to the COVID-19
pandemic to improve the response during the next national crisis?
From the standpoint of transportation stakeholders, what
worked well in terms of the government's response to helping them
confront this crisis and how can we help support transportation workers
and the critical transportation infrastructure we all depend upon in
order to mitigate the impact of future national public health
emergencies?
Thank you to all of our witnesses for being here today. I look
forward to your testimony. With that I yield to Ranking Member Graves
for his opening statement.
Mr. Graves of Missouri. Thank you, Mr. Chairman.
Since the beginning of the pandemic, the Government has
spent $5.9 trillion on combating COVID-19; $1.9 trillion has
been authorized by Congress just this year. Some of this money
was legitimately needed to help us respond and recover from a
once-in-a-lifetime pandemic. With it, we were able to do things
like Operation Warp Speed, distribute personal protective
equipment, or PPE, set up medical clinics, and provide
transportation for essential workers. I am glad today's hearing
is going to focus on oversight and look at how these funds have
been used or potentially misused.
Unfortunately, a lot of recent funding has been masqueraded
as pandemic-related relief. For example, more than $1 billion
for Amtrak, school funds for critical race theory, and loads of
extraneous green projects. And now the majority wants to add
another $3.5 trillion to the tab through its ``human
infrastructure'' bill, which will be jammed through using the
partisan budget reconciliation process. This would be the
highest level of funding for any legislative measure in the
history of our country, costing the American taxpayers about
$50,000 per U.S. household.
We cannot just casually throw around trillion-dollar
figures like we are playing with Monopoly money. We have to
consider where these astronomical amounts of money are coming
from. Unfortunately, it is going to come from the pockets of
the taxpayers, and the pockets of future taxpayers who haven't
even been born yet. The effects of this cumulative, unchecked
spending are real, and we are seeing it every day. The price of
consumer goods has gone up nearly across the board. Gasoline is
up 56 percent, airlines are up, our airfares are up 24 percent.
Used cars are up 30 percent from last year. And even the cost
of chicken wings has increased more than 58 percent.
Let's not forget, we still don't know how this virus
started, despite its high cost. More than 600,000 U.S. lives
have been lost, and we are still paying the economic toll of
recovery.
I look forward to hearing from today's panels on how this
spending is impacting our economy, and how it is impacting
jobs, and whether or not Congress was as targeted as we ought
to have been when spending such large sums of money.
With that, Mr. Chairman, I am looking forward to hearing
from our witnesses, and I do appreciate the hearing, and I
yield back the balance of my time.
[Mr. Graves of Missouri's prepared statement follows:]
Prepared Statement of Hon. Sam Graves, a Representative in Congress
from the State of Missouri, and Ranking Member, Committee on
Transportation and Infrastructure
Thank you, Chair DeFazio.
Since the beginning of the pandemic, the government has spent $5.9
trillion on combating COVID-19. $1.9 trillion has been authorized by
Congress this year alone.
Some of this money was legitimately needed to help us respond and
recover from a once-in-a-lifetime pandemic. With it we were able to do
things like Operation Warp Speed, distribute personal protective
equipment (PPE), set up medical clinics, and provide transportation for
essential workers.
I am glad today's hearing will focus on oversight and look at how
these funds have been used--and potentially misused.
Unfortunately, a lot of recent funding has masqueraded as pandemic-
related relief. For example: more than $1 billion for Amtrak, school
funds for critical race theory, and loads of extraneous green projects.
And now the Majority wants to add another $3.5 trillion to the tab
through its ``human infrastructure'' bill which will be jammed through
using the partisan budget reconciliation process. This would be the
highest level of funding for any legislative measure in our history--
costing the American taxpayers about $50,000 per U.S. household.
We cannot casually throw around trillion-dollar figures now like
we're playing with Monopoly money. We must consider where these
astronomical amounts of money are actually coming from. Unfortunately,
it'll come from the pockets of the taxpayers, and the pockets of future
taxpayers who haven't even been born yet.
The effects of this cumulative, unchecked spending are real. And
we're seeing it every day. The price of consumer goods has gone up
nearly across the board. For example, gasoline is up 56 percent,
airfares are up 24 percent, used cars are up 30 percent from last year,
and even the cost of chicken wings has increased by more than 58
percent.
And let's not forget that we still don't know how this virus
started despite its high cost. More than 600,000 U.S. lives were lost
and we're still paying the economic toll of recovery.
I look forward to hearing from today's panels on how this spending
is impacting our economy, jobs, and whether or not Congress was as
targeted as we ought to have been when spending such huge sums of
money.
Mr. DeFazio. I thank the gentleman for his brevity. I will
now turn to our witnesses.
We will be hearing testimony from witnesses, two panels,
with each panel followed by questions from Members.
I would now like to welcome witnesses on our first panel:
the Honorable Michael E. Horowitz, Chair, Pandemic Response
Accountability Committee; Ms. Heather Krause, Director of
Physical Infrastructure, Government Accountability Office; Mr.
Chris Currie, Director of Homeland Security and Justice,
Government Accountability Office; the Honorable Eric J. Soskin,
inspector general, Department of Transportation; and Mr. James
Izzard, assistant inspector general for investigations,
Department of Homeland Security.
Thanks for joining us today. I look forward to your
questions.
Without objection, the full statements will be included in
the record.
Since your written statement has been made a part of the
record, the committee requests that you extract the most
relevant points, and restrict yourself to 5 minutes.
With that, Chairman Horowitz, you are recognized for 5
minutes.
TESTIMONY OF HON. MICHAEL E. HOROWITZ, CHAIR, PANDEMIC RESPONSE
ACCOUNTABILITY COMMITTEE; HEATHER KRAUSE, DIRECTOR, PHYSICAL
INFRASTRUCTURE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE; CHRIS P.
CURRIE, DIRECTOR, HOMELAND SECURITY AND JUSTICE, U.S.
GOVERNMENT ACCOUNTABILITY OFFICE; HON. ERIC J. SOSKIN,
INSPECTOR GENERAL, U.S. DEPARTMENT OF TRANSPORTATION; AND JAMES
IZZARD, Jr., ASSISTANT INSPECTOR GENERAL FOR INVESTIGATIONS,
U.S. DEPARTMENT OF HOMELAND SECURITY
Mr. Horowitz. Thank you, Mr. Chairman and Ranking Member
Graves, and members of the committee. Thank you for inviting me
to testify at today's important hearing.
Congress created the Pandemic Response Accountability
Committee, or PRAC, which is comprised of 22 Federal inspectors
general, to oversee the more than $5 trillion in Federal
pandemic relief spending. And I am proud to report on our
accomplishments to date at today's hearing.
PRAC's mission is to work with IGs to help ensure that
taxpayer money is used effectively and efficiently, and to
address the pandemic-related public health and economic needs
that the Congress funded, as well as to root out waste, fraud,
abuse, and misconduct. Oversight of a program of this magnitude
takes a monumental and whole-of-Government effort. Our efforts
at the PRAC have focused on three pillars: transparency,
coordinated oversight, and accountability.
In order to foster transparency and enable the public to
know how its money is being spent, the PRAC established a
website, PandemicOversight.gov, and I hope people will go and
look at the website. We continually update it with new datasets
and spending data, and develop new features to enhance it as a
tool for the public.
For example, just this month we updated our data
visualizations on the Paycheck Protection Program, and for the
first time were able to incorporate loan forgiveness data.
The website also contains accountability information,
including audit and inspection reports from Federal IGs, as
well as from the Government Accountability Office.
We also track recommendations that IGs have made to
agencies to help improve the operations of Government programs
related to the pandemic.
I am particularly pleased to report that, as a result of
the PRAC's outreach efforts to our State and local oversight
partners, PandemicOversight.gov now includes reports from
State, county, and city auditors overseeing pandemic response
funds. The website contains over 125 reports so far. These
oversight entities--and there will be more to come--involving
unemployment insurance, use of coronavirus relief funds,
pandemic preparedness, contract tracing, and more.
With regard to our accountability efforts, the PRAC and
Federal IGs have been performing rigorous, independent
oversight for 16 months now. To date, these efforts have
resulted in the issuance of about 250 oversight reports related
to pandemic spending, and the Government's response to the
pandemic.
In addition, the PRAC issued an agile products toolkit to
assist with oversight efforts, and has held a series of public
forums and programs to inform the public about our oversight
efforts.
And just this month, the PRAC announced the creation of a
new working group focused on preventing and addressing identity
fraud in pandemic response programs. The PRAC Identity Fraud
Reduction and Redress Working Group seeks to help reduce
identity fraud in Government programs, and very importantly,
assist victims in recovering from what can be devastating
impacts from identity fraud.
Additionally, the PRAC and the IG community is committed to
bringing to justice those who, unfortunately, seek to defraud
and steal from pandemic programs. Earlier this year the PRAC
established a Pandemic Fraud Working Group, comprised of law
enforcement agents from across the IG community. And the work
of IG agents has resulted in hundreds of arrests and
prosecutions to date, and we have many more ongoing, open, and
significant investigations.
We are using all of the tools that Congress has given us,
civil and criminal authorities, and suspension and debarment,
among others, to prevent and detect wrongdoing. One of the most
important tools that has enabled us to effectively identify and
prevent misconduct is data analytics. That is why the PRAC is
excited about the development of our Pandemic Analytics Center
of Excellence, or PACE, and I look forward to talk about this
at today's hearing.
The PACE will allow the IG community to conduct data
analysis and visualization of all pandemic response funds,
provide fraud-fighting tools to the IG community, enable the
broad sharing of data and leading practices among IGs, and
assist investigations and audits with expanded data for open
source investigative intelligence.
In the coming months, I look forward to providing even more
information about the PACE, as we continue to build what
promises to be one of the more important tools in helping IGs
root out fraud, waste, abuse, and protect taxpayer money.
Thank you again for your continued strong support of the IG
community. The extraordinary team at the PRAC and the entire IG
community is committed to advancing transparency and
accountability through our independent oversight efforts.
That concludes my remarks, and I would be pleased to answer
any questions the committee may have.
[Mr. Horowitz's prepared statement follows:]
Prepared Statement of Hon. Michael E. Horowitz, Chair, Pandemic
Response Accountability Committee
Mr. Chairman, Ranking Member Graves, and Members of the Committee:
Thank you for inviting me to testify today to discuss the work of
the Pandemic Response Accountability Committee (PRAC), which was
created as part of the Coronavirus Aid, Relief, and Economic Security
Act (CARES Act) in March 2020. In addition to serving as the Inspector
General of the Department of Justice since 2012, for the past 15
months, I have served as acting Chair and permanent chair of the PRAC.
The PRAC is a Committee of the Council of the Inspectors General on
Integrity and Efficiency (CIGIE) and is comprised of 22 federal
Inspectors General (IGs) who are working collaboratively to oversee the
more than $5 trillion in federal pandemic-relief emergency spending.
Our primary mission at the PRAC is to work with Offices of the
Inspector General (OIG) to ensure that taxpayer money is used
effectively and efficiently to address the pandemic-related public
health and economic needs that were funded through the various COVID-19
relief bills. My testimony today will focus on the PRAC's role in
coordinating oversight of the pandemic response, and what lessons we
have learned thus far.
To put it in perspective, the more than $5 trillion in relief
provided to address the pandemic and its health and economic impact to
Americans is more than the federal government's total spending in 2019
for all discretionary, mandatory, and interest on the debt. Oversight
of a program of this magnitude takes a monumental and whole-of-
government effort. The speed at which funds were disbursed last year,
and the sheer amount of money involved, put the funds at high risk of
fraud and misuse, making the work of oversight entities like the PRAC
and IGs essential to a successful national recovery.
The PRAC was established to serve the American public by promoting
transparency and facilitating coordinated oversight of the Federal
Government's COVID-19 pandemic response and associated spending with
the goal to identify major risks that cross program and agency
boundaries, and to assist agencies in preventing and detecting fraud,
waste, abuse, and mismanagement. We also seek to provide the public
with accessible, timely, accurate, and comprehensive data about the
over $5 trillion in COVID-19 relief spending. To date, the 22 PRAC IGs,
as well as other IGs whose agencies received emergency pandemic
funding, have issued 250 oversight reports related to pandemic spending
and the government's response to the pandemic. Recognizing the need to
provide policymakers with timely insights into pandemic relief
spending, the IGs have issued many agile oversight products, including
inspections conducted remotely, flash reports, agency program funding
snapshots, management alerts, and white papers. These reports have
included specific reviews of the Department of Transportation and
Department of Homeland Security, which are covered in detail in
Inspector General Soskin and Assistant Inspector General for
Investigation Izzard's remarks.
PRAC's Work to Date
In response to the COVID-19 outbreak, Congress authorized historic
levels of emergency funding for federal agencies to provide relief to
individuals, businesses, state and local governments, and public
services. Since last March, the PRAC has worked with member IGs to
conduct oversight that seeks to identify programmatic and systemic
risks, and to develop recommendations for program improvements, refer
matters for criminal and civil investigations, and identify misspent
covered funds for recovery. I will briefly mention a few examples of
the PRAC's work over the past year to fulfill this mission and its
plans for the future.
Promoting Transparency through PandemicOversight.gov
The PRAC fosters greater transparency of the government's pandemic-
related spending through our robust, publicly accessible website,
PandemicOversight.gov. The website includes important information about
the PRAC and makes publicly available a wide range of data related to
how emergency pandemic funds have been spent. For example, the website
includes pandemic spending data from USASpending.gov, Paycheck
Protection Program (PPP) data from the Small Business Administration
(SBA), and an updated list of all ongoing work from member IGs related
to the pandemic. In addition, our website provides direct access to
recipient and sub-recipient level reporting and the expenditures made
using Coronavirus Relief Funds. Our website is currently the only place
where this data is available to the public.
We are continuing to update PandemicOversight.gov with additional
datasets and have been designing and developing new content and
features that further enhance the site's effectiveness as a
transparency tool for the public, Congress, and other key stakeholders.
In May, we provided updated Coronavirus Relief Fund data to includes
all funds spent from March 1, 2020 through March 31, 2021. In June, we
incorporated Provider Relief Fund data from hospitals and healthcare
providers that we obtained from the U.S. Department of Health and Human
Services into our website. Most recently, in July, we updated our data
visualizations on the Paycheck Protection Program and for the first
time incorporated loan forgiveness data.
The website also contains accountability information, including
findings from OIGs, such as completed audits and inspections, as well
as Government Accountability Office (GAO) reports. We also track
recommendations that IGs have made to agencies to help them improve the
operations of government programs related to the pandemic.
I am particularly pleased to report that, as a result of the PRAC's
outreach effort to our oversight partners at the state and local
levels, PandemicOversight.gov also now includes reports from state,
county, and city auditors overseeing pandemic response funds. The
website contains over 125 reports [https://www.
pandemicoversight.gov/oversight/reports?f%5B0%5D=report_type_taxonomy
%3A123] on unemployment insurance, use of Coronavirus Relief Funds,
pandemic preparedness, contact tracing, and more. The reports can be
found alongside the PRAC's pandemic oversight reports by federal
auditors. A searchable database of state and local reports allows
policy makers and the public to better understand pandemic response
oversight at all levels and helps federal oversight agencies, like the
PRAC, better monitor and protect the $5 trillion in pandemic relief
distributed across the United States. For example, a report issued by
the California State Auditor in August 2020 designated the management
of Federal pandemic response funds as high risk for the state, stating
that California must be able to properly account for and report on the
use of funds; specifically, the report stated that California must
effectively track and justify the costs of its COVID-19-related
emergency protective measures to ensure that it maximizes the
reimbursement that FEMA will provide. The California State Auditor
further noted that mismanagement of COVID-19 funds could result in
serious detriment to the state and its residents. In another example,
work completed by the New York Comptroller's Office (which includes the
state's audit function) provided a data snapshot of the impact of the
pandemic on subway ridership as well as the impact of the pandemic on
the Metropolitan Transit Authority's debt profile and highlighting that
ridership levels will likely not reach pre-pandemic levels until
sometime in 2021. These reports highlight the need for proper
management of funds, as well as provide key insights and information
about the impact of the pandemic on the ground.
We also have worked closely with GAO and its leadership to ensure
that federal oversight efforts are well coordinated and seamless. The
outstanding reports issued by GAO have been an integral part of the
federal oversight effort and we look forward to continuing to partner
with GAO, as well as our state and local oversight colleagues, as we
conduct our independent oversight efforts on behalf of the taxpayers.
Work on Cross-Cutting Issues that Transcend Federal Agencies
In February 2021, the PRAC issued a ``Top Challenges in Pandemic
Relief and Response'' report [https://www.oversight.gov/sites/default/
files/oig-reports/PRAC/PRAC-Update-Top-Challenges-Pandemic-Relief-and-
Response.pdf], which updated a similar June 2020 report [https://
www.oversight.gov/sites/default/files/oig-reports/
Top%20Challenges%20Facing%20Federal%20Agencies%20-%20COVID-
19%20Emergency%20Relief%20and%20Response%20Efforts_1.pdf] by the PRAC,
and highlighted the major management challenges facing federal agencies
during the pandemic. The PRAC report also identified cross-cutting
issues for policymakers to consider as they implement the relief
funding in the American Rescue Plan. Three of these challenges
particularly incorporate elements related to this Committee's
jurisdiction:
1. Financial Management of Relief Funding. Even in non-pandemic
times, financial management controls and proper oversight of government
contracts pose a challenge to federal agencies and programs. The
substantial increase in funding for certain programs and an expedited
timetable for the distribution of CARES Act and other pandemic-related
funds heightens the risks. Since the pandemic began in March 2020, OIGs
have found that payments have been made without the appropriate checks
and controls in place to verify the expenditures. A soon to be issued
PRAC report found that noncompetitively awarded contracts increase the
risk of higher prices and decreased contractor performance and may
require additional oversight. In addition, OIGs have identified
contracts that pose potential conflicts of interest and contractors
that have not delivered products by the specified due dates. Further,
federal agencies may face challenges maintaining their agency
operations and programming, especially those supported by contracts if
the contractors are unable to fulfill existing requirements due to
COVID-19 restrictions. As the pandemic continues, federal agencies must
continue to ensure they get what they pay for in their pandemic
response-related contracts as well as guard against fraud and improper
payments.
2. Informing and Protecting the Public from Pandemic-Related Fraud.
PRAC member OIGs have also found that Americans are being targeted in
greater numbers by dishonest people taking advantage of the crisis to
harm individuals and businesses through scams and harassment. Identity
theft is on the rise and three pandemic-related benefit programs have
been particularly hard hit: the Department of Labor's unemployment
insurance (UI) program and the Small Business Administration's Economic
Injury Disaster Loan (EIDL) program and Paycheck Protection Program
(PPP). According to the Federal Trade Commission, identity thieves
targeted pandemic unemployment insurance in record numbers, with over
394,000 people reporting that their personal information was misused to
apply for a government benefit--an increase of nearly 3,000% from
2019.\1\
---------------------------------------------------------------------------
\1\ Federal Trade Commission's Staff Report, Protecting Consumers
During the COVID-19 Pandemic: A Year in Review (April 2021).
---------------------------------------------------------------------------
In July, the PRAC announced formation of a new working group
focused on preventing and addressing identity fraud in pandemic
response programs. The PRAC Identity Fraud Reduction & Redress Working
Group is a joint effort of multiple Inspectors General who are members
of the PRAC. The Working Group is taking a holistic approach in seeking
to help reduce identity fraud in government programs and assist victims
in recovering from what can be devastating impacts from identity fraud.
As an oversight community, we have identified several internal controls
that can prevent identity fraud in federal programs to avoid the scale
of fraud that took place in 2020.
To educate the public about what watchdogs at all levels of
government--federal, state, and local--have found in their work related
to identity theft in pandemic relief programs, the PRAC has added an
interactive timeline [https://www.pandemicoversight.gov/our-mission/
identity-theft-in-pandemic-benefits-programs] to our website. The
timeline takes a user through the oversight community's audit and
investigative efforts to protect pandemic relief funds.
3. Report on Data Gaps. A third challenge we identified concerns
data transparency and completeness. A study commissioned by the PRAC
with MITRE [https://www.pandemicoversight.gov/our-mission/publications-
reports/gaps-in-cares-act-and-how-to-close-them] identified key gaps in
data sources and opportunities to close those gaps. The PRAC is
actively reviewing federal data sets to identify areas where high
impact programs contain reporting gaps that could affect the ability of
agencies, OIGs, and the PRAC to properly oversee their use of pandemic
response funds. We have been working with OMB, the Chief Financial
Officers Council, OIGs and agencies on these gaps and are working to
improve data quality and transparency.
An important result from these recent discussions was OMB
Memorandum M-21-20 [https://www.whitehouse.gov/wp-content/uploads/2021/
03/M_21_20.pdf], Promoting Public Trust in the Federal Government
through Effective Implementation of the American Rescue Plan Act and
Stewardship of the Taxpayer Resources, issued on March 19, 2021. This
guidance addresses some of the concerns PRAC leadership and staff have
been discussing with OMB since March 2020, particularly the need for
detailed and accurate award descriptions, enhanced transparency of
spending through use of disaster and emergency funding codes, and
working with the PRAC and IGs to strengthen payment integrity. The
guidance specifically mentions the Administration's commitment to
working with the PRAC and agency IGs to strengthen payment integrity in
order to minimize the risk of waste, fraud, and abuse. Additionally,
the guidance notes that ``OMB anticipates continued collaboration with
the PRAC to include joint communications on issues related to ARP
relief that will raise awareness on specific challenges and
opportunities for payment integrity.''
We continue to work with partner IGs, OMB, and the American Rescue
Plan implementation team to address program level data gaps and
opportunities to promote public trust and enhance payment integrity. In
April, we issued a Joint Alert with OMB [https://
www.pandemicoversight.gov/media/file/omb-and-prac-payment-integrity-
alert] on payment integrity. It is imperative that executive
departments and agencies incorporate in program design, tracking, and
reporting the lessons learned from previous rounds of COVID-19
stimulus. OMB and the PRAC's joint alert identifies risk factors and
mitigating strategies that agencies can consider when assessing impact
to their respective programs. And just last week we issued a second
Joint Alert [https://www.pandemicoversight.gov/news/articles/joint-
announcement-john-pasquantino-acting-omb-controller-and-michael-
horowitz-prac-0] with OMB, this one on the benefits of using automation
and data analytics in reducing the risk of improper payments of
government funds.
Coordinating Oversight Across the PRAC IGs
To facilitate coordination and collaboration between the PRAC and
its member IGs, as well as with the GAO and state and local oversight
entities, the PRAC has established five subcommittees and four issue
groups for healthcare, financial institutions, data sharing, and
identity fraud--chaired by PRAC members--to share ongoing oversight and
accountability efforts, best practices, and lessons learned. These
efforts include:
ongoing reviews of multi-dipping, or recipients of
pandemic funds using multiples sources of funds for the same purpose,
a PPP working group that is discussing outcomes related
from oversight and inspections of PPP fraud and misuse, and
sharing of data analytics and data across the pandemic
response community to create a more cohesive response to pandemic
oversight,
GAO, state and local coordination with the federal
community on high risks and areas of concern.
Specifically on state and local coordination, we regularly
interface with state and local auditors [https://
www.pandemicoversight.gov/media/file/statelocal-infographic] to keep
the lines of communication open to federal offices. We created a series
of monthly listening posts to discuss challenges that are faced by
federal, state, and local audit program, and fiscal partners in their
oversight of CARES Act funds, such as challenges completing Single
Audit Act requirements, fraud risks associated with the unemployment
programs, and sharing reports or methodologies used for similar
oversight activities, and to help find solutions to these problems.
Attendees include PRAC member OIGs, GAO, the National Association of
State Auditors, Comptrollers and Treasurers, the Association of Local
Government Auditors, and entities responsible for Tribal oversight.
We also have conducted new coordination efforts with state and
local oversight offices for pandemic-related hotlines and
investigations so that states can provide the PRAC, or the applicable
federal agency, with hotline information outside of their purview or
applicable to a federal pandemic response program. Additionally, the
PRAC has initiated quarterly briefings to share investigative best
practices or fraud indicators identified by federal investigators that
would benefit state and local investigators and auditors.
The PRAC Audit Subcommittee issued the Agile Products Toolkit
[https://
www.pandemicoversight.gov/sites/default/files/2020-11/
Agile%20Products%20
Toolkit_0.pdf] to assist members in providing expeditious oversight of
federal response in a crisis like the pandemic. The PRAC Healthcare
issue group released a report on COVID-19 testing, a risk area the
group identified [https://www.oversight.gov/sites/default/files/oig-
reports/PRAC/Federal-COVID-19-Testing-Report.pdf] that cuts across
agencies, and collaborated to create a data brief on COVID-19 testing
administered between February 2020 and August 2020 in six select
federal health care programs. This report highlights critical areas for
policymakers to consider to improve testing for Americans, including
availability, accessibility, and cost effectiveness of tests. The PRAC
Financial Institutions issue group brought together expert stakeholders
to gather their insights concerning the Federal government's pandemic
response efforts in small business and housing relief programs. The
group released a series of videos highlighting those perspectives of
lenders [https://www.pandemicoversight.gov/news/pandemic-response-
perspectives-from-banking-industry], small business and borrowers
[https://www.pandemicoversight.gov/news/pandemic-response-perspectives-
from-borrowers], and housing stakeholders [https://
www.pandemicoversight.gov/news/pandemic-response-housing-insights].
To help assess the impact of CARES Act funding, as well as discuss
lessons learned, we held a virtual forum on March 25, 2021--CARES Act
One Year Later: Oversight of America's Investment in Pandemic Response
[https://www.pandemicoversight.gov/news/events/cares-act-one-year-
later]. The event was attended live by 550 participants and featured
prerecorded remarks from Sen. Gary Peters, Rep. Carolyn Maloney, Rep.
James Comer, and Rep. Jim Clyburn. To share these insights widely with
the public, the PRAC posted the event video on PandemicOversight.gov
and our YouTube channel. In August, we will host a virtual roundtable
webinar to discuss the impact of pandemic spending on underserved
communities, whether the funds reached those they were intended to
help, and what changes may be needed in connection with future disaster
relief efforts.
Meanwhile, OIGs and our law enforcement partners at the Department
of Justice and elsewhere have been aggressively pursuing fraud cases.
The investigative workload for a number of PRAC IGs has been
substantial and, regrettably, continues to grow. The PRAC is working to
assist these IGs, including through the PRAC's pandemic fraud task
force, which I discuss below. Those who engage in fraud and other
wrongdoing in connection with pandemic-related programs will be held
accountable, and we hope that these efforts will have the necessary and
important deterrent effect.
To date, there have been 900 defendants publicly charged with
criminal offenses based on fraud schemes connected to the COVID-19
pandemic. The first civil settlement to resolve allegations of fraud
against the Paycheck Protection Program (PPP) occurred on January 12,
2021 in the Eastern District of California. Additionally, regulatory
agencies like the Food and Drug Administration, have issued 7 civil
injunctions and restraining orders against companies and individuals
who are falsely claiming to have treatments or cures for the
coronavirus.
The Offices of Inspectors General are actively engaged in combating
this criminal behavior and have led or participated in investigations
leading to over 481 indictments or complaints, 436 arrests, and 131
convictions thus far. PPP and EIDL fraud continue to trend as the
largest number of publicly announced investigations, followed by
Unemployment Insurance fraud, and investigations related to testing
supplies/treatments/vaccines.
The PRAC is also continuing to track scam and fraud alerts issued
by our member agencies, to ensure the broadest dissemination on our
website and social media platforms. Most recently, the PRAC worked with
HHS OIG to publish an alert on the vaccine scams that have begun
targeting the public.
Shared Services Support to OIGs
The PRAC is seeking to use the resources and tools that Congress
have given us to enhance shared services across the IG community, and
to fill gaps to help our partners meet the challenge of overseeing this
pandemic spending. For example, we are working with data science
programs at leading academic institutions to recruit and hire data
science fellows and build a talent pipeline for the OIG community. The
PRAC is also providing resources to PRAC members to combat fraud in
pandemic relief programs. The PRAC hosted an Educational Loan Fraud
Forum on April 22, 2021, that highlighted activities in the oversight
community related to loan fraud schemes. This allowed OIG investigators
to hear from SBA OIG, FDIC OIG, and FHFA OIG about their experiences in
pursuing PPP and EIDL cases; as well from the Department of Justice and
the Special Inspector General for Pandemic Relief (SIGPR) related to
their ongoing efforts in this area. Further, the PRAC Data Sharing
workgroup coordinates regular meetings of OIGs to discuss data sharing
opportunities to identify potential cross cutting initiatives, to share
lessons learned from OIG data-related oversight work, and to consider
ways to prevent and detect fraud, waste, and abuse using data
analytics. For example, the workgroup organized a two-day Data Expo to
share information among OIGs in terms of their data analytic
capabilities, tools, and ongoing projects.
Additionally, the PRAC Data Sharing workgroup held an International
Data Forum with counterparts from the United Kingdom and Australia in
early July. The event featured discussion of pandemic relief programs
in each country, the challenges faced in overseeing those relief
programs, and how innovative approaches to data sharing and analytics
allowed officials to address those challenges.
The PRAC also launched a hotline complaint site on its webpage
(https://www.PandemicOversight.gov/contact/abouthotline) to enable
whistleblowers and the public to report alleged wrongdoing related to
federal pandemic programs without having to determine which OIG office
has primary responsibility for a particular government program. All of
the complaints made to the PRAC hotline are reviewed by staff and then
forwarded to the appropriate OIG. As of July 20, 2021, the PRAC has
received 1,787 complaints, and has made 1,363 referrals to OIGs (since
some hotline complaints impact multiple programs and offices).
Additionally, PRAC hotlines are provided to the PRAC Task Force for
investigative follow-up where applicable.
PRAC Initiatives
Having highlighted some of the work of the IG community and PRAC to
date, let me briefly discuss some of the initiatives that the PRAC is
currently undertaking or planning to initiate going forward.
Pandemic Analytics Center of Excellence
We greatly appreciate Congress's continued support of the PRAC,
including the $40 million provided in the American Rescue Plan Act of
2021. Fulfilling the PRAC's mission of rooting out waste, fraud, and
abuse in COVID response spending requires better technological tools,
including the use of advanced data analytics that can be used to
identify and stop fraudulent payments before they are made, to
strengthen compliance and audit efforts, and detect fraud and support
efforts to recover any ill-gotten gains. To that end, the PRAC is
operating the Pandemic Analytics Center of Excellence (PACE) to: (1)
conduct data analysis and visualization of all pandemic response funds;
(2) provide fraud-fighting tools and central shared services to the IG
community; (3) enable the broad sharing of data, analytics and leading
practices across the oversight and law enforcement community; and (4)
assist investigations and audits of pandemic relief programs with
expanded data for open source investigative intelligence.
The PACE is providing the enhanced capacity needed to ensure that
pandemic response funds are used for their intended purpose, and not
wasted or misused. The PACE is comprised of three primary functional
capabilities (IT & Data Management; Analytics Visualization &
Reporting; and Investigative Support) to execute and operate its
mission:
Analytic support tools include data matching, anomaly
detection, risk modeling, social network analysis, robotic process
automation, geospatial analysis, link analysis, business intelligence,
and open-source intelligence. Currently, we are using robotic process
automation to assist a member OIG to automate tasks associated with
monitoring of pandemic spending that are currently manual reviews. This
project will save critical time for both the OIG and the recipients
that report spending information. In addition, we are assisting OIGs
with development of risk models to help them identify high-risk
recipients of pandemic funds for additional oversight. Our social
network analysis assists in investigative work to uncover insights on
networks of individuals who may have defrauded pandemic relief
programs.
Data science staff will utilize the tools to identify
trends, patterns and anomalies and generally develop insights to detect
and prevent potential or suspected fraud, waste, abuse and
mismanagement of covered funds based upon best available data and
analytic techniques. Currently, we have augmented the data science
talent focused on pandemic relief in the oversight community with 12
data science fellows placed at the PRAC and member OIGs.
Development of capabilities necessary to identify,
acquire, and curate data that can be used for pandemic oversight to
allow for a flexible and adaptable cloud-based platform to analyze
data. This should include capabilities to support data governance, data
quality, data policies and standards, data inventory, and data
security.
Cross-Cutting Oversight Work
The PRAC has eight ongoing cross-cutting oversight projects. One of
the projects is reviewing the spend rate data across five federal
pandemic response programs that provided a large majority of their
funds to states for expenditure, such as the Coronavirus Relief Fund.
On another project, with member OIGs, we are identifying programs where
multi-dipping has occurred, or there is a risk of it occurring.
Additionally, we are examining COVID-19 contracting data from Fiscal
Year 2020 where first-time federal contractors or limited competition
was used. Further, with the Audit Subcommittee, the PRAC developed an
acquisition and grant workforce data call to assess qualifications of
personnel and resources provided, as required by Section
15110(d)(1)(B)(vii-viii) of the CARES Act. The data call will go out to
the acquisition and grant workforce in early Fiscal Year 2022. With
MITRE, we are researching best practices and lessons learned from
pandemic response in state unemployment insurance (UI) benefits
programs. As I previously mentioned, the PRAC is reviewing the degree
of transparency provided in publicly available award-level data for
federal pandemic relief and assistance spending to provide Congress,
policymakers, and the public with specific examples of gaps in
reporting. We are also evaluating whether fraud controls that SBA
applied in phase III of the Paycheck Protection Program (PPP) (and
which we understand are being applied in the SBA's new Restaurant
Revitalization Fund program) would have likely detected known fraud
that occurred during last year's distribution of PPP funds. Finally, we
are collaborating with member OIGs to conduct impact case studies at
six different locations to identify the federal pandemic response funds
provided to those locations, the purpose of those funds, and whether
the federal program spending aligned with the intended goals and
objectives. Access to information about the total amount of funds
received, the purpose of those funds, and the progress made toward
achieving the program goals and objectives is not always centralized
and can be difficult for the public to track down or may not even be
available to the public.
In May, we also issued a report on COVID-19 in prisons and
detention facilities pulling together insights and trends across
multiple agencies and programs, presenting a comprehensive cross-agency
view with Department of Justice OIG, Department of Homeland Security
OIG, and Department of Interior OIG. This report is the first in a
series of cross-agency reviews.
Our staff is also working on deconfliction with OIGs and GAO, as
well as the tracking of all work in the community to identify cross-
agency trends and patterns, as required by our authorization in the
CARES Act 151109d)(1)(B)(i) through our strategic plan to ensure
coordinated, efficient, and effective comprehensive oversight. Some
examples of these efforts include the development of a systematic
coordination and deconfliction tracker that is regularly updated,
distribution of a monthly report that provides a list of all ongoing
pandemic response oversight projects to all pandemic OIGs and GAO, and
monthly meetings with GAO to share key activities and priorities.
PRAC Fraud Task Force
Earlier this year, the PRAC stood up a Fraud Task Force to serve as
a resource for the IG community by surging investigative resources into
those areas where the need is the greatest: pandemic loan fraud. As of
July, we have 28 agents from 8 OIGs who have been detailed to work on
Task Force cases. These agents have partnered with prosecutors at the
Department of Justice's Fraud Section and at United States Attorneys'
Offices across the country.
The idea behind our Task Force is to harness the expertise of the
oversight community and attack this problem with every tool we have:
criminal, civil, forfeitures of money and property, suspension and
debarments. Our PRAC Fraud Task Force works closely with other
initiatives to combat pandemic fraud such as the Department of Justice
COVID-19 Fraud Enforcement Task Force.
Additionally, the PRAC adopted a subpoena policy in April 2021.
This policy directly supports the Fraud Task Force and our member IGs,
and contributes to the IG community's efforts to stop the large-scale
fraud we are seeing in pandemic response programs.
Conclusion
The PRAC was created 16 months ago in the midst of a pandemic, yet
our extraordinarily talented staff, working with our member OIGs and
our oversight partners at GAO and at the state and local level, have
fulfilled the independent oversight responsibilities that the CARES Act
placed on us and that the public expects from us. While we know oversee
more than $5 trillion in federal spending, I am confident that the IG
community is up to the task of doing what we can to advance
transparency and accountability through our oversight efforts.
Thank you again for your strong support for our work, and we look
forward to working with the Congress and the Administration as the PRAC
and our IG partners continue to fulfill our crucial oversight mission.
This concludes my prepared statement, and I would be pleased to answer
any questions that you may have.
Mr. DeFazio. Thank you.
We would now move to Ms. Heather Krause, Director of
Physical Infrastructure, Government Accountability Office.
Ms. Krause. Chairman DeFazio, Ranking Member Graves, and
members of the committee, thank you for the opportunity to
discuss our work on the Federal Government's response to and
recovery from the COVID-19 pandemic.
While COVID-19 cases remain significantly lower than the
peak in January 2021, the recent increases in cases illustrate
the risk of known and emerging variants, and the associated
public health and economic challenges. The CARES Act and other
COVID relief laws included billions in funding to provide
disaster assistance to State, local, Tribal, and Territorial
governments, and financial relief to the transportation
industry.
FEMA, DOT, and the Department of the Treasury undertook
additional responsibilities and, in some cases, set up new
programs to distribute these funds. Our testimony today is
based on our work examining these efforts, and focuses on, one,
the status of select relief programs administered by FEMA, DOT,
and Treasury; and two, lessons learned, and actions to improve
the Federal response.
First, FEMA, DOT, and Treasury continue to play critical
roles in the ongoing Federal response to COVID-19. For example,
FEMA continues to assist individuals, as well as State, local,
Tribal, and Territorial governments in response to the
pandemic, and it has obligated over $79 billion from its
disaster relief fund. This fund, which is generally used to
provide assistance following a natural disaster, had never been
used to provide assistance for a nationwide public health
emergency on the scale required by the COVID-19 pandemic.
FEMA's efforts have included providing assistance to
individuals for lost wages, crisis counseling, and funerals,
and reimbursing States, Territories, and Tribes for pandemic-
related costs, such as for testing supplies, personal
protective equipment, National Guard activities, and vaccine
distribution.
DOT and Treasury continue to make available the
approximately $200 billion in financial assistance to the
transportation sector, including to air carriers, airports,
motorcoach and schoolbus operators, Amtrak, and transit
agencies. According to transportation industry representatives
we have spoken with, this assistance has been critical during a
period of sharp declines in travel demand, and uncertainty
about the pace and nature of the recovery, and enabled
recipients to avoid layoffs, maintain service, and ramp up
operations as demand for their service improves.
As the Federal Government's response and recovery efforts
continue, we identified key lessons and additional actions FEMA
and DOT can take to help improve these efforts and prepare for
future public health emergencies.
For example, we found that clearly established and defined
roles and responsibilities among Federal agencies is important
for an effective Federal response. The COVID-19 pandemic
highlighted once again the need for a National Aviation
Preparedness Plan to coordinate aviation and public health
sector efforts, and ensure safeguards are in place to limit the
spread of communicable disease threats from abroad, while
minimizing any unnecessary disruptions with travel and trade.
We recommended that DOT work with the Federal partners to
develop such a plan. However, DOT maintains that the
Departments of Health and Human Services and Homeland Security
should lead that effort. Without such a plan, the U.S. may not
be as prepared to minimize and quickly respond to future
communicable disease events.
In addition, Federal agencies' efforts to effectively
collect and analyze data are key to making critical decisions
on program operations. For example, FEMA faced challenges
collecting and analyzing data on requests for supplies, such as
personal protective equipment, made through the Federal
Government. We recommended that DOT develop an interim solution
to help States track the status of their supply requests, and
plan for supply needs, which it has not yet taken steps to
address. Until FEMA develops a solution, States, Tribes, and
Territories may continue to face challenges that hamper the
effectiveness of their COVID-19 response.
In closing, the size and scope of the Federal Government's
response efforts, from distributing funding to implementing new
programs, demands strong accountability and oversight. It is
critical for agencies to implement our recommendations to help
improve the Government's ongoing efforts, as well as prepare
for future public health emergencies. We will continue to
monitor the implementation of these programs and our
recommendations, as part of our ongoing oversight efforts.
This concludes our statement. We look forward to answering
your questions.
[The joint prepared statement of Ms. Krause and Mr. Currie
follows:]
Joint Prepared Statement of Heather Krause, Director, Physical
Infrastructure, U.S. Government Accountability Office and Chris P.
Currie, Director, Homeland Security and Justice, U.S. Government
Accountability Office
COVID-19 Pandemic: Actions Needed to Improve Federal Oversight of
Assistance to Individuals, Communities, and the Transportation Industry
highlights of gao-21-105202, a testimony before the committee on
transportation and infrastructure, house of representatives
Why GAO Did This Study
In response to the public health and economic crises created by the
COVID-19 pandemic, Congress provided billions of dollars across a range
of agencies to mitigate the effects of COVID-19. This included billions
to:
FEMA's Disaster Relief Fund to provide assistance to
individuals as well as state, local, tribal, and territorial
governments, and
DOT and Treasury to provide financial assistance to the
transportation sector.
This statement describes: (1) the federal response and selected
relief programs administered by FEMA, DOT, and Treasury and (2) lessons
learned based on GAO's reviews of selected COVID-19 relief programs,
including related recommendations and their implementation status. This
statement is based on GAO's body of work on the CARES Act issued from
June 2020 through July 2021.To update this information, GAO reviewed
agency documentation; and interviewed agency officials, industry
associations, and selected businesses that applied to these programs on
the latest implementation efforts.
What GAO Recommends
GAO has made numerous recommendations to help improve the
government's ongoing response and recovery efforts and prepare for
future public health emergencies, including the six identified in this
statement. While Treasury took action to develop a compliance
monitoring program, the other five recommendations to FEMA and DOT
still need to be implemented.
What GAO Found
The Federal Emergency Management Agency (FEMA), Department of
Transportation (DOT), and Department of the Treasury (Treasury), among
others, continue to provide financial assistance to mitigate the
effects of the COVID-19 pandemic.
FEMA reported obligating over $79 billion from its
Disaster Relief Fund to respond to COVID-19. Through several programs,
FEMA is providing help to individuals with funeral costs; reimbursing
communities for vaccine distribution; and funding federal agencies'
efforts to support communities, including National Guard deployments.
DOT and Treasury continue to make available the over $200
billion appropriated by COVID-19 relief laws for financial assistance
to the transportation sector, including to air carriers, airports and
airport tenants, Amtrak, and transit agencies. Through several
financial assistance programs, GAO's work has found DOT and Treasury
have provided critical support to the transportation sector during a
period of sharp declines in travel demand and uncertainty about the
pace and nature of the recovery. Depending on the program, financial
assistance has reportedly enabled recipients to avoid layoffs, maintain
service, and ramp up operations as demand for their services improves.
Based on GAO's prior work examining responses to public health and
fiscal emergencies, including the COVID-19 pandemic, GAO has (1)
identified key lessons learned that could improve the federal response
to emergencies, and (2) made several related recommendations, including
ones that highlight the importance of applying these lessons learned.
Lessons Learned
Coordinate, establish, and define roles and
responsibilities among those responding to the crisis and
address key capability gaps.
Provide clear, consistent communication.
Collect and analyze data to inform decision-making
and future preparedness.
Establish mechanisms for accountability and
transparency to help ensure program integrity and address fraud
risks.
Consider challenges posed by setting up new programs
quickly.
Source: GAO, GAO-21-105202
For example, DOT has not developed a national aviation preparedness
plan to coordinate, establish, and define roles and responsibilities
for communicable diseases across the federal government. GAO
recommended in 2015 that DOT work with federal partners to develop such
a plan, but it has not taken any action. Without such a plan, the U.S.
is less prepared to respond to future communicable disease events. In
addition, FEMA has faced challenges collecting and analyzing data on
requests for supplies, such as personal protective equipment, made
through the federal government. In 2020, GAO recommended that FEMA work
with relevant stakeholders to develop an interim solution to help
states track the status of their supply requests and plan for supply
needs. FEMA has not taken action on this recommendation, and until the
agency develops a solution, states, tribes, and territories will likely
continue to face challenges that hamper the effectiveness of their
COVID-19 response.
__________
Chairman DeFazio, Ranking Member Graves, and Members of the
Committee:
We are pleased to be here today to discuss our work assessing the
federal response to the Coronavirus Disease 2019 (COVID-19) pandemic,
particularly as it relates to supporting state, local, and tribal
governments and the transportation sector. As of mid-July 2021, the
U.S. had nearly 34 million reported cases of COVID-19 with more than
600,000 reported deaths. In addition, serious economic repercussions
from the pandemic continue to affect the transportation sector, as
travel has not fully returned to prepandemic levels across many modes.
In March 2020, Congress took action in response to this
unprecedented global crisis to protect the health and well-being of
Americans. Notably, Congress passed, and the President signed into law,
the CARES Act, which provided over $2 trillion in emergency assistance
and health care response for individuals, families, and businesses
affected by COVID-19.\1\ The CARES Act and other COVID-19 relief laws
appropriated $95 billion to the Federal Emergency Management Agency's
(FEMA) Disaster Relief Fund to provide disaster assistance to state,
local, tribal, and territorial governments, among other things.\2\
These laws also appropriated approximately $200 billion in financial
relief to programs supporting the transportation industry. The
Department of Transportation (DOT) and Department of the Treasury
(Treasury) undertook new responsibilities and, in some cases, set up
new programs to distribute these funds.
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\1\ Pub. L. No. 116-136, 134 Stat. 281 (2020). As of March 11,
2021, five other relief laws were also enacted in response to the
COVID-19 pandemic: the American Rescue Plan Act of 2021, Pub. L. No.
117-2, 135 Stat. 4; the Consolidated Appropriations Act, 2021, Pub. L.
No. 116-260, 134 Stat. 1182 (2020); Paycheck Protection Program and
Health Care Enhancement Act, Pub. L. No. 116-139, 134 Stat. 620 (2020);
Families First Coronavirus Response Act, Pub. L. No. 116-127, 134 Stat.
178 (2020); and the Coronavirus Preparedness and Response Supplemental
Appropriations Act, 2020, Pub. L. No. 116-123, 134 Stat. 146. We refer
to these six laws, each of which was enacted as of March 11, 2021, and
provides appropriations for the COVID-19 response, as ``COVID-19 relief
laws,'' and the funding appropriated by these laws as ``COVID-19 relief
funds.''
\2\ In March 2020, the CARES Act was enacted, appropriating $45
billion for the Disaster Relief Fund. Pub. L. No. 116-136, div. B, tit.
VI, 134 Stat. at 543. In March 2021, the American Rescue Plan Act of
2021 appropriated $50 billion to the Disaster Relief Fund. Pub. L. No.
117-2, Sec. 4005, 135 Stat. 4, 79.
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Recognizing the need for robust monitoring and oversight of new
authorities and funding, the CARES Act includes a provision for us to
report regularly on the federal response to the pandemic.\3\ In the
course of these reviews, we have identified key lessons learned that
support an effective federal response to crisis.
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\3\ Pub. L. No. 116-136, Sec. 19010, 134 Stat. at 579-81.
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Our statement today is based on our work examining federal actions
in response to the public health emergency and economic effects on the
transportation sector caused by COVID-19. Specifically, this statement
describes (1) the federal response and selected relief programs
administered by FEMA, DOT, and Treasury and (2) lessons learned based
on our reviews of these and other COVID-19 relief programs, including
related GAO recommendations and their implementation status.
In preparing this statement, we relied primarily on our body of
work issued from June 2020 through July 2021 that reviewed, among other
things, FEMA's efforts to coordinate the federal government's response
to the COVID-19 public health emergency and provide assistance to
states, localities, and tribes in obtaining supplies to prepare for and
cope with COVID-19. This body of work also reviewed DOT and Treasury's
efforts to support air carriers, aviation contractors and repair
station operators, ticket agents, airports and airport tenants, transit
agencies, and Amtrak, among others.\4\
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\4\ See COVID-19: Opportunities to Improve Federal Response and
Recovery Efforts, GAO-20-625 (Washington, D.C.: June 25, 2020); COVID-
19: Brief Update on Initial Federal Response to the Pandemic, GAO-20-
708 (Washington, D.C.: Aug. 31, 2020); COVID-19: Federal Efforts Could
Be Strengthened by Timely and Concerted Actions, GAO-20-701
(Washington, D.C.: Sept. 21, 2020); COVID-19: Urgent Actions Needed to
Better Ensure an Effective Federal Response, GAO-21-191 (Washington,
D.C.: Nov. 30, 2020); COVID-19: Critical Vaccine Distribution, Supply
Chain, Program Integrity, and Other Challenges Require Focused Federal
Attention, GAO-21-265 (Washington, D.C.: Jan. 28, 2021); COVID-19:
Sustained Federal Action is Crucial as Pandemic Enters Its Second Year,
GAO-21-387 (Washington, D.C.: Mar. 31, 2021); and COVID-19: Continued
Attention Needed to Enhance Federal Preparedness, Response, Service
Delivery, and Program Integrity, GAO-21-551 (Washington, D.C.: July 19,
2021).
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For those reports, we reviewed FEMA, DOT, and Treasury
documentation, analyzed program data, and interviewed agency officials.
We also interviewed industry associations representing businesses
eligible to apply to these federal assistance programs and selected
applicants. More detailed information on the scope and methodology can
be found in our June 2020, August 2020, September 2020, November 2020,
January 2021, March 2021, and July 2021 reports. For this statement, we
also included information from interviews with agency officials,
industry associations, and selected businesses that applied to these
programs on the latest implementation efforts as part of our ongoing
work on the COVID-19 relief programs. In addition, we obtained updated
data on the status of financial assistance provided by FEMA, DOT, and
Treasury.
We conducted the work on which this statement is based in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
FEMA, DOT, and Treasury Continue to Play Critical Roles Coordinating
Federal Response to COVID-19 and Providing Financial Assistance to
Hard-Hit Entities
FEMA continues to play a key role in the ongoing COVID-19 pandemic
response effort, and its workforce has taken on additional
responsibilities, including supporting COVID-19 vaccine distribution.
FEMA's Disaster Relief Fund is a major source of federal disaster
recovery assistance for state, local, and territorial governments when
a disaster occurs. As we reported in July 2021, this fund--generally
used to provide assistance following a natural disaster--had never been
used to provide assistance for a nationwide public health emergency on
the scale required by the COVID-19 pandemic.\5\ However, as of July 20,
2021, according to agency officials, FEMA had obligated over $79
billion from the Disaster Relief Fund for the following three types of
disaster assistance to respond to COVID-19:
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\5\ GAO-21-551.
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Individual Assistance. These grants provide disaster
survivors assistance to cover necessary expenses and serious needs--
such as housing, counseling, or funeral costs--which cannot be met
through insurance or low-interest loans. For the COVID-19 response, as
we reported in March 2021 and July 2021, FEMA has used this program to
provide lost wages assistance, crisis counseling, and funeral
assistance. For example, FEMA provided funeral assistance in all 50
states, D.C., Puerto Rico, Guam, Commonwealth of the Northern Mariana
Islands, American Samoa, and the U.S. Virgin Islands. According to FEMA
officials, the agency had obligated about $40 billion from the Disaster
Relief Fund for Individual Assistance grants as of July 20, 2021. This
includes $38.8 billion for Lost Wages Assistance and $1 billion for
Funeral Assistance.\6\
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\6\ Pursuant to an August 2020 presidential memorandum, upon
receiving a FEMA grant, states and territories may provide eligible
claimants $300 or $400 per week--which includes a $300 federal
contribution--in addition to their Unemployment Insurance benefits. The
presidential memorandum directed that the program would end when $44
billion had been obligated; the balance of the Disaster Relief Fund
reached $25 billion; on December 27, 2020; or upon the enactment of
legislation providing supplemental federal unemployment compensation,
whichever comes first. The White House, Memorandum on Authorizing the
Other Needs Assistance Program for Major Disaster Declarations Related
to Coronavirus Disease 2019 (Aug. 8, 2020).
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Public Assistance. These grants provide assistance to
state, local, tribal, and territorial governments, and certain types of
private nonprofit organizations so that communities can quickly respond
to and recover from major disasters or emergencies. On February 2,
2021, the President issued a memorandum that directed FEMA to fully
reimburse states, territories, and tribes for all work eligible for
emergency protective measures, which includes costs associated with
vaccine distribution and the purchase of testing supplies and personnel
protective equipment.\7\ FEMA officials stated that as of July 20,
2021, FEMA had received 25,798 project applications for Public
Assistance and awarded $29.7 billion. If all of the remaining
approximately 16,000 applicants submit projects, FEMA anticipates it
will receive a minimum of approximately 32,000 additional public
assistance projects for an estimated additional $27.8 billion as of the
end of fiscal year 2021.
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\7\ For all 59 major disaster declarations for COVID-19, FEMA has
authorized Public Assistance grants for emergency protective measures
only. This may include eligible medical care, purchase and distribution
of food, non-congregate medical sheltering, operation of Emergency
Operations Centers, and the purchase and distribution of personal
protective equipment (PPE). White House, Memorandum on Maximizing
Assistance from the Federal Emergency Management Agency, February 2,
2021. For natural disasters, Public Assistance grants can be used for
emergency cleanup and for permanent reconstruction projects to, for
example, rebuild damaged public infrastructure. White House, Memorandum
on Maximizing Assistance from the Federal Emergency Management Agency,
February 2, 2021.
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Mission assignments. FEMA also issues mission
assignments--work orders directing other federal agencies to provide
direct assistance to state, local, tribal, and territorial
governments--to support disaster response and recovery. For the COVID-
19 response, for example, FEMA issued a mission assignment to the
Department of Defense to fund National Guard deployments to assist in
recovery efforts. As of July 21, 2021, according to agency officials,
FEMA had obligated about $7.5 billion from the Disaster Relief Fund for
mission assignments.
FEMA's workforce has also been tasked with taking on additional
responsibilities to establish mass vaccination sites and provide
funeral assistance to families impacted by the COVID-19 pandemic.
Mass vaccination sites. In January 2021, the President
tasked FEMA with establishing mass vaccination sites as part of a
national effort to speed the pace of COVID-19 vaccination campaigns and
to ensure equitable access to vaccinations. In response, FEMA
established Pilot Community Vaccination Centers (CVC). As of June 20,
2021, FEMA reported that the Pilot CVCs had given more than 5.6 million
doses of vaccines across 39 locations, including sites that have
extended their participation in the pilot program.\8\ As of June 20,
2021, according to agency officials, FEMA stood down its pilot CVCs
while continuing to support state-run vaccination efforts.
Specifically, FEMA is coordinating with other federal agencies to
support the distribution of COVID-19 vaccines by deploying additional
personnel to vaccination sites and providing funding to states, tribes,
and territories for vaccine distribution. As of July 20, 2021,
according to agency officials, FEMA had obligated almost $5.7 billion
through the Public Assistance program for vaccine distribution.
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\8\ The initial pilot period for each location was eight weeks;
however, jurisdictions were able to request an extension of an
additional four weeks, during which period of time the site would
receive federal staffing and support, but not an additional vaccine
allocation.
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Funeral assistance. The COVID-19 Funeral Assistance
Program provides funeral assistance for COVID-19 related deaths that
occurred after January 20, 2020. In December 2020, the Consolidated
Appropriations Act, 2021, appropriated $2 billion to the Disaster
Relief Fund for eligible funeral expenses for individuals or households
with COVID-19-related funeral expenses.\9\ As we reported in July 2021,
the scope of FEMA's funeral assistance program for COVID-19 related
deaths is unprecedented.\10\ On April 12, 2021, FEMA began accepting
and processing applications for Funeral Assistance via a dedicated call
center number. According to agency officials, as of July 20, 2021, the
call center had received and is processing 241,664 applications, and
FEMA had approved 109,319 applications and awarded approximately $723.7
million in funeral assistance.
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\9\ Pub. L. No. 116-260, div. M, tit. II, 134 Stat. at 1910.
\10\ GAO-21-551.
COVID-19 relief laws appropriated over $95 billion for DOT to
provide financial assistance to airports and airport tenants, Amtrak,
aviation manufacturers and repair station operators, and transit
agencies.\11\ Based on the most recent data we have, DOT has expended
close to $27 billion with the level of expenditure varying by
program.\12\ DOT's Federal Aviation Administration (FAA), Federal
Railroad Administration (FRA), and Federal Transit Administration (FTA)
continue to provide financial assistance through these programs, as
described below.
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\11\ In addition to the over $95 billion appropriated for COVID-19
relief, the Airport and Airways Trust Fund received a $14 billion
appropriation from the general fund. Continuing Appropriations Act,
2021 and Other Extensions Act, Pub. L. No. 116-159, Sec. 1205, 134
Stat. 709, 728.
\12\ Some of these programs received funds in March 2021 and are
still being rolled-out.
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Airport grants. Administered by FAA, these grants provide
funds for eligible airports to prevent, prepare for, and respond to the
effects of the COVID-19 pandemic. The allocation of funds and certain
allowable uses of funds differ by COVID-19 relief law.\13\ By accepting
these funds, certain recipients must meet workforce retention
requirements.\14\ Airport association representatives told us that the
federal funding provided has been critical. According to FAA officials,
federal aid has allowed airports to maintain operations, pay their
employees, and meet their debt obligations while airports experienced
historic decreases in revenue and passenger demand for air travel due
to the COVID-19 pandemic. As of May 14, 2021, according to FAA data
sources, the agency had processed a total of 5,397 grant applications
for the CARES Act and the Consolidated Appropriations Act, 2021 funds.
Specifically, officials stated that in February 2021, FAA began
allowing airports to amend their initial CARES Act airport grant
agreements to use grant funds for near-term airport development, such
as construction projects for the airfield, terminal, or parking.
Airports were required to submit additional information about proposed
construction projects. As we reported in July 2021, FAA also continues
to process Consolidated Appropriations Act, 2021 grant
applications.\15\ FAA has also begun processing grant applications for
the American Rescue Plan Act of 2021. According to FAA officials, as of
July 2021, FAA had expended approximately $6.9 billion of the $20
billion appropriated to provide grants to airports, including grants
for the benefit of eligible airport concessions.\16\
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\13\ Under the CARES Act, funds were available for any purpose for
which airport revenues may lawfully be used. Under the Consolidated
Appropriations Act, 2021 and the American Rescue Plan Act of 2021 funds
were generally available for costs related to operations, personnel,
cleaning, sanitization, janitorial services, combating the spread of
pathogens at the airport, and debt service payments. Additionally,
under the Consolidated Appropriations Act, 2021 and the American Rescue
Plan Act of 2021, certain amounts were made available to provide relief
from rent and minimum annual guarantees to airport concessions.
\14\ Specifically, airport sponsors of small, medium, and large-hub
airports accepting CARES Act grant funds were required to continue to
employ, through December 31, 2020, at least 90 percent of the number of
individuals employed as of March 27, 2020. The Consolidated
Appropriations Act, 2021 extended this requirement through February 15,
2021, and the American Rescue Plan Act of 2021 extended this
requirement through September 30, 2021. Nonhub and nonprimary airports,
as defined under 49 U.S.C. Sec. 47102, were excluded from the
workforce retention requirement under each of the three COVID-19 relief
laws. Additionally, DOT could waive the workforce retention requirement
if DOT determined that the airport was experiencing economic hardship
as a direct result of the requirement, or the requirement would reduce
aviation safety or security.
\15\ GAO-21-551.
\16\ FAA grants to airports are made on a reimbursable basis,
meaning that airports submit requests for costs already incurred.
According to FAA officials, many airports have already incurred
reimbursable costs for their grant amounts, even though FAA's
expenditures appear low.
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Amtrak grants. Amtrak, which receives federal funding
through grants from FRA, is to use these funds to prevent, prepare for,
and respond to COVID-19 and has used these funds to address shortfalls
in ticket revenue, pay employee salaries, and cover other operating,
debt, and capital expenses. As we reported in March 2021, COVID-19
relief laws directed that funding is to be used to support Amtrak's
state and commuter partners, avoid additional employee furloughs, and
restore daily long-distance service.\17\ As of May 31, 2021, according
to agency officials, Amtrak had expended $1.95 billion of the $3.7
billion appropriated to provide financial assistance.
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\17\ GAO-21-387.
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Aviation Manufacturing Jobs Protection program. DOT, in
setting up this new program, is to use these funds to provide financial
assistance payments to businesses engaged in aviation manufacturing
activities and services, or maintenance, repair, and overhaul
activities and services.\18\ These funds are to be used for wages,
salaries, and benefits. Recipients must agree to refrain from
conducting involuntary layoffs or furloughs or reducing pay rates and
benefits for the eligible employee group for the duration of the
agreement. Based on DOT's estimated timeframes, DOT will start
allocating funds out of the $3 billion appropriated by the end of
September 2021.
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\18\ To be eligible, a business must show it involuntarily
furloughed or laid off at least 10 percent of its workforce in 2020 as
compared to 2019 or has experienced at least a 15 percent decline in
2020 revenues as compared to 2019. These businesses also may not have
received federal financial assistance under specified COVID relief
programs, such as the Paycheck Protection Program.
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Transit grants. Transit agencies are to use these funds
to prevent, prepare for, and respond to COVID-19. These funds were
initially available to transit agencies for any expenses incurred
related to COVID-19 on or after January 20, 2020, although now these
funds must be directed, to the maximum extent possible, to payroll and
operations expenses.\19\ Officials from 22 agencies we interviewed said
they had used CARES Act grants for operating expenses such as covering
employee salaries, providing PPE to employees, and implementing
enhanced cleaning and sanitation procedures on their vehicles. One
transit agency we spoke with said the federal funding they received
allowed the agency to meet its local match responsibilities, which had
been disrupted during the pandemic. Furthermore, transit association
representatives told us that federal funding used to cover payroll, and
for cleaning and disinfecting equipment and stations, has been critical
to instilling the confidence of transportation workers and passengers
in transit systems. As of May 1, 2021, according to officials, FTA had
awarded $26.2 billion of the $69 billion appropriated to provide grants
to transit agencies and transit agencies had expended $18.4 billion.
FTA is to allocate these funds primarily through existing formula grant
programs with some limitations.
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\19\ As of December 27, 2020, recipients were required to direct
funds, to the maximum extent possible, to payroll and operations of
public transit (including payroll and expenses of private providers of
public transportation), unless the recipient certifies to the Secretary
of Transportation that the recipient has not furloughed any employees.
Consolidated Appropriations Act, 2021, div. M, tit. IV, 134 Stat. 1182,
1947.
COVID-19 relief laws appropriated over $110 billion for Treasury to
provide financial assistance through programs directed at air carriers,
aviation contractors, repair station operators, ticket agents, motor
coach operators, school bus operators, and the passenger and pilot
vessel industries. Based on the most recent data we have, Treasury has
made available over $80 billion in financial assistance as loans and
payments, as described below. With continued uncertainty over when and
how travel demand will return to pre-pandemic levels, industry
associations representing aviation and other businesses that applied to
these programs and selected companies that applied for funding from
these programs said that although there were challenges, these programs
provided critical financial assistance that, for example, allowed
companies to remain operational, maintain their workforce levels, and
prevent bankruptcies.
Aviation Worker Payroll Support Programs (PSP1, PSP2,
PSP3). These funds are to be used by air carriers and aviation
contractors for employee wages, salaries, and benefits.\20\ As of July
2021, based on our analysis of Treasury data, 613 PSP1 agreements were
signed, 479 PSP2 agreements were signed, and 453 PSP3 agreements were
signed.\21\ In total, Treasury has signed agreements to provide $59
billion of the $63 billion appropriated and continues to sign PSP3
agreements. Industry associations and selected companies we interviewed
reported that these funds provided critical support and helped keep
employees on payroll. By taking these funds, businesses agreed to
refrain from conducting involuntary terminations or furloughs for
specified periods, among other requirements.\22\
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\20\ Passenger air carriers were eligible for the initial payroll
support program (PSP1) and the two extensions of the program (PSP2 and
PSP3). Cargo air carriers were only eligible for PSP1.
\21\ Many businesses received funding from multiple iterations of
the program, and only PSP2 recipients are eligible for PSP3 payments.
\22\ Treasury developed taxpayer protections for certain payments
made under PSP1, PSP2, and PSP3. Passenger air carriers receiving over
$100 million of payroll support are required to provide notes equal to
30 percent of the payroll support provided over $100 million with a 10-
year term. Contractors receiving over $37.5 million of payroll support
must provide notes equal to 44 percent of the payroll support provided
over $37.5 million with a 10-year term. In addition, certain recipients
issued warrants to Treasury providing the right to purchase shares of
common stock.
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Loans for Aviation and National Security Businesses.
Treasury provided loans to aviation and national security businesses,
which were intended to provide liquidity to these sectors. As we
reported in December 2020, Treasury executed 35 loans valued at $21.9
billion from the $46 billion in funds available through this
program.\23\ As we reported in July 2021, this loan program provided
critical assistance to large passenger air carriers, but fewer benefits
to smaller businesses.\24\ As of July 1, 2021, according to a Treasury
report, 7 loans with a total anticipated value of $18.3 billion have
been fully repaid. Of the $3.6 billion anticipated value of outstanding
loans, 36 percent ($1.3 billion) was disbursed by Treasury to loan
recipients.
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\23\ GAO, Financial Assistance: Lessons Learned from CARES Act Loan
Program for Aviation and Other Eligible Businesses, GAO-21-198,
(Washington D.C.: Dec.10, 2020).Under the CARES Act, Treasury may not
issue loans or loan guarantees to recipients unless the recipient is a
publicly traded company and Treasury receives a warrant or equity
instrument in the company, or in the case of a private company, if
Treasury receives a warrant, equity instrument, or senior debt
instrument in the company.
\24\ GAO-21-551.
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Coronavirus Economic Relief for Transportation Services
(CERTS) program. Treasury will provide these funds to businesses that
operate motor coaches, school buses, and passenger or pilot vessels--to
be used by recipients primarily to cover payroll. Treasury's
application portal was open to applicants for four weeks, opening in
late June and closing on July 19, 2021. After the application period
closed, Treasury reported it would use information from the complete
applicant pool to determine the amount of each grant award. As of July
19, 2021, based on Treasury's estimated timeline, the agency has not
started awarding funds out of the $2 billion appropriated. Among other
eligibility requirements, businesses must have experienced revenue
losses of 25 percent or more from 2019 to 2020 as a direct or indirect
result of COVID-19 pandemic. Additionally, Treasury may adjust the size
of individual grants based on other sources of federal assistance
provided to the applicant.\25\ Finally, these recipients must agree to
certain conditions, including refraining from conducting involuntary
furloughs or reducing pay rates or benefits for nonexecutive employees.
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\25\ Under the Consolidated Appropriations Act, 2021, Treasury may
reduce the amount of assistance it provides to these businesses to
ensure that the total federal assistance from all relevant relief
programs does not exceed a business's 2019 revenues. In determining the
amount of assistance to be provided, Treasury must consider, among
other requirements, other sources of federal assistance provided to the
provider of transportation services.
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Lessons Learned from Selected Federal Response Efforts to the COVID-19
Pandemic
Based on our prior body of work examining responses to public
health and fiscal emergencies, including the COVID-19 pandemic, we have
identified key lessons learned that could improve the federal response
to emergencies.\26\ We have also made numerous recommendations related
to improving the federal response, which agencies have taken some steps
to address. Below we highlight selected findings and six
recommendations from our prior work on FEMA, DOT, and Treasury that
demonstrate the importance of applying these lessons learned.
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\26\ GAO-21-387.
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Coordinate, establish, and define roles and responsibilities among
those responding to the crisis and address key capability gaps. As part
of our review of the government-wide COVID-19 response over the last
year and a half, we have found that without clearly established and
defined roles and responsibilities among federal agencies, the federal
response is not as effective.\27\ With multiple agencies working to
address and mitigate the public health and economic effects of the
COVID-19 crisis across the U.S., coordination is essential. For
example:
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\27\ GAO-21-387.
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The COVID-19 pandemic has highlighted--once again--the
need for a national aviation-preparedness plan for communicable
diseases that clearly establishes roles and responsibilities. In 2015,
we found that such a plan could establish a mechanism of coordination
between aviation and public health sectors to more effectively prevent
and control a communicable disease threat while minimizing unnecessary
disruptions to the national aviation system. We recommended that DOT
work with federal partners to develop such a plan in light of the
effect of communicable diseases, such as Ebola, on air travel and
public health; however, DOT maintains that the Departments of Health
and Human Services and Homeland Security should lead the effort.\28\
With no action taken, in June 2020, we urged Congress to take
legislative action to require the Secretary of Transportation to work
with relevant agencies and stakeholders, such as the Departments of
Health and Human Services and Homeland Security, and members of the
aviation and public health sectors, to develop a national aviation-
preparedness plan.\29\ As we reported in July 2021, Congress has
considered but not passed legislation to require a national aviation
preparedness plan.\30\ Without such a plan, the U.S. will be less
prepared to minimize and quickly respond to future communicable disease
events.
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\28\ GAO, Air Travel and Communicable Diseases: Comprehensive
Federal Plan Needed for U.S. Aviation System's Preparedness, GAO-16-
127, (Washington D.C.: Dec.16, 2015).
\29\ GAO-20-625.
\30\ GAO-21-551.
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Our prior work on National Preparedness found that FEMA
uses several scenarios--including a pandemic influenza similar to
COVID-19--to allow states, territories and other jurisdictions to
assess their own emergency response and recovery capabilities (e.g.,
how quickly they can restore electricity, or how much emergency housing
they can provide).\31\ While this information has provided useful
information about capability gaps at the state and local level, FEMA
has not used the information to determine the nation's capability gaps
across all levels of government. Moreover, FEMA has yet to determine
what steps are needed to address the capability gaps once they are
identified, including capability gaps that have been known since 2012.
If FEMA had determined what steps are needed to address capability
gaps, the nation may have been more prepared to respond to COVID-19. In
May 2020, we reported that FEMA had yet to: (1) determine what steps
are needed to address the nation's capability gaps across all levels of
government; and (2) informed key stakeholders, such as Congress, about
what resources will be needed across all levels of government.\32\ To
address this, we recommended that FEMA should, following the completion
of the 2021 National Preparedness Report, determine what steps are
needed to address the nation's emergency management capability gaps
across all levels of government and inform key stakeholders, such as
the Office of Management and Budget and Congress, about what level of
resources will be necessary to address the known gaps.
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\31\ See for example, GAO, National Preparedness: Additional
Actions Needed to Address Gaps in the Nation's Emergency Management
Capabilities, GAO-20-297 (Washington, D.C.: May 4, 2020).
\32\ GAO-20-297.
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In June 2021, FEMA officials stated that they are planning to
complete the National Preparedness Report by December 31, 2021. In
addition, FEMA is planning to complete the National Stakeholder
Preparedness Review and National Preparedness Investment Strategy to
identify capability gaps and establish priorities that align with those
gaps. FEMA anticipates it will identify resources and capabilities
needed to address the national gaps by December 31, 2022.
Provide clear, consistent communication. In a crisis, federal
agencies should provide clear and consistent communication,
specifically to those they are trying to assist.\33\ We previously
reported that Treasury and FEMA did not always communicate effectively
with applicants and recipients of programs they administered or
managed, which left these entities unable to fully benefit from the
programs:
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\33\ For example, see GAO-21-387 and GAO-20-701.
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In prior reviews, we found that Treasury did not
communicate in a clear, consistent way with applicants and recipients--
particularly smaller businesses--of the Payroll Support Programs and
Loans for Aviation and National Security Businesses program.\34\ For
example, we reported in December 2020 that when designing and
implementing the loan program, Treasury viewed itself as a lender of
last resort but did not state this view in published documents.\35\
This omission led to some applicants being surprised by parts of the
process, such as when Treasury encouraged over a third of all
applicants to apply to another loan program before continuing to pursue
a loan from Treasury. Since Treasury's authority to make new loans
under this program was set to expire in December 2020, we highlighted
lessons for Congress and Treasury for designing and implementing
program like this type in the future, including setting and
communicating clear program goals and communicating clear timelines for
actions. As Treasury implements new federal assistance programs, such
as CERTS, it has opportunities to engage in clearer, more consistent
communication with eligible businesses and their representatives.
According to Treasury officials, they are working to ensure CERTS
program eligibility is easily understood, and they have reached out to
industry associations representing potential applicants to share
information about the programs and to inform program design.
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\34\ GAO-21-551; GAO-21-198; GAO-20-701.
\35\ GAO-21-198.
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FEMA did not always communicate effectively with Public
Assistance applicants, specifically tribal governments. As we reported
in March 2021, several tribal governments reported challenges related
to completing administrative requirements-such as activating an
emergency operations plan and submitting a tribal Public Assistance
Administrative Plan--to request and receive Public Assistance program
funding directly from FEMA.\36\ Although FEMA's Tribal Pilot Guidance
states that tribes may request technical assistance, tribal
representatives we interviewed reported that many tribal governments
were given little or no technical assistance when they requested
support. Without the availability of consistent and timely technical
assistance across regions, some tribal entities may be unable to
request and receive Public Assistance directly from FEMA to help
respond to the COVID-19 pandemic. Further, we reported that FEMA did
not consult with tribal entities in advance of issuing its policy on
eligible Public Assistance costs early in the COVID-19 pandemic. In
March 2021, we recommended that the FEMA Administrator provide timely
and consistent technical assistance to support tribal governments'
efforts to request and receive Public Assistance directly from FEMA,
including providing additional personnel, if necessary, to ensure that
tribal nations are able to effectively respond to COVID-19.\37\ The
Department of Homeland Security (DHS) concurred with our
recommendation. DHS stated that FEMA's Recovery Directorate will
publish a memorandum that will contain direction to FEMA regions
regarding the assignment of Public Assistance program delivery managers
to promote equitable delivery of Public Assistance to tribal
governments. As we reported in July 2021, FEMA stated that it plans to
send the draft memorandum to tribal governments in July 2021.\38\
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\36\ GAO-21-387.
\37\ GAO-21-387.
\38\ GAO-21-551.
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We also recommended that the FEMA Administrator adhere to the
agency's protocols listed in its updated 2019 Tribal Consultation
Policy by obtaining tribal input via the four phases of the tribal
consultation process when developing new policies and procedures
related to COVID-19 assistance. DHS concurred with our recommendation.
As we reported in July 2021, DHS stated that FEMA's National Tribal
Affairs Adviser, based in the Office of External Affairs, will
coordinate with other FEMA offices and directorates, as appropriate, to
review the agency's adherence to protocols listed in the Tribal
Consultation policy.\39\
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\39\ GAO-21-551.
Collect and analyze data to inform decision-making and future
preparedness. Without data, federal agencies face difficulties making
critical decisions to inform efforts and program operations. In our
review of FEMA's COVID-19 activities, we found it faced challenges at
the national and regional levels collecting the data needed to make
decisions and allow for the prioritization of resources.\40\ In
September 2020, we reported that these challenges included tracking
supply requests, including those for personal protective equipment,
made through the federal government and budgeting for ongoing needs. As
a result, we recommended that the FEMA Administrator work with relevant
federal, state, territorial, and tribal stakeholders to devise interim
solutions, such as systems and guidance and dissemination of best
practices, to help states enhance their ability to track the status of
supply requests and plan for supply needs for the remainder of the
COVID-19 pandemic response.
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\40\ GAO-21-387; GAO-20-701.
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As we reported in July 2021, FEMA has not taken action to devise
interim solutions that would systematically help states, tribes, and
territories effectively track, manage, and plan for supplies to carry
out the COVID-19 pandemic response in the absence of state-level end-
to-end logistics capabilities that would track critical supplies
required for a response of this scale.\41\ Without action across the
board to help states ensure they have the support they need to track,
manage, and plan for supplies, states, tribes, and territories on the
front lines of the whole-of-nation COVID-19 response will likely
continue to face challenges that hamper their effectiveness.
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\41\ GAO-21-551. DHS disagreed with this recommendation, noting,
among other things, work that FEMA had already done to manage the
medical supply chain and increase supply availability. Although FEMA
disagreed with our recommendation, it began taking some action in March
2021. We note that we made this recommendation to both DHS and the
Department of Health and Human Services (HHS) with the intent that they
would work together under the Unified Coordination Group to address
challenges reported by state officials with both public health and
emergency management responsibilities. Although both DHS and HHS have
reported separate actions, taken as part of other efforts within each
separate purview, neither has articulated how they worked with the
other nor how they assessed whether the actions changed the experiences
of state officials who reported issues during our prior work.
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Establish mechanisms for accountability and transparency to help
ensure program integrity and address fraud risks. With over $200
billion in financial assistance appropriated to support the
transportation sector, ensuring the funds are spent as intended is
critical to reduce fraud and ensure the programs support recovery. Our
work on COVID relief to the transportation sector underscores the
importance of establishing, documenting, and implementing processes and
procedures to ensure accountability and guard against fraud.\42\
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\42\ GAO-21-191.
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We found that DOT and Treasury initially experienced challenges
related to the oversight of COVID relief monies and programs, although
early difficulties are diminishing.\43\ These challenges underscore the
tension between getting the funds out as quickly as possible and
setting up robust, risk-based oversight and monitoring processes:
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\43\ GAO-21-551; GAO-21-191; GAO-20-701.
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FAA reported difficulties administering the COVID relief
programs while simultaneously setting up monitoring and compliance
systems to oversee funds. More specifically, FAA officials said it was
challenging and resource-intensive to establish and oversee a grant
program with more eligible uses than allowed under existing airport
grant programs. FAA has since taken steps to manage this increased
workload, including establishing a dedicated team--two full-time
employees and three annuitants with prior airport grant management
experience--to review and process airport payment requests.
Additionally, in late 2020, FAA hired a contractor to develop a
monitoring dashboard and develop auditing policies and procedures. In
July 2021, we reported that FAA continues to track recipient compliance
with statutory workforce requirements. We continue to review FAA's
oversight efforts.
Treasury officials also told us that developing a
compliance monitoring system for hundreds of PSP recipients from
scratch was time-consuming and initially involved trial-and-error. In
November 2020, we reported while PSP recipients had begun submitting
required compliance reports, Treasury had not yet finalized a
monitoring system to identify and respond to the risk of noncompliance
with PSP agreement terms, potentially hindering its ability to detect
program misuse in a timely manner.\44\ We recommended that Treasury
finish developing and implement a compliance monitoring plan that
identified and responds to risks of noncompliance. In April 2021, we
confirmed that Treasury had developed, documented, and implemented a
risk-based approach to monitor PSP recipients' compliance with the
terms of their financial assistance. We continue to review Treasury's
compliance monitoring of PSP recipients.
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\44\ GAO-21-191.
In our reviews, we have found that DOT and Treasury are tracking
recipient compliance with statutory requirements. For example, the
Payroll Support Programs (PSP1, PSP2, and PSP3) agreements require
recipients to 1) limit executive compensation and 2) not engage in
involuntary furloughs or terminations for specific periods of time.
Concerns continue to be raised by other oversight bodies and members of
Congress about certain actions taken by recipients that may not be
serving the interests of taxpayers and aviation workers.\45\ With
regard to federal assistance to the transportation sector, specific
concerns have been raised, including the following:
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\45\ Some have suggested that these concerns could be addressed by
federal agencies imposing additional requirements on recipients of
federal assistance.
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Businesses ``double-dipping'' or obtaining funds from
more than one federal financial assistance program, and
Businesses furloughing employees prior to signing PSP
agreements with workforce retention requirements and outsourcing jobs
after workforce retention requirements for federal financial assistance
have expired.
However, the laws that authorized these programs did not prohibit
businesses from accessing other federal financial assistance, and the
requirement for businesses to retain employees expires for PSP3
recipients in either September of this year or the date on which
assistance provided is exhausted, whichever is later.
New programs authorized in December 2020 and March 2021, CERTS and
Aviation Manufacturing Jobs Protection program, do take into account
other COVID-19 relief funding provided to eligible recipients.
According to DOT and Treasury officials, these and other relevant
requirements regarding eligibility will be clearly laid out and built
into the application and review process.
Consider challenges posed by setting up new programs quickly. In a
crisis, federal agencies may be called upon to set up new programs to
address urgent needs. In our reviews, DOT and Treasury acknowledged
challenges in standing up new COVID relief programs and getting funds
out quickly through these programs. For example:
DOT was tasked with setting up the Aviation Manufacturing
Jobs Protection program under the American Rescue Plan Act of 2021 in
March 2021. Setting up this program included establishing program rules
and guidelines, creating a public website, conducting public outreach,
selecting an application portal, and moving personnel within the
department to lead this effort and provide assistance. DOT officials
said setting up a new program for a sector that has not historically
received federal financial assistance, requires a balance between
distributing the funds quickly while ensuring necessary oversight is in
place.
With regard to PSP, the loan program, and CERTS, Treasury
also noted the challenges of setting up emergency financial programs
with intense industry expectations for the quick distribution of
funds.\46\ Also, Treasury officials noted the challenge of providing
assistance to industry sectors for which the agency had no prior
experience and that included a wide-range of applicants, from those
with only a few employees to those with tens of thousands.
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\46\ The CARES Act required Treasury to publish procedures for PSP1
not later than 5 days after the date of enactment of the act, and for
the loan program within 10 days after enactment of the act.
Additionally, the CARES Act directed Treasury to make initial payments
to air carriers and contractors that submitted requests for financial
assistance approved by the Secretary no later than 10 days after
enactment of the act.
In our reviews, we found that distributing funds through existing
programs was relatively straightforward.\47\ Unlike the Aviation
Manufacturing Jobs Protection program and the programs implemented by
Treasury; FRA and FTA allocated funds primarily through existing
programs, as directed by law. For example, FTA was able to distribute
grants to transit agencies quickly using its existing program formulas.
In addition, many of the transit grant recipients were well-known by
FTA.
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\47\ GAO-21-387; GAO-21-191.
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As part of our ongoing work, we will continue to assess how FEMA,
DOT, and Treasury are implementing the federal response as the country
recovers from the public health and economic crises brought on by
COVID-19 pandemic. This work includes examining how DOT and FAA are
supporting research and development related to protecting the health of
air travelers during pandemics while also maintaining aviation safety,
security, and efficiency. In addition, we will continue to monitor
issues related to FEMA's Disaster Relief Fund, workforce, and funeral
assistance for COVID-19 related deaths.
Chairman DeFazio, Ranking Member Graves, and Members of the
Committee, this completes our prepared remarks. It is critical for
agencies to implement our recommendations to help improve the
government's ongoing response and recovery efforts as well as prepare
for future public health emergencies. We will continue to assess these
issues as part of our ongoing work, including making recommendations as
appropriate, and will be happy to assist the Committee as you work to
support the federal efforts to recover from the pandemic. We would be
pleased to respond to any questions that you may have at this time.
Mr. DeFazio. Thank you for your testimony.
We now move on to the Honorable Eric J. Soskin, inspector
general, DOT.
Mr. Soskin. Chairman DeFazio, Ranking Member Graves, and
members of the committee, thank you for inviting me today to
discuss DOT's response to the challenges created by the COVID-
19 pandemic.
As you know, COVID-19's impact on the transportation
industry has seriously affected jobs, businesses, and the lives
of most Americans.
DOT is committed to the safety and efficiency of our
transportation system. And DOT agencies have moved quickly to
release the more than $106 billion that Congress provided to
DOT to help workers, families, and businesses deal with the
pandemic. However, the large volume of funds makes it critical
for DOT to enforce internal controls to prevent fraud, waste,
and abuse.
Today I will focus on the five risk areas my office has
identified to help DOT effectively steward its COVID relief
funds. Those are airport grants management; surface
transportation oversight; contract and grant execution;
financial management systems; and prevention of fraud, waste,
and abuse.
As to the first risk area, FAA must make effective use of
the $20 billion in COVID relief funds it received for American
airports. We have recommended stronger controls over grantee
reimbursements, and a risk-based approach for detecting fraud,
waste, and abuse. To its credit, FAA has begun assigning
appropriate risk levels to grantees, and adjusting its
oversight accordingly. FAA will also benefit from enforcing
existing policies to verify grant spending and check cost
increases. A focus on controlling costs is critical, given the
100-percent Federal share the CARES Act provides for approved
projects.
Second, DOT's surface agencies must adapt their oversight
to mitigate risks. These agencies received most of DOT's COVID
relief funds, about $83 billion. And the volume also presents
operational challenges. FTA and FRA, for example, received much
more for some programs they oversee than in a typical year.
While FTA quickly allocated these funds, transit agencies may
take years to actually expend the grants, time during which the
specific recipients and purposes can change. FTA must,
therefore, ensure that it correctly awards funds, and tracks
them over time. FRA faces similar challenges, with monitoring
the $3.7 billion in supplemental funding Congress provided for
Amtrak through FRA.
At the same time, agencies must contend with the pandemic's
operational impact and increased program risks. For example,
FTA postponed its in-person oversight reviews in 2020, but has
since resumed them, and now plans additional oversight reviews
for COVID funding recipients this year.
The third risk area for DOT is better managing contracts
and grants. This is key, given the massive influx of COVID
funds, in addition to its already substantial annual funding
for contracts and grants that will be critical for DOT to
address weaknesses our prior work has found.
Specifically, DOT must, one, foster competition and obtain
reasonable pricing for services and programs; two, ensure that
contractors and grantees expend funds to achieve desired
outcomes; three, have sufficient numbers of adequately trained
and supervised personnel to ensure compliance with Federal
requirements; and four, DOT must maintain the integrity of its
multiple financial management systems, particularly given the
recent increase in cyber attacks on Federal and private-sector
information systems.
DOT must, likewise, maintain its vigilance on efforts to
prevent improper payments, as the drastic increase in
disbursements and transactions could make compliance with
Federal requirements more difficult.
Finally, we are increasing our outreach to transportation
agencies, as COVID relief funds are susceptible to fraud,
waste, and abuse. Early detection and intervention will be
critical, and it will be important for DOT agencies to use
high-quality tracking and monitoring procedures. We are working
to inform DOT staff and grantees about red-flag indicators of
fraud, and how to report that fraud, as well as tracking and
monitoring information.
We are committed to using our audits and investigations to
help maximize the Department's COVID funding, and to help it
meet its mission. And we will keep the committee apprised of
our work.
This concludes my prepared statement. I will be happy to
answer any questions that you, Mr. Chairman, or other members
of the committee may have. Thank you.
[Mr. Soskin's prepared statement follows:]
Prepared Statement of Hon. Eric J. Soskin, Inspector General, U.S.
Department of Transportation
Challenges Facing the Department of Transportation's COVID-19 Response
Efforts
Chairman DeFazio, Ranking Member Graves, and Members of the
Committee:
Thank you for inviting me here today to discuss the Department of
Transportation's (DOT) response to the challenges caused by the
Coronavirus Disease 2019 (COVID-19) pandemic. As you know, COVID-19 has
had a major impact on the U.S. transportation industry in ways that
affect the Nation's economy and the jobs, businesses, and way of life
of the American people. We note the Department's commitment to the
success of recovery efforts through its work to ensure the safety and
efficiency of the American transportation system while also protecting
the safety and well-being of DOT employees.
The Department has moved quickly to make the over $106 billion that
Congress provided \1\ to DOT agencies available to help American
workers, families, and businesses deal with the pandemic (see exhibit
A). The volume of the funds and the speed with which they have been
made available, however, present serious oversight challenges beyond
those we have highlighted in past reports to the Secretary of
Transportation and Congress. In June 2020, to help DOT promote
effective stewardship of the over $36 billion provided by the
Coronavirus Aid, Relief, and Economic Security (CARES) Act, we
identified five potential risk areas to help the Department bolster its
oversight of these funds: managing airport grants efficiently; adapting
surface transportation oversight approaches when necessary; executing
contracts and grants effectively; tracking and monitoring funds
accurately; and preventing and detecting fraud, waste, and abuse. These
risk areas, and our suggestions to mitigate them, were drawn largely
from our prior work helping DOT oversee a significant influx of funds
for economic and emergency relief.\2\ Since that time, the Coronavirus
Response and Relief Supplemental Appropriations (CRRSA) Act and
American Rescue Plan (ARP) Act have added over $70 billion to this huge
investment in DOT programs. These additional appropriations make the
Department's attention to spending risks and internal controls even
more critical for efficient and compliant expenditures and prevention
of fraud, waste, and abuse.
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\1\ The Coronavirus Aid, Relief, and Economic Security (CARES) Act
of 2020 (Pub. L. 16-136) provided over $36 billion to DOT. The
Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act
of 2021 (Pub. L. 116-220) provided over $27 billion and the American
Rescue Plan (ARP) Act of 2021 (Pub. L. 117-2) provided over $43
billion. See exhibit A for the breakdown by agency.
\2\ The American Recovery and Reinvestment Act of 2009 (ARRA), Pub.
L. 111-5.
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My testimony today will focus on the five risk areas mentioned
above and how we are working to support the Department's efforts to
help ensure funds achieve their vital purpose.
Summary
DOT has received billions of dollars to fund its efforts to respond
to and mitigate COVID-19 across all modes of transportation. For
example, the Federal Aviation Administration (FAA) received over $20
billion to support airports' continuing operations and replace lost
revenue resulting from the sharp decline in passenger traffic and other
airport business due to the pandemic. To mitigate the challenges
associated with this huge influx of funds, we found that FAA must
establish controls to ensure grantees adhere to Federal requirements
and increase its own reporting transparency. The Agency is taking
positive steps toward establishing a risk-based oversight approach and
has categorized all COVID-related relief grants as ``high risk,'' thus
strengthening its ability to manage these grant funds. DOT's surface
transportation agencies received about $83 billion in COVID-19 relief
funding and also face challenges in overseeing these funds and carrying
out normal operations under COVID-19 constraints. Further, DOT agencies
have started to adjust their oversight approaches to ensure that
recipients meet Federal requirements and will need to continue to do
so. We also highlighted that the Department must increase emphasis on
how it awards and administers contracts and grants, ensure that
individuals making agency or recipient awards have appropriate
authority and training, improve procedures to maintain its overall low
improper payment rate, and maintain the availability and integrity of
its multiple financial management systems. Layered atop these
challenges is the fact that the volume of COVID-19 relief funds and the
speed at which they must be disbursed puts them at a higher than usual
risk for fraud, waste, and abuse. For this reason, we found that it
will be critical for all DOT agencies to implement data-quality
procedures for tracking and monitoring and to be aware of ``red flag''
indicators of fraud schemes. To assist DOT in achieving that end, we
are conducting outreach and education efforts to enhance understanding
about how to recognize, prevent, and report fraud to the appropriate
authorities.
Effectively Managing Grants To Support Airports
Since March 2020, FAA has received $20 billion in COVID-relief
funds \3\ for grants-in-aid through the Airport Improvement Program
(AIP)--more than the amount it received through AIP in the preceding 5
fiscal years combined. While AIP has been DOT's main vehicle for
providing grants to airports across the Nation for many years, FAA's
receipt of this unprecedented injection of funds for COVID-19 relief
comes with challenges similar to those our prior work has identified.
To ensure these funds are put to effective use, FAA needs to establish
increased controls over grantee reimbursements and implement a risk-
based approach to detect potential fraud, waste, and abuse.
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\3\ FAA received $10 billion through the CARES Act, $2 billion
through CRRSA, and $8 billion through the ARP Act.
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Establish Controls To Prevent Lapses in Grantee Adherence to Federal
Requirements and Increase Reporting Transparency
Our work has previously identified challenges that FAA faces in its
efforts to effectively manage large allocations of funds. Audits we
conducted following Hurricanes Katrina and Rita in 2005 and the
economic recession of 2009, as well more recent assessments, found
lapses in grantee adherence to Federal laws and regulations, including
those regarding improper payments, periods of performance, and grant
documentation.\4\ Our 2021 AIP audit, for example, identified misused
funds, false claims, and insufficient supporting documentation for
reimbursement requests--issues with a total impact on AIP obligations
of $298.1 million. Resolving these issues is critical, in part because
the CARES Act authorizes the Federal share of approved projects to be
increased to 100 percent, potentially reducing the incentives for
localities to rigorously control project costs. Therefore, the Agency
will benefit from enforcing existing policies that require program
managers to verify grant fund expenditures and cost increases.
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\4\ Oversight of Airport Improvement Program Hurricane Grants (OIG
Report Number AV-2007-014), December 13, 2006. FAA Fulfilled Most ARRA
Requirements in Awarding Airport Grants (OIG Report Number AV-2011-
053), February 17, 2011. Gaps in FAA's Oversight of the AIP State Block
Grant Program Contribute to Adherence Issues and Increase Risks (OIG
Report No. AV2021017), February 10, 2021. OIG reports are available on
our website: https://www.oig.dot.gov/.
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Our prior AIP audit work has also identified concerns about FAA's
grant reporting practices. For example, FAA did not update over 75
percent of the American Recovery and Reimbursement Act (ARRA) estimated
grant amounts it published online with its actual awards to recipients.
In particular, 25 of the 319 project cost estimates were off by more
than 50 percent. Similarly, we identified issues with the accuracy of
FAA-provided data for AIP grants during our 2021 review.
Use a Risk-Based Approach for Grant Oversight
In addition, FAA is following through on recommendations made in
our past work to establish a risk-based oversight approach, assign the
appropriate risk level to grantees, and adjust the Agency's oversight
accordingly. Given FAA's need to target its resources to oversee the
vast number of grants that will be supported by COVID-19 funds, we
initiated an audit assessing FAA's policies and procedures for the
award and oversight of CARES Act funds. While this audit is currently
underway, we have found that FAA has categorized all of its COVID-
related relief grants as ``high risk''-generating additional oversight
and review responsibilities for Agency officials. In addition, FAA has
primarily centralized those oversight and review responsibilities
within its Headquarters personnel; it took this action to ensure that
the process is standardized and to accelerate awareness of potential
implementation issues due to the unique nature of the relief funding.
For example, FAA is planning to collect and review documentation for
the Aviation Manufacturing Jobs Protection Program.\5\ These steps will
strengthen the Agency's mitigation strategy for identifying financial
errors and inconsistencies in order to detect and prevent improper
payments. Our future work will continue to focus on FAA's efforts to
protect taxpayers' interests related to the oversight and management of
these COVID-related grants.
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\5\ The Aviation Manufacturing Jobs Protection Program, established
by the American Rescue Plan Act of 2021, provides funding to eligible
businesses, paying up to half of their compensation costs for certain
categories of employees for up to 6 months.
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Leveraging Stewardship and Oversight Approaches To Enhance Transparency
and Mitigate Risk
DOT's surface transportation agencies received extensive COVID-19
relief funding--about $83 billion. In particular, the Federal Transit
Administration (FTA) has received about $69 billion to help transit
systems in the United States mitigate the impacts of COVID-19,
including support for their operating expenses. Congress also provided
$10 billion to the Federal Highway Administration (FHWA) for highway
infrastructure programs; over $3.7 billion to the Federal Railroad
Administration (FRA) to support Amtrak; approximately $4.1 million to
the Maritime Administration; and $150,000 to the Federal Motor Carrier
Safety Administration. Based on our work, we have identified challenges
these agencies may face in overseeing their funds in addition to
carrying out normal operations under COVID-19 constraints.
Track and Report on Funding Progress and Accountability
Sound processes for accurate tracking and reporting on funding
progress and accountability are important for transparency and
mitigating the risk of misuse.\6\ FTA and FRA, for example, received
substantially more for the programs funded through COVID relief than
they typically receive annually for the same programs and for recent
disasters, such as Hurricane Sandy. While FTA has expeditiously
allocated its COVID-relief funds, our work examining FTA's progress in
using about $10 billion in Hurricane Sandy funds shows that transit
agencies receiving grant funds can take years to expend large
amounts.\7\ In addition, the amounts allocated to specific recipients
and purposes can change over time. Therefore, FTA will need to pay
ongoing attention to ensure that it correctly awards funds to
recipients and that obligated amounts do not exceed limitations.
Similarly, FRA oversees annual Federal funding for Amtrak, which in the
last fiscal year amounted to $2 billion. In June 2021, we reported on
FRA's program to oversee Amtrak's use of these Federal funds.\8\ The
$3.7 billion in supplemental funding appropriated to ameliorate the
impact of COVID-19 on Amtrak makes FRA's oversight even more critical.
Our work, which was also applicable to FRA's oversight of the
supplemental funding, found that the Agency has taken steps to improve
its Amtrak oversight program and has plans to address weaknesses in its
processes and systems for monitoring expenditures and tracking and
following up on issues. FRA's completion of this work will enhance its
ability to oversee Amtrak's use of both annual and COVID-19
supplemental funding.
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\6\ According to GAO's Government Auditing Standards (GAO-21-368G),
April 2021, as reflected in applicable laws, regulations, agreements,
and standards, Federal program officials and managers are responsible
for providing reliable, useful, and timely information for transparency
and accountability of these programs and their operations.
\7\ Our work supporting FTA's Hurricane Sandy funding oversight
includes: FTA Made Progress in Providing Hurricane Sandy Funds but
Weaknesses in Tracking and Reporting Reduce Transparency Into Their Use
(OIG Report No. ST2021032), July 21, 2021; FTA's Limited Oversight of
Grantees' Compliance With Insurance Requirements Puts Federal Funds and
Hurricane Sandy Insurance Proceeds at Risk (OIG Report No. ST2020005),
October 30, 2019; and FTA Has Not Fully Implemented Key Internal
Controls for Hurricane Sandy Oversight and Future Emergency Relief
Efforts (OIG Report No. ST2015046), June 12, 2015.
\8\ Fully Implementing a Grants Management Framework Will Enhance
FRA's Amtrak Funding Oversight (OIG Report No. ST2021027), June 30,
2021.
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Adapt Oversight Processes To Address COVID-19 Impact and Program Risks
The Department also must contend with the pandemic's impact on
program risks and operations, such as in-person inspections and travel.
For example, while FTA was monitoring and providing guidance to grant
recipients, it postponed the oversight reviews planned for fiscal year
2020 until fiscal year 2021. In April 2021, FTA reported that it has
since incorporated oversight of COVID-19 relief funds into the Agency's
existing oversight program and developed a new proactive approach to
COVID-19 relief funding oversight that focuses on both technical
assistance and supplemental oversight.\9\ The Agency added that,
starting in early summer 2021, it will begin supplemental oversight
activities for COVID-19 relief funding recipients not scheduled for a
Triennial or State Management Review this year. These steps by FTA to
enhance oversight of COVID-relief funding are laudable and indicate
progress toward addressing the potential risk areas we identified for
stewardship of these funds. Such actions are also particularly
important in light of the ways in which COVID-relief laws changed how
recipients can use FTA funds, such as by allowing all recipients,
regardless of size or urbanized area population, to charge operating
expenses to FTA grants on a 100-percent Federal share basis. Other DOT
agencies may face similar challenges and also may need to adjust their
oversight approaches to ensure that recipients meet Federal
requirements and use funds only for eligible purposes. We anticipate
that future audits will examine the Department's performance in this
area and also assess DOT's tracking and reporting efforts. We recently
announced our audit of FTA's COVID-19 relief funding oversight.
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\9\ FTA, ``Dear Colleague'' Letter, April 20, 2021.
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Executing Contracts and Grants Effectively To Achieve Desired Outcomes
Given the large influx of COVID-19 funds the Department has
received, DOT agencies will need to pay even greater attention to the
ways in which they award and administer contracts and grants. As of
July 6, 2021, DOT had received over $106.3 billion in COVID-19 funding
and had obligated over $47 billion of those funds. This obligation was
in addition to its annual contract and grant obligations, which totaled
over $74 billion in fiscal year 2019. Based on our previous work,
unless the Department sustains focus on its award and oversight
practices, it will face a number of risks to the effective use of these
funds. Specifically, the Department needs to ensure that DOT agencies
foster competition and receive reasonable pricing for services and
programs; contractors and grantees expend funds as intended and to
achieve desired outcomes; and that adequately trained and supervised
personnel manage funds in accordance with Federal requirements. Our
future work will focus on whether the Department is able to effectively
manage the use and expenditure of DOT grant and contract funds,
including those for COVID relief.
Foster Competition to the Extent Practical and Ensure Reasonable
Pricing
To achieve efficiency and effectiveness and realize the best value
for taxpayers, DOT will need to promote competition to the extent
practicable and verify fair and reasonable pricing before agency-funded
contracts are awarded. These activities should include developing sound
independent Government cost estimates, conducting price and/or cost
analyses, and requiring adequate justification for single bids.
However, our past work--which has covered oversight of FHWA's ARRA-
related spending--identified deficiencies in these areas that could put
billions in Federal funds at risk. For example, our 2012 audit of ARRA-
funded FHWA contracts showed that even minimal increases in the number
of bids received could have a significant impact.\10\ Prices for
contracts with one or two bids averaged 11 percent higher than prices
for contracts with three bids--resulting in a total projected price
difference of at least $179 million. In addition, in 2019, we assessed
FAA's competitive award practices for major acquisition program
contracts and subsequently recommended that the Agency could put up to
$4.9 billion in Federal funds to better use by improving its ability to
establish contract pricing that is fair, reasonable, and realistic.\11\
Specifically, FAA put billions of dollars at risk by awarding some
competitive contracts without developing required Government cost
estimates or adequately justifying several noncompetitive awards.
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\10\ Lessons Learned From ARRA: Improved FHWA Oversight Can Enhance
States' Use of Federal-Aid Funds (OIG Report No. ZA-2012-084), April 5,
2012.
\11\ FAA's Competitive Award Practices Expose Its Major Program
Contracts to Cost and Performance Risks (OIG Report No. ZA2020020),
March 9, 2020.
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Ensure That Contractors and Grantees Expend Funds as Intended
As is the case with the Department's annual contract and grant
spending, it is vital that DOT provide clear direction to contractors
and grantees on Federal requirements for verifying and documenting
expenditures of COVID-19 funds. However, our past work has found that
DOT could do more to direct grantees to provide supporting
documentation for their reimbursement requests and reviews to avoid
improper payments. For example, in 2019, we reported that the
Department did not routinely require grantees to provide support
showing that the costs they submitted for reimbursement were reasonable
or allowable.\12\ In addition, our review of FTA's oversight of
Hurricane Sandy funds determined that FTA did not verify that grantees
were using those funds solely for eligible expenditures, including an
instance where a grantee had inappropriately spent over $17 million
that had to be returned to the Federal Government.\13\ We also recently
reported that FAA did not always award and administer contracts in
accordance with the domestic content laws,\14\ which direct Federal
agencies, with certain exceptions, to purchase American-made materials
and goods to strengthen our economic and national security.\15\ This
lack of compliance highlights another potential risk area for the
Department as it strives to maximize the extent to which COVID-relief
funding fulfills the goal of supporting our Nation's economic well-
being.
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\12\ Stronger Guidance and Internal Controls Would Enhance DOT's
Management of Highway and Vehicle Safety R&D Agreements (OIG Report No.
ZA-2019-051), May 1, 2019.
\13\ FTA Can Improve Its Oversight of Hurricane Sandy Relief Funds
(OIG Report No. ZA2016077), July 21, 2016.
\14\ Domestic content laws include the Buy American Act (BAA), 41
U.S.C. Sec. Sec. 8301-8305, and Buy American Preference (BAP), 49
U.S.C. Sec. 50101.
\15\ Gaps in Guidance, Training, and Oversight Impede FAA's Ability
To Comply With Buy American Laws (OIG Report No. ZA2021026), June 2,
2021.
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In the coming months, we will continue our work to assess the
Department's efforts to effectively monitor the use of its COVID-19
funds. Planned audits include assessing FAA's oversight of CARES Act-
funded airport development contracts and evaluating whether other DOT
or grantee contracts using COVID-19 funds were awarded and expended for
their intended purpose and accurately tracked for transparency.
Appropriately Train and Manage Personnel Who Administer Federal Funds
Our previous reviews of DOT and grantee contracting activities also
identified issues with the authorization and training of staff who
award funds--within the Department and at recipient organizations.
Given the distinct requirements associated with the COVID-19 funds, DOT
must require that individuals administering agency or recipient awards
have the appropriate authority and training to ensure compliance with
applicable laws and regulations and that funds are used for intended
purposes, an area in which our previous work has found gaps.\16\ In
other work, we found that two DOT agencies--representing 69 percent of
the Department's overall COVID funding--did not ensure that oversight
support staff consistently documented their reviews or that resulting
recommendations were tracked and resolved at the grantee and Federal
levels.\17\
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\16\ MWAA's Weak Policies and Procedures Have Led to Questionable
Procurement Practices, Mismanagement, and a Lack of Overall
Accountability (OIG Report No. AV-2013-006), November 1, 2012.
\17\ FTA Did Not Adequately Verify PATH's Compliance With Federal
Procurement Requirements for the Salt Mitigation of Tunnels Project
(OIG Report No. ZA2016057), March 28, 2016; Opportunities Exist To
Improve FRA and Volpe's Acquisition and Use of Oversight Contractors
(OIG Report No. ZA2019056), July 10, 2019; FTA Has an Opportunity To
Improve the Integrity Monitor Program for Hurricane Sandy Grantees (OIG
Report No. ZA2019064), September 9, 2019.
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Ensuring the Availability and Integrity of DOT's Systems for Tracking
and Monitoring Federal Funds
Effective stewardship of COVID relief funds depends on DOT's
ability to effectively track and monitor spending, to detect errors in
grant activities, and keep errors in expenditures low. These efforts
require the Department to maintain the availability and integrity of
its financial management systems.
Maintain the Availability and Integrity of DOT's Systems for Tracking
and Monitoring Federal Funds
A major possible risk area for the Department is maintaining the
confidentiality, availability, and integrity of the financial
management systems \18\ that process CARES Act grants and monitor and
disburse payments. Due to an increase in cyberattacks on Federal and
private sector information systems since March 2020, we are currently
assessing the security of the financial systems the Department uses to
track and monitor COVID relief funds. For example, our review of FTA's
ability to mitigate threats from cyberattacks found security control
weaknesses, including that the Agency does not require over 4,600
external users to use multifactor authentication, such as a username
and password or a personal identification verification card, to access
its financial management systems. Cyberattacks are among the biggest
security threats facing the Federal Government today, as evidenced by a
May 2021 Executive order that requires agencies to implement
multifactor authentication within 180 days.
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\18\ FTA uses three financial management systems--Transit Award
Management System, Financial Management System and ECHO-WEB, which
interfaces with the DOT-wide financial management system, Delphi.
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Given the multiple financial management systems involved in
tracking COVID relief grants, the Department will face security risks
in tracking and monitoring these funds. For instance, an attacker could
exploit vulnerabilities to take control over certain systems, cause a
denial of service attack, or gain unauthorized access to critical files
and data. To protect the integrity, availability, and confidentiality
of sensitive information and mitigate risks to its financial management
systems, DOT will need to effectively select, assess, and monitor its
security controls and detect and correct weaknesses. For example,
consistent updating of financial management systems with software
patches will be vital whenever a security flaw is uncovered. Also, to
mitigate risks to data availability, DOT must maintain adequate
disaster recovery plans to quickly restore systems after unexpected
disruptions. We will keep this committee apprised of DOT's progress in
these and other areas when we complete our current audit work.
Maintain Compliance With Improper Payment Reporting
During previous reviews,\19\ we found that some errors, such as
improper payments, were caused by insufficient documentation, a program
design or structural issue, or an administrative or process error made
by State or local agency grantees. We also reported that DOT complied
with the requirements of the Improper Payments Elimination and Recovery
Act of 2010 and the Payment Integrity Information Act of 2019 and had
reported an overall improper payment rate below 10 percent for each
reviewed program and activity.\20\ However, the drastic increase in
disbursements and volume of transactions under the COVID relief
statutes could make it difficult for DOT to keep its reported improper
payments below the 10-percent threshold. Sustained focus on procedures
to detect improper payments could help mitigate this risk.
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\19\ DOT's Fiscal Year 2019 IPERA Compliance Review (OIG Report No.
FS2020029), April 27, 2020; DOT's Fiscal Year 2018 IPERA Compliance
Review (OIG Report No. FI2019054), June 3, 2019; DOT's Fiscal Year 2017
IPERA Compliance Review (OIG Report No. FI2018055), May 14, 2018.
\20\ See OIG Report No. FS2020029. The Payment Integrity
Information Act of 2019 (PIIA), Public Law 116-117, superseded the
Improper Payments Elimination and Recovery Act of 2010 (IPERA), Pub.
Law 111-204 (July 2010); see DOT's Fiscal Year 2020 Payment Integrity
Information Act Compliance Review (OIG Report No. FI2021031), July 14,
2021.
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Increasing Outreach and Education to Transportation Agencies To Prevent
and Detect Fraud, Waste, and Abuse
The volume of COVID-19 relief funds and the speed with which they
are disbursed puts them at a higher than usual risk for fraud, waste,
and abuse by recipients. Given that these funds will be spent on
multiple purposes, with disparate requirements and restrictions,
existing risk assessments may not be sufficient. Based on our prior
assessments of DOT's oversight of large funding amounts--such as
through ARRA and other initiatives--early detection and intervention is
essential to mitigate misuse of funds. Thus, it will be critical for
all DOT agencies to implement data quality procedures for tracking and
monitoring. We are reviewing financial datasets--from the Department
and from other Government resources--to determine whether DOT agencies
are using COVID-19 funds properly.
An important way to deter fraud is for DOT staff and grantees to be
aware of certain ``red flag'' indicators typically associated with
fraud schemes. For example, any mismarking or mislabeling of products
and materials might indicate product substitution fraud; see exhibit B
for descriptions of other fraud indicators. The best way to make
individuals aware of these indicators is to conduct systematic fraud
prevention education in the field. To that end, we are working with the
Department to conduct outreach and education efforts to enhance
understanding about how to recognize, prevent, and report potential
fraud to the appropriate authorities, including our office.
Since March 2020, our Office of Investigations has conducted over
1,200 hours of outreach focusing on education and deterrence related to
the Department's COVID-relief funds. In fact, this year we have almost
doubled the hours we spent on COVID-relief outreach a year ago. In
addition to hosting training events for our own investigators, we have
conducted 139 COVID-funding-related outreach activities with DOT
officials, regional modal partners, State grant recipients, and Federal
law enforcement partners across the country--38 of which included
information on fraud indicators. In addition, we are greatly involved
with the work of the Pandemic Response and Accountability Committee,
and we continue to seek out innovative methods of analyzing data and
leveraging the experiences of others working on pandemic relief efforts
across the inspector general community. These added outreach efforts
will likely result in an increase in reporting of suspected
mismanagement and indicators of criminal activity related to DOT-
disbursed COVID-19 funds.
Our experience with the rapidly dispersed ARRA stimulus funds
resulted in 24 investigations, 57 indictments, and 49 convictions
representing over 38 years of incarceration and $85 million in
restitution, recoveries, forfeitures and fines. For example, one
investigation revealed that from 2004 to 2010, a CEO of an FTA grantee
conspired and embezzled Federal ARRA funds. The CEO was sentenced to 30
months of incarceration, 36 months of supervised release, and $1.3
million in restitution. It will also be essential for DOT, when
notified of wrongdoing by grantees or contractors, to take timely
action to suspend andor debar these individuals or firms that have
defrauded the Government or are otherwise known to be irresponsible. By
doing so, the Department can help protect other Federal programs from
fraud and other wrongdoing by the same individuals and entities. Timely
action in response to indications of fraud will better protect against
misuse of public funds by fraudulent or unethical firms or individuals
in the future.
Conclusion
COVID-19 has had a wide-reaching impact on the transportation
industry and our economy. In response, DOT has taken quick action to
distribute COVID relief funds and implement requirements established by
the CARES, CRRSA, and ARP acts. Our office is committed to assisting
the Department in its efforts to maximize the efficacy of these funds
and meet its mission in these exceptional times. By maintaining focus
on the most significant risk areas and establishing robust internal
controls, DOT can spend COVID relief funds effectively, prevent fraud,
waste, and abuse, ensure compliance with the law, and carry out its
safety mission. Meeting these goals will maximize the value of taxpayer
dollars during this critical time.
In fulfillment of our own responsibilities pertaining to these
funds, we will announce future work related to COVID oversight as
needed and continue to deter and pursue wrongdoers who target COVID
spending. We look forward to continuing to work with DOT in support of
our shared goal to safeguard these critical funds from fraud, waste,
and abuse and sustain our ongoing economic recovery.
This concludes my prepared statement. I will be happy to answer any
questions you or other Members of the Committee may have.
Exhibit A. COVID-19 Relief Funds Provided to the Department of
Transportation, as of July 6, 2021
Coronavirus Aid, Relief, and Economic Security (CARES) Act
------------------------------------------------------------------------
DOT Agency Funds Provided
------------------------------------------------------------------------
Federal Aviation Administration................... $10,025,000,000
Federal Transit Administration.................... $25,000,000,000
Federal Railroad Administration................... $1,018,250,000
Office of the Secretary of Transportation......... $57,753,000
Federal Motor Carrier Safety Administration....... $150,000
Maritime Administration........................... $4,134,000
Office of Inspector General....................... $5,000,000
---------------------
Total Amount Provided by the CARES Act.......... $36,110,287,000
------------------------------------------------------------------------
Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act
------------------------------------------------------------------------
DOT Agency Funds Provided
------------------------------------------------------------------------
Federal Aviation Administration................... $2,000,000,000
Federal Highway Administration.................... $10,000,000,000
Federal Transit Administration.................... $14,000,000,000
Federal Railroad Administration................... $1,000,000,000
Office of the Secretary of Transportation......... $23,332,000
---------------------
Total Amount Provided by the CRRSA Act.......... $27,023,332,000
------------------------------------------------------------------------
American Rescue Plan (ARP) Act
------------------------------------------------------------------------
DOT Agency Funds Provided
------------------------------------------------------------------------
Federal Aviation Administration................... $8,009,000,000
Federal Transit Administration.................... $30,461,356,000
Federal Railroad Administration................... $1,700,000,000
Office of the Secretary of Transportation......... $3,000,000,000
---------------------
Total Amount Provided by the ARP Act............ $43,170,356,000
------------------------------------------------------------------------
Source: DOT Office of the Chief Financial Officer
Exhibit B. Red Flag Indicators for Common Fraud Schemes and How To
Report Suspected Fraud
The following pages include brief descriptions of selected fraud
schemes commonly seen on transportation projects, along with sample
``red flag'' indicators for each scheme. It is important to note that
the presence of one or more indicators does not prove fraud and that
the indicators shown are not all-inclusive for each of the schemes
described.
Bid Rigging and Collusion
In bid rigging and collusion schemes, contractors misrepresent the
competition against each other when, in fact, they agree to cooperate
on the winning bid to increase job profit. Watch for:
Unusual bid patterns: too close, too high, rounded
numbers, or identical winning margins or percentages.
Different contractors making identical errors in contract
bids.
Bid prices dropping when a new bidder enters the
competition.
Rotation of winning bidders by job, type of work, or
geographic area.
Losing bidders hired as subcontractors.
Apparent connections between bidders: common addresses,
personnel, or phone numbers.
Losing bidders submitting identical line item bid amounts
on nonstandard items.
Materials Overcharging
In materials overcharging schemes, a contractor misrepresents how
much construction material was used on the job and is then paid for
excess material to increase job profit. Watch for:
Discrepancies between contractor-provided quantity
documentation and observed data, including yield calculations.
Refusal or inability to provide supporting documentation.
Contractor consistently loading job materials into
equipment away from inspector oversight.
Truck weight tickets or plant production records with
altered or missing information.
Photocopies of quantity documentation where originals are
expected.
Irregularities in color or content of weight slips or
other contractor documents used to calculate pay quantities.
Time Overcharging
In a time overcharging scheme, a consultant misrepresents the
distribution of employee labor on jobs in order to charge for more work
hours or a higher overhead rate, to increase profit. Watch for:
Unauthorized alterations to time cards and other source
records.
Billed hours and dollars consistently at or near budgeted
amounts.
Time cards filled out by supervisors, not by employees.
Photocopies of timecards where originals are expected.
Inconsistencies between a consultant's labor distribution
records and employee timecards.
Product Substitution
In product substitution schemes, a contractor misrepresents the
product used in order to reduce costs for construction materials. Watch
for:
Any mismarking or mislabeling of products and materials.
Contractor restricting or avoiding inspection of goods or
service upon delivery.
Contractor refusing to provide supporting documentation
regarding production or manufacturing.
Photocopies of necessary certification, delivery, and
production records where originals are expected.
Irregularities in signatures, dates, or quantities on
delivery documents.
High rate of rejections, returns, or failures.
Test records reflect no failures or a high failure rate
but contract is on time and profitable.
Unsigned certifications.
Disadvantaged Business Enterprises (DBE) Fraud
In disadvantaged business enterprises schemes, a contractor
misrepresents who performed contract work in order to appear to be in
compliance with contract goals for involvement of minority or women-
owned businesses. Watch for:
Minority owner lacking background, expertise, or
equipment to perform subcontract work.
Employees shuttling back and forth between prime
contractor and minority-owned business payrolls.
Business names on equipment and vehicles covered with
paint or magnetic signs.
Orders and payment for necessary supplies made by
individuals not employed by minority-owned business.
Prime contractor facilitated purchase of minority-owned
business.
Minority-owned business owner never present at job site.
Prime contractor always uses the same minority-owned
business.
Quality-Control Testing Fraud
In quality-control testing schemes, a contractor misrepresents the
results of quality control (QC) tests to falsely earn contract
incentives or to avoid production shutdown in order to increase profits
or limit costs. Watch for:
Contractor employees regularly taking or labeling QC
samples away from inspector oversight.
Contractor insisting on transporting QC samples from the
construction site to the lab.
Contractor not maintaining QC samples for later quality
assurance (QA) testing.
Contractor challenging results, or attempting to
intimidate QA inspectors who obtain conflicting results.
Photocopies of QC test results where originals are
expected.
Alterations or missing signatures on QC test results.
Bribery
In bribery schemes, a contractor compensates a government official
to obtain a contract or permit contract overcharges. Watch for:
Other government inspectors at the job site noticing a
pattern of preferential contractor treatment.
Government official having a lifestyle exceeding his/her
salary.
Contract change orders lacking sufficient justification.
Oversight officials socializing with or having business
relationships with contractors or their families.
Source: OIG
Mr. DeFazio. OK, I thank the gentleman.
And last would be Mr. James Izzard, assistant inspector
general for investigations, Department of Homeland Security.
Mr. Izzard. Chairman DeFazio, Ranking Member Graves, and
members of the committee, thank you for inviting me here today
to discuss OIG's oversight of FEMA's response to the COVID-19
pandemic.
The CARES Act provided DHS OIG $3 million in supplemental
funding to conduct oversight of the nearly $50 billion of
COVID-19 relief. DHS OIG is strategically initiating work to
have the highest impact to help improve DHS programs and
operations.
Since January 2020, DHS OIG has received more than 6,000
complaints, and initiated 120 investigations related to COVID-
19. We continue to investigate COVID-19 fraud perpetrated by
companies and individuals seeking to exploit DHS-affiliated
Government programs, including relief programs that FEMA
administers.
A number of our open investigations are under review for
possible criminal prosecution by U.S. attorneys offices
nationwide. Since the passage of the CARES Act, we have been at
the forefront to detect, deter, and investigate COVID-19 fraud
perpetrated against DHS and its components through our
participation in working groups, coordination with FEMA and the
PRAC, and leveraging the expertise of our professional staff to
identify and investigate fraud schemes.
For example, on February 3, 2021, as a result of an
investigation we worked jointly with the VA OIG, the FBI, and
the U.S. Attorney's Office for the Eastern District of
Virginia, a defendant pleaded guilty to wire fraud, theft of
Government funds, and making false statements. The
investigation determined that the defendant repeatedly and
falsely claimed to Federal officials that he was in possession
of large quantities of PPE, including N95 masks.
Based on the defendant's statements, VA and FEMA awarded
his company contracts for more than $38 million to deliver 6.5
million N95 masks. The VA intended to use the PPE to protect
employees and patients at VA facilities, and FEMA intended to
procure the N95 masks for the national stockpile. Despite the
defendant's claims, he failed to supply any PPE or N95 masks to
the Federal Government. On June 16, 2021, the defendant was
sentenced to 21 months incarceration, and nearly $349,000 in
restitution.
In another instance, we led a task force that used data
analytics to identify a major facilitator of fraudulent
unemployment insurance claims. In November 2020, DHS OIG
determined the individual and her co-conspirators were involved
in facilitating close to a half million dollars in fraudulent
unemployment insurance benefits, which included fraudulently
using the identities of State prisoners.
On April 8, 2021, the United States Attorney's Office for
the Eastern District of Virginia issued a nine-count indictment
charging four defendants with conspiracy to commit fraud in
connection with major disaster benefits.
Recognizing the magnitude and potential of these fraud
schemes related to FEMA and unemployment insurance programs, we
designated a team of special agents to investigate major
unemployment insurance facilitated fraud schemes involving FEMA
funds. Over the last 10 months, this team has executed 15
search warrants and seizures, recovered $3 million, and
realized 10 judicial actions. Our team continues to open new
investigations nationwide that will likely yield high-impact
results.
In addition, since March 2020, we have initiated nine new
audits related to CARES Act funds and FEMA's response to COVID-
19, including audits of FEMA's Federal coordination efforts and
medical supply chain. We look forward to reporting the results
of those audits when they are complete.
Earlier this month, we completed an audit that was
initiated in 2019, and is directly relevant to FEMA's ability
to deliver crucial supplies in response to the pandemic. We
found FEMA personnel didn't always take the necessary steps to
ensure prospective contractors could deliver goods and services
during compressed disaster response timeframes. Between March
and May 2020, FEMA awarded and canceled at least 22 contracts,
valued at $184 million, for crucial supplies in response to the
national COVID-19 pandemic. We made one recommendation to FEMA,
which is currently open.
Thank you again for Congress' continued funding for our
mission, which supports our robust oversight of the Department
to help make its programs and operations more efficient and
effective.
Mr. Chairman, this concludes my testimony. I am happy to
answer any questions you or other members of the committee may
have.
[Mr. Izzard's prepared statement follows:]
Prepared Statement of James Izzard, Jr., Assistant Inspector General
for Investigations, U.S. Department of Homeland Security
Chairman DeFazio, Ranking Member Graves, and Members of the
Committee:
Thank you for the opportunity to discuss the Department of Homeland
Security, Office of Inspector General's (OIG) critical oversight of the
Federal Emergency Management Agency's (FEMA) preparedness, response,
and recovery efforts related to the coronavirus (COVID-19) pandemic.
Since the beginning of the pandemic, we have provided significant and
timely information about the Department and its COVID-19 response
through our audits, inspections, evaluations, and investigations. We
are committed to transparency and keeping you and your fellow Members
of Congress fully informed of our findings and recommendations.
Annually, DHS OIG provides taxpayers with a substantial return on
their investment. Each fiscal year DHS OIG issues hundreds of
recommendations to improve the integrity, accountability, and
performance of the Department. In FY 2020, DHS OIG identified
$7,500,553,271 in questioned costs and funds put to better use through
audits and inspections. In FY 2020, DHS OIG achieved more than $1.1
million in recoveries, $389,000 in fines, and more than $15.3 million
in restitutions.
The DHS Inspector General (IG) is one of nine statutory IGs who are
members of the Pandemic Response Accountability Committee (PRAC),
created by Congress through the Coronavirus Aid, Relief, and Economic
Security (CARES) Act. We closely coordinate with the PRAC, as
appropriate, to share model practices and enhance our effectiveness.
The CARES Act provided DHS $45.9 billion for COVID-19 relief and
provided DHS OIG $3 million in supplemental funding, through a transfer
from the Disaster Relief Fund (DRF), to conduct oversight of those
funds. Given this funding and the range of associated mandates, DHS
adopted a layered response to deliver critical supplies and services.
FEMA, along with other Federal partners, is the DHS component
responsible for managing the Federal Government's COVID-19 pandemic
response.\1\ On August 8, 2020, then-President Trump authorized FEMA to
expend up to $44 billion from the DRF for lost wage payments.\2\
---------------------------------------------------------------------------
\1\ ``The Federal Emergency Management Agency's Response to COVID-
19 and Other Challenges.'' Statement of Robert Fenton, Senior Official
Performing the Duties of the Administrator, FEMA. April 14, 2021. See
also, ``Known for Disaster Aid, FEMA Prepares for New Challenge with
Coronavirus Relief'', NPR, March 19, 2020.
\2\ Presidential Memoranda, Memorandum on Authorizing the Other
Needs Assistance Program for Major Disaster Declarations Related to
Coronavirus Disease 2019, August 8, 2020.
---------------------------------------------------------------------------
On December 27, 2020, the Consolidated Appropriations Act first
required FEMA to provide funeral assistance through its Individual and
Household Programs for deaths related to the COVID-19 pandemic. The Act
provided $2 billion to reimburse funeral expenses incurred through
December 31, 2020, at a 100 percent Federal cost share. On March 11,
2021, President Biden signed the American Rescue Plan Act (ARPA), which
appropriated $50 billion to FEMA for costs associated with major
disaster declarations, including for funeral assistance and did not
limit the date for expenses incurred.\3\ As of July 12, 2021, FEMA has
provided over $606 million to more than 91,000 people to assist with
COVID-19-related funeral costs for deaths occurring on or after January
20, 2020.\4\ DHS OIG did not receive an additional allocation to
oversee those monies, but nonetheless, we initiated work to oversee
FEMA's funeral assistance efforts, as described below.
---------------------------------------------------------------------------
\3\ American Rescue Plan Act of 2021, P.L. 117-2.
\4\ FEMA press release HQ-21-134, July 12, 2021.
---------------------------------------------------------------------------
Investigations
Since January 2020, DHS OIG has received a substantial number of
COVID-19 fraud complaints nationwide and continues to investigate fraud
perpetrated by companies and individuals seeking to exploit DHS-
affiliated government programs, including relief programs that FEMA
administers. To date, DHS OIG has received more than 6,000 complaints
and initiated 120 investigations. Many of our investigations involve
individuals who have also attempted to defraud other COVID-19 programs.
Since the passage of the CARES Act, DHS OIG has been at the
forefront to detect, deter, and investigate COVID-19 fraud perpetrated
against DHS and its components through our participation on working
groups, coordination with FEMA, and reliance on the expertise of our
professional staff.
Our special agents participate in various working groups and task
forces at the local, state, and regional level. This includes
partnering with the Small Business Administration (SBA) OIG, Department
of Labor OIG, Veterans Affairs OIG, United States Postal Inspection
Service, Homeland Security Investigations (HSI), United States Secret
Service, Federal Bureau of Investigation (FBI), and United States
Attorney's Offices.
We also participate in national working groups and task forces
including the:
Department of Justice (DOJ) Stimulus Funds Fraud Working
Group;
COVID-19 Fraud Enforcement Task Force;
National Unemployment Insurance Fraud Task Force;
DOJ Procurement Collusion Strike Force;
DOJ Grant Fraud Working Group; and
PRAC.
We interface with FEMA through a joint Fraud Working Group. That
Fraud Working Group provides fraud training, including indicators and
fraud scheme awareness, that is tailored to assist FEMA employees with
preventing and reporting suspected fraud. With respect to FEMA's
funeral assistance program, DHS OIG special agents are actively and
independently collaborating with FEMA to facilitate early detection of
fraud.
DHS OIG also developed an innovative approach to enhance the way we
identify COVID-19 fraud schemes. Our team of special agents, forensic
accountants, analysts, digital forensic examiners, and data scientists
provides a multidisciplinary approach to analyzing large and complex
data sets to identify fraud indicators and develop investigative leads.
Using its expertise and a suite of cutting-edge data analytics tools,
along with support from other Federal, state, and local partners, DHS
OIG has uncovered complex, multi-million-dollar fraud schemes involving
FEMA personal protective equipment (PPE) contracts and facilitators of
major unemployment insurance fraud schemes involving FEMA funds. Over
the last 10 months, our team has executed 15 search warrants and
seizures, recovered $3 million, and realized 10 judicial actions, and
our team continues to open new investigations that will likely yield
high-impact results. We also developed an analytical dashboard to
identify fraudulent FEMA vendors who were contracted to provide PPE for
the National Stockpile. We have shared our model practice with the
Inspector General community and through the PRAC.
In addition, we established an internal COVID-19 fraud
investigation team dedicated to identifying and investigating
unemployment insurance fraud. This team is comprised of geographically
dispersed agents who conduct high impact COVID-19 fraud investigations
nationwide. In addition to investigating fraud associated with FEMA
COVID-19 funding, these agents coordinate with task forces, working
groups, and United States Attorney's Offices nationwide.
Examples of our high-impact FEMA COVID-19 fraud investigations
include:
Personal Protective Equipment Contract Fraud
On February 3, 2021, the Chief Executive Officer (CEO) of Federal
Government Experts, LLC (FGE) pleaded guilty to making false
statements, wire fraud, and theft of government funds. The
investigation determined the CEO repeatedly, and falsely, claimed to
contracting officials from FEMA and Veteran's Affairs (VA) that he was
in possession of large quantities of PPE, including N95 masks.
Based on the CEO's statements, FEMA and the VA awarded FGE
contracts to deliver more than 6 million N95 masks for a total cost of
$38.5 million. FEMA intended to procure the N95 masks for the National
Stockpile, and the VA intended to use the PPE to protect employees and
patients at various VA facilities. Despite the CEO's claims, FGE failed
to supply any PPE to FEMA and the VA. Ultimately, it was determined
that the company was never in possession of large quantities of PPE or
N95 masks despite the CEO's fraudulent claims.
In addition, it was determined the CEO applied for various loans on
behalf of FGE under the Federal Payroll Protection Program (PPP) and
the Economic Injury Disaster Loan (EIDL) Program. The loan applications
submitted by the CEO falsely stated the number of FGE employees and the
amount of FGE's payroll. Specifically, the CEO claimed FGE had 37
employees when, in fact, the company had 9. The CEO also claimed he had
a monthly payroll of $322,000 when, in fact, FGE's monthly payroll was
$13,907. FGE was awarded PPP and EIDL loans in the amount of $1.06
million. On June 16, 2021, the CEO was sentenced to 21 months in
Federal prison, with 3 years of supervised release, and paid $348,714
in restitution.
Lost Wages Assistance Fraud
In November 2020, DHS OIG determined that an individual and her co-
conspirators fraudulently acquired $436,834 in FEMA Unemployment
Insurance (UI) benefits, which included using the identities of state
prisoners. On April 8, 2021, the United States Attorney's Office for
the Eastern District of Virginia issued a nine-count indictment
charging four defendants with conspiracy to commit fraud in connection
with major disaster benefits, fraud in connection with major disaster
benefits, and mail fraud. One of the defendants pleaded guilty on June
24, 2021, and is scheduled to be sentenced in October 2021. Judicial
outcomes regarding the three co-defendants are pending.
In a similar scheme, an individual pleaded guilty on June 11, 2021
to mail fraud for her role in fraudulently obtaining FEMA unemployment
benefits for 22 prison inmates. With the assistance of an inmate co-
conspirator, the individual used the identities of prisoners to file
fraudulent UI claims to collect at least $223,984 in unemployment
benefits.
We continue to build and maintain relationships with our Federal,
state, and local law enforcement counterparts and to use data analytics
to identify significant fraud rings that impacted FEMA's Lost Wages
Assistance Program. Given our current limited funding, we are focusing
on Federal, state and local partners in areas most heavily impacted by
unemployment insurance fraud. As we identify new fraud schemes, the
number of cases will continue to grow.
Audits
Between 2014 and 2017, DHS OIG issued three reports on DHS'
readiness to continue mission essential functions during a pandemic. In
FY 2014, we reported \5\ that DHS did not adequately assess its needs
before purchasing pandemic preparedness supplies and did not
effectively manage its stockpile of pandemic PPE and antiviral medical
countermeasures. In FY 2016, we reported \6\ DHS did not ensure
sufficient coordination, adequate training, and consistent screening of
people arriving at U.S. ports of entry during its response to Ebola. In
FY 2017, we reported \7\ that DHS may not be able to effectively
execute its preparedness plans during a pandemic. In total, we made 28
recommendations and those recommendations are closed. In FY 2021, we
conducted a verification review of DHS' efforts to determine the
adequacy and effectiveness of DHS' corrective actions to our prior
recommendations.\8\ While the Department provided adequate
documentation of its initial plans and actions to address the 28
recommendations, DHS did not effectively implement corrective actions
to address three recommendations intended to provide operational
efficiencies and controls needed in the current pandemic. We made three
recommendations to ensure we improved department-wide oversight of PPE
and pandemic planning. The Department concurred with the three
recommendations and they remain open.\9\
---------------------------------------------------------------------------
\5\ DHS Has Not Effectively Managed Pandemic Personal Protective
Equipment and Antiviral Medical Countermeasures (OIG-14-129).
\6\ DHS' Ebola Response Needs Better Coordination, Training, and
Execution (OIG-16-18).
\7\ DHS Pandemic Planning Needs Better Oversight, Training, and
Execution (OIG-17-02).
\8\ Ineffective Implementation of Corrective Actions Diminishes
DHS' Oversight of Its Pandemic Planning (OIG-21-14).
\9\ A recommendation is considered open when agreed-upon corrective
action has not been implemented. A recommendation is resolved when the
Component management official and OIG agree on (1) the reported
findings and recommendations, (2) the corrective actions to be taken,
and (3) where appropriate, target completion dates.
---------------------------------------------------------------------------
We recently completed an audit that is directly relevant to FEMA's
ability to deliver crucial supplies in response to COVID-19 but was
initiated prior to the COVID-19 pandemic: FEMA Must Strengthen Its
Responsibility Determination Process (OIG-21-44). We conducted this
audit to determine whether FEMA contracting personnel followed Federal
regulations, DHS policies, and FEMA procedures when awarding disaster
response contracts. We found FEMA contracting personnel did not always
take the necessary steps to ensure prospective contractors could
deliver goods and services during compressed disaster response
timeframes. As a result of inadequate guidance, FEMA personnel awarded
contracts without making fully informed determinations as to whether
prospective contractors could meet contract demands. Between March and
May 2020, FEMA awarded and canceled at least 22 contracts, valued at
$184 million, for crucial supplies in response to the national COVID-19
pandemic. By awarding contracts without ensuring prospective
contractors can meet contract demands, FEMA will continue wasting
taxpayer dollars and future critical disaster and pandemic assistance
will continue to be delayed. We made one recommendation to strengthen
FEMA's responsibility determination process. FEMA concurred with our
recommendation and it remains open.
In the early days of the COVID-19 pandemic, DHS OIG identified the
need to collect data before launching audit work in this unprecedented
area. Therefore, in March 2020, DHS OIG began gathering DHS and the
U.S. Department of Health and Human Services (HHS) pandemic response
data in real time. We observed daily and semi-weekly interagency
conference calls hosted by FEMA and HHS officials and monitored FEMA
and HHS' daily national COVID-19 situation reports. OIG used this
information to inform ongoing and proposed projects related to the
pandemic.
Since June 2020 our auditors have been monitoring FEMA's use of
CARES Act funds in addition to FEMA's vaccine support role. Our
auditors participate with Federal, state, and local oversight officials
on various working groups, including the PRAC and the National
Association of State Auditors, Comptrollers and Treasurers' COVID-19
Accountability Work Group, to coordinate oversight work across local,
state, and Federal agencies and to identify issues related to the
administration of CARES Act and the ARPA funding. Finally, our Office
of Audits is actively involved in DHS OIG's Disaster Relief Working
Group, which focuses on our COVID-19 oversight work. This group
collectively identifies common oversight issues and facilitates
coordination and deconfliction.
Since March 2020, we have initiated nine new audits related to
FEMA's response to COVID-19, including audits of FEMA's Federal
coordination efforts and medical supply chain. Our ongoing audits of
FEMA's COVID-19 response include:
FEMA's Federal Medical Supply Chain in Response to COVID-
19: Our objective is to determine to what extent FEMA managed and
distributed medical supplies and equipment in response to COVID-19.
FEMA's Federal Coordination Efforts in Response to COVID-
19: Our objective is to determine how effectively FEMA supports and
coordinates Federal efforts to distribute PPE and ventilators in
response to the COVID-19 outbreak.
FEMA Emergency Food and Shelter Program (EFSP)
Administration of CARES Act Funding: Our objective is to determine
whether FEMA is administering CARES Act funding for the EFSP in
accordance with Federal requirements to meet program goals.
FEMA's Response to Declaration Requests for States,
Tribes, and Territories: Our objective is to determine whether FEMA
follows its policies and procedures consistently when responding to
state, tribal, and territorial declaration requests.
FEMA's Controls of Mission Assignments in Response to
COVID-19: Our objective is to determine to what extent FEMA develops
and oversees mission assignments for COVID-19 in accordance with FEMA's
policies and procedures.
FEMA's Disaster Relief Fund for Lost Wages Assistance to
DHS Employees: Our objective is to determine to what extent eligible
DHS employees received FEMA's DRF for supplemental state lost wages
assistance.
FEMA's DRF Lost Wages Assistance to States and
Territories: Our objective is to determine to what extent FEMA ensured
states and territories distributed supplemental state lost wage
assistance from the DRF to eligible recipients.
FEMA's Funeral Assistance for COVID-19: Our objective is
to determine how effective FEMA's policies, procedures, and internal
controls are in providing proper oversight of its funeral assistance
program for COVID-19.
FEMA's Workforce Management during Concurrent Events: Our
objective is to determine whether FEMA is effectively planning,
managing, and deploying its workforce to successfully respond to
concurrent and consecutive disasters and emergencies, including
assisting other DHS components or Federal agencies.
We look forward to reporting the results of these audits when they
are complete.
Our oversight of the Department and its components would not be
possible without the continued, bipartisan support from Congress that
we have received for our budget requests. Because of that support, we
expanded our ability to obtain and analyze a growing volume of digital
forensic evidence, initiated efforts to modernize our information
technology infrastructure, and we augmented our program and support
staff to enhance our effectiveness. For example, we hired experts to
help us improve our business information systems, improve the strength
of our processes, and increase the efficiency of our workforce. In
addition, we hired additional special agents in our Major Frauds and
Corruption Unit to expand our ability to combat COVID-19 fraud.
Congress' support has directly enhanced our ability to promote
accountability and deter future fraud against DHS and its programs.
Thank you for the opportunity to discuss the important work of DHS
OIG and our continued oversight of the Department and FEMA's COVID-19
response. This concludes my testimony, and I look forward to answering
any questions you may have.
Mr. DeFazio. Thank you for that. We will now proceed to
questions to the first panel, and I think I will start with
you, Mr. Izzard.
Congratulations on the fraud you identified. Obviously,
part of the problem was the lack of stockpile and preparedness
that DHS had. And then, as I understand, some of the stockpile
was outdated, proved to be otherwise not usable. Where are we
at now?
We are looking now--we are wearing masks again. That is
just the Delta variant. Who knows what Epsilon, or Foxtrot, or
whatever the next two are going to be. Where are we at in doing
a better job of having a stockpile, so we don't have to go out
for bids to unknown, specious vendors, and get ripped off?
Mr. Izzard. Thank you for that question, sir. As mentioned,
we have a number of ongoing projects that are looking at FEMA's
readiness and preparedness to handle the pandemic. They are
ongoing. And I would really be happy to take that back as a
get-back, to make sure that we provide you a specific and
detailed response to answer your question.
Mr. DeFazio. I would appreciate that. I have read recently
that we are now sourcing the N95s in the United States, which
would be greatly preferable.
I got involved--there was a gentleman in Texas who had--
when 3M abandoned the U.S. to go get cheap labor in China, they
abandoned a plant, and this gentleman bought it, and he was
running it with just one line, because he didn't have a lot of
business, and then he wanted to ramp it up, but it took quite a
bit of convincing and cajoling to get FEMA to work with him, as
opposed to all this stuff we were trying to fly in from China.
So I would like to get an update on that.
And then I also--for Mr. Currie--no, that is all right, we
have covered that.
I had another question here.
Well, if you could all just sort of generally give a 30-
second--in the areas which you oversee, a 30-second summary of
what we can do to make this better in the future, and answer
whether or not it requires specific changes in authorization or
authority by Congress, or if this has all been internal to the
bureaucracies and the Federal administrative rules.
I know that is a lot to say, but give it a try. So we would
start with the first panelist. That would be Michael Horowitz.
Mr. Horowitz. Mr. Chairman, just a couple of things. I do
think that work can continue to be done, as you referenced
earlier, to advance transparency, to ensure that all
information, all data is getting out there about how money has
been spent, and where it has been spent, and to whom the money
has gone to.
We also think additional controls need to be put in place,
and we have been working over the last many months with OMB
leadership, and with the ARP implementation team leadership to
do that.
In terms of additional efforts that could be done from a
congressional standpoint, or legislative standpoint, I think
some of the needs of various programs, to ensure that they are
taking the steps they are legally allowed to take with regard
to, for example, data matching, and identity theft, that those
agencies can undertake those efforts to try and address what
are pretty substantial concerns in both of those spaces.
Mr. DeFazio. OK, thank you.
Ms. Krause?
Ms. Krause. Sure. Yes, I would say there is a mix of things
that both can be done when you are setting up programs in the
future, as well as things that can still be handled on an
ongoing basis, as we continue to respond.
We identified some lessons learned, so coordinating, and
identifying, defining roles and responsibilities when you are
setting up the programs, and also as you are executing things,
providing clear and consistent communication. I think we saw
some challenges with that, with some of the program
implementation.
But there are opportunities, as, say, Treasury rolls out
the CERTS Program, and FAA rolls out the Aviation Manufacturing
Jobs Protection Program to sort of improve communications, and
provide clear and consistent communications.
I think, again, establishing strong accountability and
transparency mechanisms, those are things that, I think, as you
heard from the panel today, a lot of us are continuing to look
at, and audit, and oversee as agencies begin to set those up.
Mr. DeFazio. OK, thank you. And then Mr. Izzard?
Mr. Izzard. Thank you, sir, for the question. I would echo
the comments of my fellow panel members, except just to add,
again, to really highlight what we believe is important, is
accountability and transparency in the programs and processes.
From an oversight perspective, we continue to allow our
existing work to inform our future work. So, as we continue to
learn more things in our existing work, I think that will help
to tell us where we go next.
As well as maintaining collaboration with FEMA, we do
currently have collaborative efforts with FEMA within the lanes
of our mission space, to ensure that they are able to detect
fraud, and understand what types of things that we need to look
for in their programs. So that is, I think, how we would answer
that, from a DHS OIG perspective.
Mr. DeFazio. OK, thank you. My time has expired.
OK, I recognize Representative Webster for 5 minutes.
[Pause.]
Mr. Webster. Thank you, Chair. I have a question, I think,
of Mr. Horowitz, and that is, do you think that, if there is--I
don't know if you investigated the fact that the money may have
been spent properly, it may have been the right price at the
right time, so forth, but if the science was flawed, would that
have affected something that you might ask, in that we are
buying things, but we don't even need to buy them?
Was there anything in your reports or any of the things
that you did that would distinguish between right and wrong in
that area?
Mr. Horowitz. Congressman, we wouldn't generally look at
trying to assess that kind of a question. Our HHS OIG, Health
and Human Services inspector general, has done a fair amount of
work on the healthcare-related issues, and I can certainly
follow up with her in that office to see if there is anything
in particular that would address your question. But I am not
aware of it, as I sit here today.
Mr. Webster. Yes, well, for 60 years there has been an
acceptance of some flawed information that has been proven
flawed in the last month or so, dealing with the size of
particles, and are they airborne, an aerosol, or are they
droplets that fall to the ground.
So there were, literally, millions of these [indicating
hand sanitizer bottle] bought by who knows who, everybody. And
there was a bunch of dots that are on the ground--some of them
are still out there--to keep 5 to 6 feet of distance between
other people. All of that, basically, if this disease was
carried from air particles, would be flawed, in that we would
have spent millions, maybe billions of dollars on things that
really didn't do any good, and it has been proven in this
report that came out a couple of weeks ago from Linsey Marr,
who is an aerosol scientist at Virginia Tech, but also is one
of the few people in the world who is also studying infectious
diseases.
So in the end, we ended up buying things that may have been
the right price, we just didn't need them. And I just wondered
if there is--I mean, that may be just as fraudulent as charging
too much for some sanitizer.
[Pause.]
Mr. Webster. So I guess my question would be is there
anything in the future that you might be looking at that would
also make sure that what we are buying is what we need?
Mr. Horowitz. Well, I will say, Congressman, as an IG
community, we do look at questions about whether what has been
purchased is consistent with what is needed. Obviously, over
time, as information is learned and issues come up, that could
evolve. But it is certainly something that we would look at in
the context of what has been purchased, generally.
And I will just say, in terms of the website,
PandemicOversight.gov, we are trying to put out there so that
the public can see how money has been used, and where it has
been used. Much of what we do, as inspectors general, is to get
information out to the public, so that they can assess how that
spending has occurred.
Mr. Webster. Yes. Well, unfortunately, the bedrock of the
science in every medical journal and medical book and doctors
and their training, and so forth, stress hand washing, which is
a good thing to do, and doesn't have anything to do with this,
and distancing, in that the particles are--6 feet is enough
distance. And therefore, that is OK.
And so that was sort of the basis of all of the protection
that was being done, including in this chamber. I remember
telling some of the leadership, ``You don't have to be washing
the doorknobs. It is in the air.'' But CDC and WHO were both
saying, no, it is not, it gets into a droplet, falls to the
ground, which was totally inaccurate, and has been proven
false.
I don't know, I just think we spent a lot of money on some
things that didn't really need to be bought. But my time has
run out, and I would love to discuss this further.
I yield back.
Mr. Larsen [presiding]. The Representative's time has
expired. The Chair recognizes Congresswoman Norton for 5
minutes.
Ms. Norton. Mr. Chairman, can you hear me?
Mr. Larsen. We can hear you, yes.
Ms. Norton. I very much appreciate this hearing, as we try
to focus on what we have learned for the future.
My first question is for Inspector General Soskin. The
District is Amtrak's hub, so I am particularly interested that
Congress provided almost $4 billion in supplemental
appropriations for Amtrak, in response to COVID-19 earlier this
summer. You did an audit report on the Federal Railroad
Administration's program of oversight of Amtrak's use of
Federal funding. Your report found a range of problems at FRA:
incomplete policies to assess Amtrak's adherence to programs,
et cetera. You made several recommendations to FRA to improve
its oversight.
Can you describe FRA's response to your office's findings,
and the specific steps it plans to take to implement the
recommendations?
Mr. Soskin. Yes, Representative Norton, I can.
That audit report on FRA's oversight of Amtrak grant
spending recognized in it its likely application, and the
application of those recommendations to the future spending
through CARES Act and other coronavirus relief funds that
actually exceed the amount of grant funding that FRA typically
administers for Amtrak.
And we made several recommendations, which FRA has
accepted, and is in the process of implementing, I believe,
with target dates for closure later in 2021. Those
recommendations include that they create measurable oversight
goals and metrics for their oversight of Amtrak spending; that
they create and develop policies and procedures by which they
can track, on a comprehensive basis, the issues that are
identified in their oversight, so that they don't just identify
issues, and then those remain unaddressed by Amtrak; and
relatedly, that they develop a more robust set of procedures to
identify issues they identify that may need to be escalated to
a higher level, to work with Amtrak to assure compliance with
what has been identified in FRA's oversight.
We believe that, if these recommendations are implemented,
and implemented successfully, and executed upon, they will
greatly assist FRA's oversight of those Amtrak supplemental
funds in the COVID relief legislation.
Ms. Norton. I appreciate that you set target dates, and
that, apparently, these dates are being adhered to.
My next question is for Mr. [sic] Krause of GAO.
I am chair of the subcommittee that has just passed the
transportation infrastructure bill. And the District, of
course, has Metro, and is dependent on transit. So I am
particularly interested in the billions in grant assistance to
help transit agencies that Congress provided to manage their
fiscal restraints.
So, Mr. [sic] Krause, I would like to ask, how did the
Federal Transit Administration perform in managing such a large
influx of funds, and getting it to transit agencies in a timely
manner?
Ms. Krause. Thank you, Congresswoman Norton. This is
actually Heather responding to your question, Heather Krause.
So FTA, we found that they had some initial implementation
challenges, because the use of funds was expanded beyond what
they typically did. But when we have talked to transit
agencies, they identified very few challenges that they have
experienced in getting the funds.
As it has been implemented, and as we get into the newer
funds that have come out, there are more challenges at the
local level, as they figure out how to allocate the funds among
different entities at the local level.
But otherwise, we have heard few challenges from the
transit agencies, in terms of implementation. I know that our
colleagues at the DOT IG are looking more closely at----
Mr. Larsen. The gentlewoman's time has expired.
The Chair recognizes Representative Davis of Illinois for 5
minutes.
Mr. Davis. Thank you, Mr. Chair. My first question would be
to Mr. Horowitz.
First off, I want to say thank you for the work that you
and your team have done on a wide variety of issues that you
and your team and this country has faced over the last few
years.
I do want to raise an issue that falls outside the realm of
transportation and infrastructure, though. But you raised it in
your testimony, and that is because it affects many of my
constituents, including me, and it is the issue of unemployment
insurance fraud.
Does your committee have data on how many individuals were
victims of identity theft during the pandemic, as it relates to
attempts to defraud the unemployment insurance system, and how
much money has the Federal Government been defrauded?
Mr. Horowitz. Congressman, we have worked, the PRAC,
closely with the IG at the Labor Department on these issues,
and the Department of Labor OIG has done a lot of work in this
space, and has made some estimates that the amount of fraud
could be upwards of 10 percent at this point. But it is still
unknown, I should emphasize, as we are investigating and
looking at these issues.
But one of the significant issues, as I mentioned, and as
you referenced, has been identity theft, and the number of
people that we have heard from have expressed concerns about
having their identity stolen, of course. There are two
problems, two very serious problems that arise from that, as
you know. One is the program itself gets defrauded. But then,
separately, you have the victim, whose identity has been used,
who has to deal with the fallout from their credit, other
issues, security clearances, perhaps, if you are a Federal
employee, or employed in a sensitive position, and a number of
challenges that arise as a result of that.
And that is why we set up the Identity Fraud Working Group
that we did, to try and tackle that problem.
Mr. Davis. Well, thank you, Mr. Horowitz. As I mentioned, I
was a victim myself, in my home State of Illinois. And after
going through that ordeal, we tried to make sure that all of
our constituents who were affected knew the right steps to take
to protect themselves, and protect their families, and their
own identity.
But with that being said, sir, do you have any policy
recommendations that you could lay out that might make it into
any final report or recommendation?
Mr. Horowitz. We have, as a community, put out some--
actually, the Labor Department IG and the SBA IG have public
reports that they have recently issued on that, and certainly
would be happy to send them to you. Much of it focused on what
the agencies can do to both detect potential identity theft
before it occurs, so stop it in its tracks, and then also, when
it does occur, how to help victims of identity theft address
those problems.
So, for example, ensuring--and some of these are maybe
obvious steps, but steps that--SBA OIG, for example, has
recommended, with regard to the Economic Injury Disaster Loan
Program, [inaudible] the importance, for example, of just
maintaining and tracking identity theft complaints, processing
information about identity theft, and helping to restore
identity theft victims to their condition prior to the fraud,
including stopping loan billing statements, preventing
delinquency collections, taking what may seem like commonsense
steps, but steps that aren't necessarily yet being done. And
the IG there, and the IG at the Labor Department has also made
recommendations that they are following up on. I am happy to--
Mr. Davis. Thank you.
Mr. Horowitz [continuing]. Talk with you further about
that.
Mr. Davis. Thank you. With that, you know, we tried to
address the issue of unemployment in our initial funding given
to States. Like, my home State of Illinois got $40 million to--
over $40 million, I believe to implement a pandemic
unemployment insurance system to avoid some of these issues.
Is there any work being done at the DOJ to investigate
where those administrative fees might have gone, and what
States could have done better to actually address identity
theft on the front end, and unemployment fraud on the front
end, since they got that administrative money before the
pandemic unemployment insurance system was in place?
Mr. Horowitz. That is an excellent question, and important
question, Congressman. I would have to follow up with the
Department on what they may be doing, investigatively, in that
regard.
But I do know, from working with and speaking with the
Labor Department IG, and with our meetings that we have had
ongoing with OMB leadership, that this an important area that
the Labor Department IG has been following up on, and taking
steps to look to address within the UI program, and that we
have been raising consistently at the PRAC level, and are going
to continue to try and move forward on to get the steps taken
to try and address this very serious problem.
Mr. Larsen. The Representative's time has expired. I now
recognize myself for 5 minutes, and my first question is for
Ms. Krause of the GAO.
Since 2015, I have called for a National Aviation
Preparedness Plan, following, in fact, your agency's
recommendation from 2015. We have learned some lessons over the
last year, and you have mentioned it in your testimony and
report. Ms. Krause, could you elaborate on the GAO's
recommendation for such a plan, and any new issues that ought
to be addressed since your recommendation was released?
Ms. Krause. Thank you, Mr. Larsen. We continue to advocate
that this is something important that DOT needs to follow
through on.
Given how the pandemic rolled out at the beginning, I think
it would have benefitted by having a National Aviation
Preparedness Plan to more clearly outline roles and
responsibilities, as well as airlines and airports have
individual plans that can feed into a national plan, so that we
are better prepared.
Mr. Larsen. I note, as well, for maybe Mr. Currie, the
joint testimony states the Department of Transportation
maintains that the HHS and Homeland Security should lead the
effort to develop a preparedness plan. Are those agencies in a
position to work with DOT in developing a plan?
Mr. Currie. Yes, sir. It is a good question. Those agencies
are definitely more broadly responsible for national biodefense
strategies, and so they should include those types of agencies,
and work with them.
But I totally agree that, in the space of the aviation
environment, the Department of Transportation would be the one
expected to take the lead on something like that, working with
their industry. DHS and HHS just have too much to do across the
board to focus in on every single industry.
Mr. Larsen. Yes, thanks. I think we always saw, though,
upon the announcement that, basically, U.S. citizens had to get
back to the U.S., and were given very few days to do that--I
think that was in February or March--clearly, DHS has a role,
as Americans flooded immigration turnstiles throughout the
country.
So with this apparent conflict of agencies saying, ``It is
not our job, it is their job, it is not our job, it is their
job,'' is there a different agency--does the NSC, National
Security Council, need to get heads together to make this
happen?
How do we get past the gridlock of finger-pointing at the
bureaucracies? Have you thought through that, either Mr. Currie
or Ms. Krause?
Mr. Currie. This is Chris Currie, I can take that.
Absolutely.
So what we have been recommending for years, and what is
being done right now is there has been a national biodefense
strategy, even well before the pandemic, that is supposed to
work across the entire Federal Government. And the Aviation
Pandemic Plan would just be a piece of that, a sub-piece of
that within the industry.
So it is pretty well spelled out, who is responsible at the
highest level. HHS and DHS have that broad authority to develop
the strategy, and work with the White House and NSC, as you
have said. But as I mentioned, I totally agree with Ms. Krause,
that the Department of Transportation would have the lead in
working specifically with their industry.
Mr. Larsen. That is great. Thank you both very much.
And just a reminder to Members, I have a bill to direct the
DOT to develop a National Aviation Preparedness Plan, and would
welcome cosponsors on that bill.
Continuing on, Ms. Krause, I think it is page 17 of your
testimony, and if you could just quickly address the Aviation
Manufacturing Jobs Protection Program, which we approved in the
American Rescue Plan, it has been set up, the first round of
applications are in, DOT has reopened the application process
through August 4th--I think I got the dates right.
Have you started to look at the DOT's rollout of the
application process, or will you wait a certain amount of time
before GAO looks at the rollout of the plan?
Ms. Krause. Yes, we have already begun work on that, in
meeting with DOT and understanding how they are implementing
the program, as well as talking to some of the industry
associations to get a sense as to how the implementation has
been going.
I mean, initial conversations is they feel like the
communication has been good from DOT with that program. But
obviously, we will be following closely, and expect to report
out on the status of that implementation later this fall, in
October.
Mr. Larsen. And one of your points in your report is that a
lot of these programs were rolled out through existing
mechanisms throughout the agencies. This was one program that
sort of had to be created from whole cloth. Is it one of the
things you are looking at, the compare-and-contrast of that, of
those activities?
Ms. Krause. Yes, certainly. I think what we found, as we
have looked at all the different transportation programs,
whether it is at Treasury or DOT, is if they are going through
existing programs, that does help facilitate implementation.
But when you are setting up new programs, or with entities
that you don't typically either work with or have that kind of
relationship with the agency, like DOT, or get this type of
funding, typically, it is taking some time to get the program
stood up, the guidelines out there, and then, obviously, some
mechanisms on the back end to track the funds.
Mr. Larsen. That is great. Thanks. My time has expired. I
appreciate the answers from the both of you very much. And I
now recognize Representative Massie of Kentucky for 5 minutes.
Representative Massie.
Mr. Massie. Thank you, Chairman Larsen. I would like to ask
unanimous----
Mr. Larsen. Mr. Massie, could you try your volume? And we
will try on our end to increase your volume, as well, thank
you.
Mr. Massie. All right, can you hear me?
Mr. Larsen. A little better, thank you, yes.
Mr. Massie. All right, I would like to ask unanimous
consent to submit to the record two articles from NPR. The
first one is from August 5, 2020, titled, ``Foreign Workers
Living Overseas Mistakenly Received $1,200 U.S. Stimulus
Checks,'' and the second article is, ``IRS Says Its Own Error
Sent $1,200 Stimulus Checks to Non-Americans Overseas.''
Mr. Larsen. Without objection.
[The information follows:]
Article entitled, ``Foreign Workers Living Overseas Mistakenly Received
$1,200 U.S. Stimulus Checks,'' by Sacha Pfeiffer, NPR, August 5, 2020,
Submitted for the Record by Hon. Thomas Massie
Foreign Workers Living Overseas Mistakenly Received $1,200 U.S.
Stimulus Checks
by Sacha Pfeiffer
NPR, August 5, 2020
https://www.npr.org/2020/08/05/898903600/foreign-workers-living-
overseas-mistakenly-received-1-200-u-s-stimulus-checks
Thousands of foreign workers who entered the U.S. on temporary work
visas received $1,200 checks in error during the first round of
stimulus payments, and many of them are spending the money in their
home nations. One tax preparation firm told NPR that it has clients
from 129 countries who mistakenly received stimulus checks, including
Brazil, Canada, China, India, Nigeria and South Korea.
Government officials and tax experts say the mistake happened
because many foreign workers, whether unintentionally or on purpose,
file incorrect tax returns that make them appear to be U.S. residents.
Some of them are now trying to amend their returns because they worry
that having mistakenly received a stimulus check will jeopardize their
visa status, green card application or ability to return to the U.S.
How much stimulus money was mistakenly sent to foreign workers
living overseas is difficult to quantify. But Sprintax, which does U.S.
tax preparation for nonresidents, did about 400 amended returns last
year for people who mistakenly filed as U.S. residents, and so far this
year it has done 5,000--almost 5% of the total federal tax returns it
filed last year, according to the company. If just 5% of last year's
more than 700,000 student and seasonal workers with F-1 and J-1 visas
received a stimulus check in error, that would total $43 million.
The ``economic impact payments'' sent erroneously to non-U.S.
citizens are the latest in a series of mishaps involving coronavirus
relief efforts, including nearly $1.4 billion in stimulus checks sent
to dead Americans. As Congress debates another pandemic relief package,
it's considering a second round of payments that would exclude the
deceased, but its new bill does not address the problem of $1,200
checks having mistakenly gone to foreign workers in other countries.
Many of those workers are college students, often from Eastern
Europe and South and Central America, who travel to the United States
for temporary and seasonal low-wage jobs such as waiters, lifeguards
and hotel housekeepers at ski resorts, amusement parks and beach
destinations. In a typical year, the U.S. issues work visas to several
hundred thousand foreign students.
One of them is a 24-year-old citizen of the Dominican Republic who
spent last summer working at a Cape Cod grocery store and this spring
received a $1,200 stimulus check signed by President Donald J. Trump.
``I was really surprised because I was not expecting that money,''
the man told NPR, which agreed not to identify him because he is
concerned that receiving the check could put him at odds with the U.S.
government.
``I don't want . . . any problems,'' added the man, whose former
Cape Cod landlord received the check and sent it to him in the
Dominican Republic. ``If they say that we have to return it, I will
return it. It is not a problem.''
He said numerous foreign student workers he knows have also
received stimulus checks, including people in Bulgaria, Colombia,
Jamaica and Montenegro. Sometimes the checks were directly deposited
into bank accounts on file with the IRS. Sometimes the checks were
mailed to their former U.S. addresses and forwarded to them. And some
checks could have been mailed to them directly overseas.
The payments were intended to stimulate the U.S. economy by giving
consumers spending money, but this Dominican man is not able to work on
Cape Cod this summer because the Trump administration's freeze on
foreign work visas has prevented seasonal workers from coming to the
U.S.--so he'll be spending his stimulus payment in his own country.
``This money, to be honest, is a big help,'' he said, ``because we
can buy food, we can pay the cable services, and we also can pay the
university,'' referring to a school in the Dominican Republic where he
takes online classes.
Only U.S. citizens and U.S. ``resident aliens'' are eligible for
stimulus money, but the Dominican man interviewed by NPR and some of
his friends do not meet that eligibility standard. A ``resident alien''
is a federal tax classification, and to qualify for it an individual
needs a green card or must have been in the U.S. for a certain amount
of time.
The U.S. government acknowledges that some stimulus checks were
improperly sent to foreign workers and told NPR that the Treasury
Department is ``exploring possible options'' to prevent that from
happening again.
Most foreign workers should file a form 1040-NR--the NR stands for
nonresident--but instead mistakenly file a 1040, the form most commonly
used by individual U.S. taxpayers, according to Georgia attorney
Clayton Cartwright, who specializes in immigration tax law and has a
background in accounting.
LEFT: Stimulus checks are prepared on May 8, 2008, in Philadelphia. In
2020, stimulus checks again went to many Americans, this time during
the pandemic's economic fallout. Some of that money went to thousands
of foreign workers not eligible to receive the funds. Jeff Fusco/Getty
Images
RIGHT: Thousands of foreign workers mistakenly received economic
stimulus checks from the U.S. government, likely because many filled
out an IRS 1040 tax form instead of a nonresident 1040-NR form. Daniel
Acker/Bloomberg via Getty Images
``I would say probably anywhere to a third to a half [of first-time
foreign filers] are filing the wrong return,'' especially if they use
e-filing software such as TurboTax that is intended only for U.S.
residents, Cartwright said.
When foreign workers file the wrong form, ``I don't know if the IRS
would even be able to tell,'' he added. ``I mean, they have no way of
knowing. You don't mark on your [Form 1040] tax return whether you're a
citizen.''
If a foreign worker files an incorrect tax form and also has a U.S.
address, a bank account on file with the IRS, and a Social Security
number--as many foreigners with work visas do--that increases the
likelihood that the IRS would mistakenly mail them a stimulus check, he
said.
Some foreign workers did not realize they had filed incorrect tax
forms until they received a stimulus check in error this spring, and
they are now scrambling to amend their returns, said Sprintax's vice
president, Enda Kelleher.
``We saw a huge number of people contacting us after the first
stimulus payment because they said, `Hey, I got this check. I never
asked for it, I didn't think I was entitled to it, and how can I
correct it?' '' he said.
Those clients were from 129 different countries, including
Argentina, Zimbabwe, Peru, Colombia, Vietnam, Pakistan, Spain, Japan,
Germany, Ghana, Russia, Nepal, Mongolia, Uzbekistan and the
Philippines, according to Kelleher.
``It's a serious issue,'' he added, noting that in a recent
Sprintax survey of more than 500 schools, 43% reported they had
students or scholars who think they received stimulus checks in error.
As a result, many schools ``believe it's a significant problem,'' he
said.
``It doesn't surprise me that that would have happened,'' said
Cartwright, the Georgia attorney. ``Now, does that make good policy
sense? Probably not.''
Cartwright said Congress was in ``panic mode'' in March as the U.S.
economy was shutting down over the pandemic, so it rushed stimulus
funding out the door. ``You know--damn the torpedoes, full steam ahead.
We've got to get the money out,'' he added. ``So they just do it and
just live with the consequences,'' including unintended ones.
``That is spillage,'' Cartwright said of the money that
accidentally leaked overseas as Congress tried to flood the U.S.
economy with stimulus money. ``I don't mean to sound flip or cavalier,
but it's spillage.''
The IRS says non-U.S. residents who received stimulus money in
error should return it. But Kelleher anticipates that if additional
stimulus payments are distributed, some foreign workers who tried to
send back their first mistaken check will get a second one.
Article entitled, ``IRS Says Its Own Error Sent $1,200 Stimulus Checks
to Non-Americans Overseas,'' by Sacha Pfeiffer, NPR, November 30, 2020,
Submitted for the Record by Hon. Thomas Massie
IRS Says Its Own Error Sent $1,200 Stimulus Checks to Non-Americans
Overseas
by Sacha Pfeiffer
NPR, November 30, 2020
https://www.npr.org/2020/11/30/938902523/irs-says-its-own-error-sent-1-
200-stimulus-checks-to-non-americans-overseas
The IRS now acknowledges that its own error caused some citizens of
other countries to mistakenly receive $1,200 coronavirus relief
payments--and that the mistake is likely to happen again if more
stimulus money goes out.
When reports of the mistake first surfaced, the U.S. government
placed the blame on those non-Americans, saying that many noncitizens
erroneously received stimulus checks because they had filed incorrect
tax returns that made them appear to be American.
But many non-Americans who received stimulus money do not file U.S.
tax returns. One of them is Susanne Wigforss, a 78-year-old Swedish
citizen who lives in Stockholm.
Wigforss was surprised in July to get a $1,200 check in the mail
from the U.S. Treasury. It was followed by a letter from the White
House signed by President Trump, addressed to ``My Fellow American''
and informing her that ``your economic impact payment has arrived.''
``I thought, `I can't believe it,' '' Wigforss recalled. ``They're
sending it to me. Why? I mean, it's crazy, isn't it?''
Only U.S. citizens and U.S. ``resident aliens'' are eligible for
stimulus money--``resident alien'' is a federal tax classification, and
to qualify an individual needs a green card or must have been in the
U.S. for a certain amount of time--and Wigforss is neither.
Asked about this by NPR, the IRS acknowledged it mistakenly sent
checks to some noncitizens who receive Social Security and other
federal benefits--such as Wigforss, who receives a small Social
Security payment from having worked in California for several years.
``This is so wrong,'' Wigforss said, ``because I saw that a number
of people were being evicted every month in Chicago, for instance, and
I thought one of those families would have needed this stimulus check.
Why should a Swedish citizen living abroad receive $1,200?''
``There's no way I'm going to cash this money--it doesn't belong to
me,'' she added. ``But how much money is bleeding out from the Treasury
Department because of these [misdirected] stimulus checks, I wonder?''
The U.S. government cannot answer that question. The Treasury
Inspector General for Tax Administration did find that, as of late May,
$34 million in stimulus money had gone to people who filed a tax return
with a foreign address.
But that includes eligible people, such as U.S. citizens living
abroad, and does not include ineligible foreign citizens who received a
check at a U.S. address. For example, NPR interviewed a citizen of the
Dominican Republic who was not eligible yet received a $1,200 economic
impact payment at his former address in Massachusetts. That $34 million
also does not include people, such as Wigforss, who received a check
but did not file a U.S. tax return.
Since Congress passed its coronavirus relief package in a hurry in
March, the U.S. government has put no mechanisms in place to prevent
these mistakes from happening again. As a result, if a new relief plan
with more stimulus payments passes in the final weeks of the Trump
administration or during the Biden administration, some of that money
is likely to mistakenly end up in mailboxes overseas again.
U.S. Treasury officials said they are ``continuing to assess the
accuracy of the economic impact payments . . . and the recovery efforts
for any erroneous payments.'' In the meantime, they told NPR, the IRS
is ``relying on individuals to voluntarily return these payments.''
``I think the poor folks in the IRS don't have the bandwidth to go
chasing this,'' said Enda Kelleher, a vice president at Sprintax, which
does U.S. tax preparation for nonresidents, ``but it would be great if
they did, because I believe that there's millions of dollars that have
gone to people that weren't entitled to it, or they're certainly not
the intended recipients.''
Kelleher said Sprintax has clients from about 150 countries who
mistakenly received stimulus checks, mostly commonly in India, China,
South Korea, Vietnam and the United Kingdom, as well as numerous
nations in Latin America.
``It's awful when we hear of millions of dollars going into the
wrong hands,'' he added, ``but it was probably within a somewhat
acceptable threshold of error or margin of error'' because Congress
opted for speed over accuracy when it flooded the U.S. economy with
money last spring.
Many non-Americans who erroneously received a check are trying to
return it because they worry it will jeopardize their visa or
immigration status, ``but there's equally thousands that are saying,
`Well, if they were silly enough to make this mistake, it's their
mistake and I'm not going to give it back until they ask for it,' ''
Kelleher said.
Van Shockley falls in that category. He's 74 and was born in
Pennsylvania, but he moved to Australia after becoming disillusioned
with U.S. politics in the 1960s.
``I had always been depressed when JFK was killed,'' he explained.
``I just couldn't get over that, so I started looking for someplace
else [to] start all over.''
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
LEFT: Susanne Wigforss, a Swedish citizen, poses with the letter she
received from the White House about the $1,200 economic impact payment
she received. Susanne Wigforss
RIGHT: Van Shockley, who gave up his U.S. citizenship and has been an
Australian citizen for about a half-century, mistakenly received a
stimulus check and suspects he got it because he receives Social
Security from having worked in the U.S. before moving overseas. Van
Shockley
Shockley gave up his U.S. citizenship and has now been an
Australian citizen for about a half-century. His last trip to the U.S.
was 40 years ago. But he, too, received stimulus money, even though he
is not eligible for it and does not file a U.S. tax return.
``That was the weirdest thing ever,'' he recalled. ``I checked the
mail and I pulled out a check. It had a Federal Reserve/Treasury
thingamajig on it with the eagle and all that. It's made out to me. I
thought: `What's it from--America? What the hell's going on here? Why
am I getting a check from the government?' ''
Shockley suspects he mistakenly got a check because he receives
Social Security from having worked in the U.S. before moving overseas.
``At first, I thought it was a joke,'' he said, ``and then I went
down to the bank and I said, `Do you have some way of verifying that
this is legal?' And the girl came back after five minutes and said,
`It's legal. You got the money.' ''
``I didn't ask for the money. I didn't expect any money,'' Shockley
added. ``But as soon as I got it, I stuck it in the bank. You ain't
getting it back!''
He attributes the mistake to U.S. government incompetence.
``Oh, complete stupidity. They're just not doing their job
properly,'' Shockley said. ``But I'm not complaining totally because I
was happy with the money!''
Mr. Massie. Mr. Horowitz, I want to focus on these stimulus
checks that were sent overseas to folks that weren't American
citizens. These articles were from last year.
But disturbingly, not only were the $1,200 checks sent, I
am aware of a situation where somebody who hasn't even worked
in the United States since the 1970s received not just the
$1,200 check, but the $600 check and the $1,400 check. This
individual does not file a U.S. tax return, and so there was no
way to know whether the individual even met the constraints or
requirements on income in order to receive these checks.
Can you tell me what the IG's office has done to
investigate these?
Mr. Horowitz. Yes, Congressman. So last year, for example,
the tax IG that oversees the IRS issued a report outlining a
series of problems with payments by the agency of stimulus
checks. And the GAO actually reported on that, as well, last
year, and outlined some of the matching that failed to occur at
the IRS with sending out the stimulus checks.
I would have to follow up with the tax IG about what
ongoing work they may have done with regard to the subsequent
checks that have been sent out. I am not familiar, frankly, as
I sit here today, with the ongoing work, and I believe GAO may
have some followup work, as well, in that space.
Mr. Massie. OK, if you could send those to my office, I
would appreciate it, as it comes out in real time.
Mr. Horowitz. Will do.
Mr. Massie. I am afraid, since all three checks went to the
particular person that I am aware of, and that this person does
not file a U.S. tax return--this person actually worked in the
United States in the late 1960s and early 1970s, and for that
reason is somehow in the database. This person does not file a
U.S. tax return. This person does not have a green card. This
person is not a U.S. citizen or a dual citizen of the United
States. And I would hope that we have the measures in place to
keep this money from going to these individuals, or maybe
Congress needs to acknowledge that they wrote a law that sends
money overseas to people who aren't citizens.
One of two things is true. We are either sending money to
people who don't qualify on the income level, people who don't
file tax returns, to people who don't work in the United
States, people who don't live in the United States. That is the
other thing. These checks are going to foreign addresses. I
would hope that would be a trigger to do a check to see if this
person is a citizen, if we are sending it to a foreign address.
Maybe we should check to see if they have filed a tax return.
I know U.S. citizens who didn't get checks. Some still
haven't gotten their checks, who are U.S. citizens, and it had
something to do with their tax return, yet this didn't keep
people who are foreign nationals from getting these checks, who
don't file tax returns, haven't filed tax returns in, you know,
in at least 40 years.
So I hope we will keep a check on that. And I don't want to
take any more of your time, and I appreciate you looking into
it. And I will yield back the balance of my time. Thank you.
Mr. Horowitz. Thank you.
Mr. DeFazio [presiding]. Representative Napolitano?
Mrs. Napolitano. Thank you, Mr. Chair.
Ms. Krause and Mr. Soskin, I want to follow up on
Representative Norton's question regarding assistance at
transit agencies.
Ms. Krause, you mentioned problems cities are having. Can
you expand on that? Can you tell us about those problems you
mentioned?
Ms. Krause. What I was getting at is more the time that it
takes at the local level to determine how to distribute the
funds, when you are at the urbanized area and the funds are
down at that level. There are some discussions at the local
level as to how to dedicate those funds to the different and
often multiple providers that are at the local level. So that
is what is playing out, in terms of some of the transit funding
now.
Mrs. Napolitano. Are there any problems other than that?
Ms. Krause. No. As I said before, when we have talked to
transit agencies, largely implementation has gone--they found
few challenges with implementation of the program from FTA.
Mrs. Napolitano. Thank you.
Mr. Soskin, Ms. Krause mentioned you would be able to
expand on the issues of assistance to transit agencies. Can you
please explain your work and findings on assistance to transit
agencies?
Mr. Soskin. Absolutely, Congresswoman Napolitano. We have
two audits planned on Federal Transit Administration relief
funding oversight. It is a sort of a two-phase audit, one of
which will be the design of the FTA's controls for requirements
and oversight risks during the awarding and life cycle of the
grants that they are providing to transit agencies, and the
second phase, or second audit will be a look at the
implementation of their controls.
In the relief funding management challenges report that we
identified for the Department of Transportation last year, we
also recognized several of the other oversight challenges, the
challenges the transit agencies will face with these funds.
One is that there is an interesting hybrid here of
providing funds through an existing program, but providing them
for new purposes, in terms of the operating expenses, and the
100-percent Federal share of those operating expenses. And we
look forward in our work to examining how the oversight and how
the expenditures work, given that new purpose within an
existing program.
And the other challenge we highlight is monitoring funding
and FTA's past reliance, in many cases, on either self-
certifications by transit agencies of their compliance with
eligibility and funding conditions, as well as the reliance on
oversight contractors, oversight support personnel who can be
contractors, who, of course, are a valuable, important resource
when the spigot of funds opens suddenly, as it has with
pandemic relief funding, and as it has with hurricane relief
funding in the past, with the ARRA funding a decade ago.
But ensuring that those support personnel are properly
trained, that they are familiar with the Federal oversight
restrictions, and that they have methods to ensure that
attention is brought to their recommendations and issues they
identify will be critical.
Mrs. Napolitano. Well, one of the transit agencies
indicated that they were having problems securing the PPEs. Can
you tell me why?
Mr. Soskin. I am not familiar with the details of that
issue of securing PPEs. I am not sure if we have done work in
that area, but my staff and I would be happy to follow up with
you about that question, and work with the Department to try
and get you a specific and accurate response.
Mrs. Napolitano. Thank you very much. I think it would be
important to find out why the distribution was held up to the
States, and then filtered down to the counties. And it made a
great problem for my transit agencies, especially the little
ones, too.
Thank you very much. Mr. Chair, I yield back.
Mr. DeFazio. Representative LaMalfa.
Mr. LaMalfa. Thank you, Mr. Chairman. I did want to touch
on the issue of commercial aircraft, and the mask-wearing issue
with COVID, and I wanted to address this to Mr. Soskin.
Last month, 27 of us sent a letter to TSA and CDC about
their decision to renew the mandate through September 13, at
least--not even sure when they are going to review the length
of time. But we asked them to review the policy, and remove or
modify it for passenger commercial aircraft. What we are
getting is reports of 75 percent of the unruly passengers
reports this year are because of the mask situation.
I think we have all seen the videos of people getting
pretty roughed up there, with the--if their 2-year-old doesn't
have the mask on, or it is not on the right way, and this while
people are on the plane that are not even wearing theirs
correctly, with the enforcement or what have you.
So we know that the aircraft themselves have extremely
efficient filters that do a good job through the HEPA filters,
of circulating the air through the aircraft, and cleaning it.
So the situation is such that people are getting extremely
frustrated, and that we are asking TSA and CDC to look at this
sooner, rather than after the complete summer season is over
with.
So what was the consideration for the social effects for
people that are on passenger planes, and the interaction this
would cause with passengers and flight personnel on the
aircraft?
Has that been considered by DOT at all, are you aware of,
Mr. Soskin?
Mr. Soskin. Well, Representative LaMalfa, first let me
express that we take extremely seriously the issue of unruly
passengers on aircraft, and the potential impact on aviation
safety. Our criminal jurisdiction here overlaps with the FBI's.
And it is important to note that FAA has instituted a zero
tolerance policy, and can pursue civil penalties, including
increasingly more significant fines for unruly passengers, as
they work to keep the onboard environment safe.
We haven't done any work at this time in looking at the
mask policy, specifically. As you know, it is an evolving
public health environment. We saw the new CDC guidance and OMB
guidance, as well as that from the--I understand the
congressional doctors over the last few days, regarding masking
in nonaviation environments.
I do appreciate your highlighting, however, the efficiency
of the filters on commercial aircraft. I think it is, of
course, important for members of the traveling public to
recognize all the safety measures that are in place to keep
commercial aviation safe.
Mr. LaMalfa. Well, it is exciting to hear about the zero
tolerance policy, but I am talking about real people that are
trying to travel here. And if they do have kids, if they do
have people with special needs, it seems there is some really
overzealous enforcement going on. And I think, for the flight
personnel themselves, I hear the browbeating by the people
announcing, as the flight is going along, ``Wear the mask,''
you know. Basically, it is really becoming an atmosphere that
is not pleasant for something that has been on the wane here
lately for, you know, the mask mandates.
Now we are seeing we are going back and forth on mask
mandates in this very body here--a lot of politics being played
around it, as you might be hearing, that on one side of the
building, in the House, it is a strong mandate. And on the
Senate side, it doesn't seem to be as big of a problem. So
somewhere in the rotunda there is a transition of how big the
threat is.
But I think we need to take a really good look at how this
is affecting the morale of passengers, as flights are picking
up once again, people with special needs, people with small
children, and just a general attitude. It is not helping the
airlines, it is not helping those personnel to have to be these
hardcore enforcers on that.
So is that something that you see there being an issue, Mr.
Soskin?
Mr. Soskin. Again, we have not engaged in any work to look
specifically at the mask mandate or its effects. It is an area
of overlapping responsibility among DOT and TSA, as well as the
FBI, for enforcement. And I think my staff and I would be happy
to discuss that question----
Mr. LaMalfa. I am interested in that FBI piece there. So
that is something. OK, well, I thank you for your time.
Mr. Chairman, I will yield back.
Ms. Davids [presiding]. Mr. Cohen, you are now recognized
for 5 minutes.
Mr. Cohen. Thank you very much. And first I would like
everybody--if you can notice in the background, there is a
television screen in my office, where the Washington Nationals
are playing a baseball game. Four of their players are on COVID
restrictions. Eight of their personnel are on COVID
restrictions. I think they--masks is a good idea, and
especially on airplanes, and where the public gathers in small
spaces.
But I want to thank Chairman DeFazio and Member Graves for
holding this hearing.
Most of the transportation industry was devastated, with
significant declines because of COVID-19, people afraid to fly,
and concerned about flying next to people. And even with masks,
it is still somewhat concerning.
We resuscitated the industry with lots of aid, but some of
it was far from perfect in how it was delivered. One issue I
worked on extensively was the disproportionate share of CARES
Act grants that were awarded to certain smaller, less-
trafficked airports at the expense of our major commercial-hub
airports, who service most of the public, and do most of the
work, and need most of the money, including Memphis, which is
the world's largest cargo airport in the world.
These award amounts were based on a formula developed by
the Senate and the Federal Aviation Administration that
produced massive windfalls for certain small airports. As many
as 31 airports received grants for at least 4 years' worth of
operating expenses, and over and above--so they would have had
4 years' worth of operating expenses without any moneys that
they would otherwise have received. Fortunately, the wrong-
headed formula was changed, and the airports, for the future
funding, didn't receive a disproportionate share of funding
from two subsequent relief bills based on the pandemic.
Nevertheless, the amounts that were awarded to certain airports
for the CARES Act were far more than needed or were fair.
Mr. Soskin, can you tell me why the formula was written
this way in the first place, and what your office is doing to
monitor the smaller airports, and their use of that money, and
to see to it that it is properly spent, in accordance with FAA
grant requirements?
Mr. Soskin. Congressman Cohen, as Ms. Krause highlighted
earlier, one of the tradeoffs that we face in awarding
emergency relief funding, like in the CARES Act and CRRSA and
the ARP, is the tradeoff between doing something new and
unfamiliar for the agencies administering funds, and making use
of existing mechanisms, existing programs, and existing
formulas.
And in this case, I think it is instructive. The responsive
approach that was taken by FAA when it identified the
multiyears of operating expenses that you referenced, and
updated and limited the funding beyond a certain point, and
then Congress, in the CRRSA, extended that, and narrowed the
scope----
Mr. Cohen. Mr. Soskin, I know the history. I know the
history. I have been through it, and found it difficult to get
through it. The question was why was it written that way in the
first place?
It wasn't using a formula that we already had. It was a new
formula that the Senate and the FAA came up with. Why did they
do that?
Mr. Soskin. That is a question that we may look at, as part
of our current audit in the FAA's award and oversight of CARES
Act funds. And, you know, beyond its potential inclusion in
that ongoing audit work, those are----
Mr. Cohen. Mr. Soskin, thank you. You are not answering the
question, but I will go on to Ms. Krause, and hopefully she
will be better at doing that.
What can you tell us about how much of the grants that were
awarded to these small airports has been used, and whether
larger, commercial service airports are getting enough funding
from the FAA to meet their needs?
Ms. Krause. Yes, we have some data, and we can give you
more specifics. But at the highest level, the larger airports,
when you are looking across the different funding streams, have
expended more funds than the smaller ones.
So when you are looking at the large-hub airports, you are
seeing about 75 percent of their funds that they have received
across the 3 buckets of money having been expended, where you
are seeing lesser funds closer--you know, it all depends. We
can give you more details, but when you get to the smaller
airports, it is a smaller percentage, but in some cases, you
know, around 50 percent or so.
So I am happy to give you more details on sort of the spend
rates across airport----
Mr. Cohen. If you can. And if they are spending that money
on superfluous things, they had plenty of funds. They,
basically, have long, dirt runways and a windsock, and they
didn't really need all that money. And what are they spending
it on now? Is it extraneous things, just to spend the money?
This was horrific. And if you would, let me know about
that.
Mr. Soskin, if you would, give me your report, and let me
know why that was done, and what is being done to oversee it,
and make sure that the money is being spent properly.
With that, I yield back the balance of my time.
Ms. Davids. Thank you. The gentleman yields back. Mr.
Johnson from South Dakota is now recognized for 5 minutes.
Mr. Johnson of South Dakota. Thank you very much, Madam
Chair. My question will be for any of the panelists that want
to weigh in, because I am sure you all have some expertise on
this front. And I would compliment the chair on pulling
together this panel. Clearly, we should all care about the
efficiency and the effectiveness of Federal dollars invested in
infrastructure, certainly during COVID, as well as during any
time.
So I think my preference would be this, to remind all of us
about how inefficient much of our investment in infrastructure
is in this country. Environmental reviews in this country
commonly run in excess of 1,000 pages. That is not typical
across the world. Our environmental reviews take, on average,
five times longer than they do in Canada, and twice as long as
they do in the European Union. Of course, building subways is
expensive, but the New York subway capital construction costs
per project are quadruple the global average for urban subway
systems.
And so I think my question for the panelists is, as you did
your analysis of these infrastructure investments during COVID,
did we get a sense of what the financial cost of compliance to
these environmental and historical reviews were?
And do we have any sense about how they compare to what we
would see in other parts of the world?
Mr. Soskin. Representative Johnson, I can take that
question first, because I think it is important to understand
that, at this point, a lot of the funds that have so far been
allocated and awarded have been on the operating expense,
upfront.
So we are going to see the reviews and the infrastructure
awards flow out over a period of years, and, you know, that is
something that we have observed in our work on the Hurricane
Sandy relief funding, where, in our report earlier this year,
we highlighted that, although $10 billion in hurricane
resilience and recovery funds were awarded shortly after
Hurricane Sandy, even at this point only about $4 billion of
those funds have been expended.
So at this point----
Mr. Johnson of South Dakota. Mr. Soskin, give this
committee some--as we look forward, because, you are right,
sort of the next tranche of capital investment is likely
coming--given your historical experience, give us some sense of
what the financial costs of those environmental and historical
reviews would be.
Mr. Soskin. So I don't have readily at hand the details of
what some of those expenses are. Anecdotally, I believe, the
elements of your question are correct, that planning and
environmental reviews can take longer than in some other
countries. I think that is a problem that has been recognized
across the Government, and it is something we would be happy to
follow up on if we have some work in that area we can share
with you.
Mr. Johnson of South Dakota. Maybe for all the panelists,
just so we can focus on solutions, given your deep expertise,
and as you have done analyses in inefficient and efficient
governmental spending, are there things that could be changed
in the Federal infrastructure, environment, landscape, statutes
that could make for a more efficient investment?
Are we getting in the way? And if so, how?
Ms. Krause. I can jump in. This is Heather.
So I would say, as infrastructure funding gets rolled out,
depending on what folks are looking for out of the investment,
being clear about and defining what the program is, if there
are certain intentions, if there are certain outcomes that you
are looking for; really, being clear on what you want the
outcomes to be, and sort of thinking about how to measure that,
I think upfront, is really important.
Mr. Johnson of South Dakota. Thank you very much.
Anybody else?
Mr. Currie. I will jump in, sir----
Mr. Johnson of South Dakota. Mr.----
Mr. Currie. Yes, I will jump in. This is Chris Currie from
GAO. And so I do a lot of our work on disaster response and
recovery, multibillion-dollar recovery programs, which, though,
for disasters go to rebuild infrastructure.
And the issue you talked about of EHP reviews, or whether
it is engineering reviews, or whatever it might be, has been a
huge challenge in these infrastructure programs.
Another thing that I wanted to point out, though, it is not
just within individual grants or programs. There are so many
different funding streams from different agencies that--all of
which often have different requirements and different
timeframes.
So one of the things we hear from State and locals is, ``I
may have to do an EHP review for FEMA projects, and do a
separate one for HUD, and then do a separate one for FTA, and
do a separate one for Federal Highway.'' I think that is
something that could be looked at in this area, as well.
Mr. Johnson of South Dakota. Oh, thank you very much. That
is an excellent tactical suggestion, Mr. Currie.
And for any of the other experts, if you have other
suggestions, I am out of time, but I would love to have any
comments from you. And we will work together, I am sure, on the
committee in a bipartisan way to try to make these investments
even more efficient.
And with that I would yield back. Thank you.
Ms. Davids. Thank you. The gentleman yields back. The Chair
now recognizes Mr. Johnson from Georgia for 5 minutes.
Mr. Johnson of Georgia. Thank you, Madam Chair, for holding
this hearing. And thank you to the witnesses for your time and
your testimony. The amount of $5.9 trillion is a significant
sum of money, a lifeline for hard-working Americans, and the
sum total of relief and job protection measures provided in the
CARES Act.
Last year, Congress acted decisively during a once-in-a-
century pandemic. But our work is far from done. We are
obligated to ensure that relief aid arrived to the folks who
needed it most, especially Black Americans, communities of
color, and low-income groups already in poorer health, due to
being without healthcare coverage. Communities of color were
the essential workers who disproportionately bore the brunt of
sickness, hospitalization, and death due to COVID-19, and who
were exposed throughout the pandemic, while enabling us to work
from home. They are the people who have too often been
underserved and unserved by the Federal Government.
Mr. Izzard, your office has found FEMA's management of
disaster relief grants and funds to be inadequate. You reported
last year that improving FEMA's management of these grants
would be one of DHS's top challenges in responding to the
COVID-19 pandemic. What is the impact of these deficiencies on
FEMA's ability to get disaster relief grants to communities of
color and Black Americans?
Mr. Izzard. Well, thank you for the question, sir. As you
rightly stated, we have done a lot of work in this area, and we
have ongoing work now.
One particular audit that was done--and I will just say
that I am much more attuned to our criminal investigative work,
but have some general visibility on our audit work, and one
particular audit that was done looked at FEMA strengthening its
responsibility determination process, to ensure that contracts
are granted properly in the right place and the right time.
That audit, actually, was awarded and then cancelled, cancelled
22 contracts valued at about $184 million.
So we were able to identify, as a part of that audit, that
there were deficiencies that FEMA had, in not providing
guidance to the contracting personnel, and we provided a
recommendation to them, as well, in order to fix that.
Also looking at----
Mr. Johnson of Georgia. Let me ask you this. Has FEMA made
any improvements in helping the underserved and
underrepresented since your report was released?
Mr. Izzard. Well, we do have other projects ongoing now
that speak to equity, and one in particular that is going on
now is we are looking at some work that will actually deal with
equity in how things are handled. We are planning work that is
related to that. So that is ongoing. And so we would hope to
have an answer for you more specifically here, in the near
future.
But we will take that as a get-back, because we believe
that is very important work.
Mr. Johnson of Georgia. All right, thank you.
Ms. Krause, the GAO reported on the CARES Act loan program
for aviation, and found that small businesses were less likely
to receive loans under this program, and that Treasury
prioritized applications from large passenger carriers.
That said, small businesses are more likely to be led by
minorities and women. As a result of Treasury's actions, what
has been the impact on minority-owned small businesses and
Black-owned small businesses from prioritizing the large
carriers?
Ms. Krause. So we didn't get into that level of detail, in
terms of who is impacted, in terms of the types of--or that
level of detail in the data.
I think what we did find, though, with that program, and
some of the challenges that the small businesses faced, was
some lessons to be learned if there is another similar type of
program in the future. So having potentially multiple paths, or
multiple programs to be able to support the diversity of
businesses that might be applying for that type of assistance.
Mr. Johnson of Georgia. Thank you.
Mr. Izzard, what key things do you believe FEMA still needs
to do to improve their grant management oversight, especially
for the grantees who desperately need these funds, whose
livelihood and families depend on relief aid?
Mr. Izzard. Well, as you stated, sir, that is a very, very
important area to look into. We certainly remain in
collaborative [inaudible] with FEMA to ensure that they are
continuing to direct their attention----
[Audio malfunction.]
Mr. Izzard [continuing]. Gaps and deficiencies.
In fact, our recommendations in my audit works are intended
to actually point them in the direction of where the greatest
deficiencies are. So we will continue our collaboration with
them, and continue to--in the hopes that they will move in the
direction that----
Ms. Davids. Thank you, the gentleman's time has expired.
Mr. Johnson of Georgia. Thank you.
Ms. Davids. The Chair now recognizes Mr. Nehls from Texas
for 5 minutes.
Mr. Nehls. Thank you, Madam Chairwoman.
Mr. Izzard, I thank you for being here. It is good to see
you. In your written testimony, it states that each fiscal
year, DHS, Department of Homeland Security, OIG issues hundreds
of recommendations to improve the integrity, accountability,
and performance of the Department, the Department of Homeland
Security.
The DHS inspector general is one of nine statutory IGs who
are members of the Pandemic Response Accountability Committee,
or PRAC. We know that the CARES Act provided DHS, Department of
Homeland Security, almost $46 billion for COVID-19 relief, and
I believe your Department, sir, you have around $3 million of
that to conduct oversight of those funds.
So my question for you is, Mr. Izzard, are you monitoring
the resources the Biden administration uses on border missions?
Mr. Izzard. Thank you, sir. We have a number of ongoing
projects with regard to the border at this time. In fact, our
inspector general has recently made a number of trips to the
border to personally take a look at the humanitarian crisis
that is occurring at the border.
And so, as a result of that trip, our office has initiated
additional projects. So there are projects that are ongoing. I
am happy to get back with our staff, and make sure we provide
details of what those projects entail, and what they will
cover, what they are intended to cover.
Mr. Nehls. Thank you. And as you stated, the humanitarian
crisis--how much is the border crisis costing the American
people?
In other words, how much money has DHS used to address the
1 million people who have been apprehended at our southern
border since the start of the year?
Mr. Izzard. That is a great question, sir, and I don't have
that information and detail available. I prefer not to speak
anecdotally to it, but I will certainly make sure that we get
you the detailed information. I believe we have done work in
that area, and we will look at that to get that answer back to
you.
Mr. Nehls. That is fair enough, and thank you for that.
And recently, the city of La Joya, in Texas, issued a
public health warning due to the potential spread of COVID from
infected migrants. And what took place? About July 26th, just a
couple of days ago, there was an undocumented migrant family at
a Whataburger, and they were coughing and sneezing while they
were inside this Whataburger, and they weren't wearing any
masks. And so a citizen contacted the La Joya Police
Department, and the officer approached them and asked that
family, ``What are you doing here? What is going on?'' And that
family said that they were released by Border Patrol because
they had COVID-19. The family also stated that a local charity
group paid for their room at a local hotel.
We do know that the Hidalgo County judge, Mr. Richard
Cortez, called on Federal immigration officials to stop
releasing infected migrants into their communities.
So has the Department of Homeland Security--has your office
examined how many migrants have been released from custody with
COVID? If so, how many?
Mr. Izzard. We do have an open project that looks at DHS's
protocols, and how they handle matters such as that at the
border. I will make sure we get that information to you. But
yes, sir, to directly answer your question, we do have an open
project. It is ongoing. We look forward to providing and
publishing the final report, once it is complete.
Mr. Nehls. Thank you. And I can't wait to receive that
answer.
And you stated earlier that you have a collaborative effort
with FEMA. And so is FEMA being deployed to the border?
Mr. Izzard. I am aware that there are reports that FEMA has
been represented at the border. That is my understanding.
Mr. Nehls. All right, so what--so you don't really know
what operations have been impacted due to FEMA's deployment at
the southern border? You couldn't answer that. Fair enough.
Is FEMA spread too thin, sir?
And the reason I ask that is will FEMA be able to respond,
as hurricane season bears down on the gulf coast?
I represent southwest Houston, southwest Texas, and
hurricane season is coming. Will FEMA be able to handle that,
with the responsibility that I believe they also have at the
southern border?
Mr. Izzard. Well, I certainly understand that question,
sir, and I appreciate it. We believe that our independence and
objectivity is really the bedrock of what we do, and so we will
continue to conduct our oversight work to ensure that we
address issues that arise. And if there are gaps that arise,
that we will address those.
I don't know that we would opine on whether they are spread
too thin, or their role and how they function, but we certainly
will, in an oversight capacity, address any gaps that do arise
as a result of how they lay out their programs.
Mr. Nehls. Thank you, Mr. Izzard, and I look forward to
hearing back from you. And thank you for your candidness.
Madam Chair. I yield back.
Ms. Davids. Thank you. The gentleman yields back. Ms. Titus
is now recognized for 5 minutes.
[Pause.]
Voice. Muted.
Voice. You are muted, Ms. Titus.
Ms. Davids. Ms. Titus, I believe that your microphone is
muted.
Ms. Titus. Is that better?
Ms. Davids. We can hear you now.
Ms. Titus. Oh, OK----
Ms. Davids. You are recognized for 5 minutes.
Ms. Titus. I was addressing this to Mr. Currie.
Early on in the pandemic, there were several reports from
State and local emergency responders, alleging that their
orders for supplies were getting redirected. The chairman and I
raised some concerns with the former Administrator, and it
seemed that the former President's son-in-law was heavily
involved in some of the coordination efforts under FEMA.
One example was in Arizona. The Phoenix fire chief
complained, ``We have ordered millions of dollars of personal
protective equipment that keeps getting hijacked before getting
to the city of Phoenix.'' I wonder what steps FEMA has taken to
prevent this kind of unpredictability from happening again in
the future.
And is there any investigation still going on about that,
or what can we do to take additional steps to be sure that we
don't have a bridge to nowhere?
Mr. Currie. Yes, ma'am, thanks for the question. That was
actually one of our recommendations last year, still early on
in the pandemic. There is no doubt there was a ton of confusion
early on between FEMA and the State and local governments about
who was making decisions, where Federal supplies wound up, and
where they didn't. We heard lots of stories from States about
supplies showing up that they didn't ask for, and then supplies
that they asked for never showing up.
So one of our recommendations was that, obviously, FEMA
needed to get a better handle on communication and coordination
with the States on that prioritization.
Actually, back when we made that, they disagreed. They
thought we were already doing that. But they have taken a
number of steps to improve that. And we have heard some
improvements. But I will say that the need for the PPE and the
supplies, as you know, has drastically been reduced over the
last 6 months or so.
So my concern, moving forward, if we face another surge,
and we get into the need for the Federal Government to begin
airlifting and providing those supplies again, that we are
going to face similar challenges moving ahead.
Ms. Titus. Well, that distresses me because Las Vegas is
becoming a hot spot, and we see on the news every night
hospitals are being backed up, we need more testing to
complement the vaccine. So I hope all these things you hear
about supply chain are not going to apply to the work that you
all are doing. So I am glad you are trying to get on top of
that.
I would add that, while most of the people you worked with
were good actors, there were a number of kind of schemes that
we heard about, fraud schemes, theft of public funds, hoarding
of scarce materials, fictitious claims against the Government.
Are you all working with the State and local law enforcement to
try to either go after those people, or be sure that it doesn't
happen in the future, or what we need to put in place to
prevent it?
Mr. Currie. Yes, ma'am. A couple of things I will say, and
then I want the DHS IG to talk about some of their
investigative work, too.
But one of the things we saw in the pandemic that creates
that situation is when there was a run on supplies, FEMA and
DHS were looking around, trying to find anybody that could
provide that. And, of course, mixed up in that were people that
were looking to defraud the system and could never provide the
supplies.
We saw the same thing after 2017, with the disasters,
people promising they could provide a certain amount of meals
or water in Puerto Rico, and things like that, and they never
could. So, you know, whenever there is----
Ms. Titus. There is also price gouging, I am sure.
Mr. Currie. Oh, yes, ma'am, absolutely, and that is one of
the--I mean, that is not outright fraud, but that is one of the
most important roles of the Federal Government, to make sure
that is not going on.
So we have looked at that from the standpoint of, like, how
do we get better at contracting, so we don't have these kind of
gaps and deficiencies. But I know Mr. Izzard has also done a
lot of investigative work on that side, too.
Ms. Titus. Thank you.
Mr. Izzard?
Mr. Izzard. Yes, ma'am. So, as Mr. Currie mentioned, we
have done and continue to do a lot of investigative work on
that front.
We found that the amount of fraud, as it relates to
identity theft, misuse of the lost wage assistance program is
continuing to grow. We identified additional misconduct
allegations and threats to that program that we have to wind up
initiating investigations on.
So we are using sort of a parallel approach with initiating
audits that address potential gaps in the program, as well as
going after the bad actors who have defrauded the system.
It would not be a stretch or an exaggeration to say that we
have seen it across the entire Nation. And so we believe that
we are going to continue to find those pockets in areas where
there are individuals who have exploited the system to
personally enrich themselves, financially,
Ms. Titus. Well, thank you. I serve also on the Homeland
Security Committee, so be sure you reach out and let me know if
we can be helpful in that in any way with our local State
officials, working together with you.
Thank you both, and thank you, Mr. Chairman. I yield back.
Ms. Davids. Thank you. The gentlelady yields back. The
Chair now recognizes Mr. Stauber for 5 minutes.
Mr. Stauber. Thank you, Madam Chair.
You know, I first would like to speak a little about some
of the jaw-dropping scenes we have seen over the past several
months, where entire classes of individuals have been refused
service and the ability to fly because they have a disability.
I have a son with Down syndrome, and I understand the
difficulties that parents must deal with when traveling with
children with disabilities. I will say this loud and clear:
Just because someone has a mental or physical disability does
not mean they are less of a human, or have less of a right to
fly than you and I. And yet we have seen this exact situation
play out all over the country.
Those with disabilities and their families have been
shamed, embarrassed, and harassed, all because a child may take
down their mask unintentionally, or someone has such a severe
disability that it precludes them from wearing a face covering.
This type of discrimination is not what America should look
like. It is unacceptable. And I urge President Biden to stop
encouraging these types of rigid and inflexible mandates that
both put our transportation workers in uncomfortable positions,
and discriminate against those with disabilities.
And now, shifting gears, Mr. Horowitz, according to your
testimony it is your responsibility to ``ensure that taxpayer
money is used effectively and efficiently to address the
pandemic-related public health and economic needs that were
funded through the various COVID-19 relief bills,'' It is clear
that the last 12 months may account for the largest amount of
financial fraud to ever be committed against the United States.
We have seen countless stories of algorithms and bots applying
for fake unemployment insurance, identity theft, misuse of PPP,
and idle grants and loans, and an array of other crimes that we
haven't even heard about yet.
And Mr. Horowitz, are you aware that the EIDL program alone
has $80 billion--that is with a ``B''--$80 billion in fraud?
Mr. Horowitz. Congressman, I am aware of various reports to
that effect, in terms of the numbers. And frankly, there are
still investigations ongoing.
Mr. Stauber. Yes, and just so----
Mr. Horowitz. How that was distributed----
Mr. Stauber. Just so we are on the same page, you are aware
of $80 billion worth of fraud, and----
Mr. Horowitz. I am aware of reports----
Mr. Stauber. Yes, and how about the PPP, Mr. Horowitz? How
about the PPP? Do we know how much fraud is in there yet? And
can you give us an estimate?
Mr. Horowitz. I don't have an estimate. I can get back to
you on what the SBA IG has reported on. And he has put out----
Mr. Stauber. Sure.
Mr. Horowitz [continuing]. A number of reports about his
concerns regarding how that--both of those programs, frankly,
were handled certainly a year ago, when----
Mr. Stauber. Yes, Mr. Horowitz, I think that, if you would
get back to the committee on what the PPP fraud is, or what you
think it is--and I know that, working with the SBA, you can get
a really, really good idea. And I appreciate that.
And I hope that it concerns you as much as it does me that
there are everyday Americans who were being denied loans and
assistance because the accounts had run dry, while at the same
time there were criminals collecting, in one example, $20
million from these relief funds for fake small businesses.
And I understand that you aren't working to combat these
crimes, but these crimes against the taxpayer should never have
been able to be committed in the first place. And I thank you
for testifying today, and I think that before my colleagues on
the other side of the aisle prepare to pass another $4.5
trillion in spending that we can't afford, we should address
this fraud, corruption, and abuse that has already plagued the
Federal Government and hurt everyday Americans.
Mr. Currie, with my 1 minute remaining, you had mentioned
that FEMA was doing all they could in reference to the supply
chain, getting the supplies wherever they could. Mr. Currie,
would you agree that bringing back manufacturing to our shores,
bringing back pharmaceutical manufacturing to this country,
bringing back PPE-making in this country, and bringing back
critical minerals mining to this country to hold the destiny of
this great country into our own hands, would you agree with
that?
Mr. Currie. Sir, there is no doubt that the pandemic
exposed that we are reliant on foreign sources for many of our
products, pharmaceutical, all the things that you mentioned. So
the----
Mr. Stauber. And if we don't--Mr. Currie, if we don't learn
from that, shame on us, correct?
Mr. Currie. Yes, sir.
Mr. Stauber. OK, thank you. I yield back.
Ms. Davids. Thank you. The gentleman yields back. The Chair
now recognizes Ms. Brownley for 5 minutes.
Ms. Brownley. Thank you, Madam Chair. I appreciate it. My
first question is to Mr. Horowitz.
And just in general, do you feel like you have enough
resources, in general, to appropriately oversee fraud and
abuse?
Mr. Horowitz. So, Congresswoman, I think we have been
certainly very appreciative in the community about the support
coming from Congress. But frankly, several IGs have noted the
challenge they have, overseeing billions of dollars in spending
in their agency, compared to what they have gotten in terms of
additional relief.
I know DHS OIG is one of the IGs that have mentioned this
problem, and Mr. Izzard could speak to that, about, I think,
getting a few million dollars to oversee tens of billions of
dollars has been a challenge, for example, for DHS OIG. And I
know some other IGs have also raised that concern.
We have demonstrated, as IGs, as a track record, that we
have returned multiples of investments in our efforts because
of the wrongdoings that we find, the efficiencies we find. And
so investment in IGs have proven, over our 40-year history, to
be very good investments for the taxpayers.
Ms. Brownley. I couldn't agree with you more.
And Mr. Izzard, if you have anything to add to that?
Mr. Izzard. Oh, yes, ma'am, thank you. I agree 100 percent
with Mr. Horowitz, and appreciate his response.
The Department received, I believe it was, over $40 billion
to assist with our CARES--from the CARES Act, and we were--OIG
received about $3 million, too, for oversight work. And so we
have found it at times challenging. However, we forged ahead.
And I believe we have been successful in our efforts, and
certainly leveraging our relationships and partnerships, for
example, with the PRAC, which is a relationship that we
thoroughly appreciate, as well as the other OIGs in the
community.
So also, funeral assistance is a new one, a newer one,
where there was tens of billions of dollars allocated to
support that. And we have not gotten any supplementals for
that. However, we have moved ahead. We actually have projects
ongoing now to address funeral assistance.
So I think, with more, we certainly can do more. But
notwithstanding, we are going to continue to forge ahead and do
everything we can to address the challenges that the pandemic
has brought with it.
Ms. Brownley. Thank you, sir. And I just wanted to say to
you, I know that you personally are not responsible for
Homeland Security priorities, and particularly around FEMA. But
I was concerned, in your response to another question with
regards to FEMA's readiness, in terms of extreme weather
conditions. I mean, I think we all have to look ahead and know
that that is coming.
I am from California. There is no question that our fire
season has started very early. And I just anticipate across the
country that we are going to continue to experience more
extreme weather conditions. And coupled with that, we don't
know whether there is going to be another surge in this
pandemic, where we are going to have to call upon FEMA, as
well.
So I would just like to say, I hope that FEMA is doing the
appropriate planning and expressing what their needs may be in
order to be ready for any pandemic issues or any extreme
weather conditions experienced across the country.
And my last question is, again, back to Mr. Horowitz. On
the CARES Act and other related legislation, there were
detailed reporting requirements to ensure transparency and
accountability. And then, going on OMB's guidance to agencies,
then, was to say we don't really need any more additional
information.
Your office has come back and said that that your office
recommended that OMB issue the guidance to agencies to collect
the missing information. So I was just wondering if that
actually happened.
Mr. Horowitz. Thank you for asking about that,
Congresswoman, because that has--you are right--been a very
important issue for us. We were very concerned last year, when
OMB issued its guidance initially after the CARES Act, without
consulting with the PRAC, that basically said USAspending.gov
would be the tool that you will use to report through.
We have identified in another report that is on our website
that we issued in November some of the significant problems
with that. And we are pleased that OMB----
[Audio malfunction.]
Mr. Horowitz [continuing]. This year issued a revised memo
that tried to address some of that. Of course, it's very
difficult to go back from a year ago to get that kind of data
that we need.
Ms. Brownley. Well----
Mr. Horowitz. We are working with leadership to do that.
Ms. Brownley. Thank you. I believe my time is up.
I yield back, Madam Chair.
Ms. Davids. The gentlewoman yields back. The Chair now
recognizes Mr. Westerman for 5 minutes.
Mr. Westerman. Thank you, Madam Chair. And thank you to the
witnesses.
Mr. Soskin, at the end of the 116th Congress, Congress
authorized a Maritime Transportation System Emergency Relief
Program. But the administration has not requested any funds for
this program.
The U.S. maritime industry estimates it needs $3.5 billion
in emergency relief, as a result of unanticipated COVID costs,
and has requested those funds be provided under the MTS
Emergency Relief Program. Are you monitoring the maritime
industry's resources?
Mr. Soskin. Mr. Westerman, I am not actually familiar with
the maritime industry funding issue that you have identified. I
would be happy to consult with my staff, and we can follow up
with you on your question about that area.
Mr. Westerman. OK, thank you. I would appreciate that.
Mr. Soskin, in March, Administrator Fenton, in talking
about testing on the border, he said that testing is happening,
COVID testing, and that there is less than a 6-percent positive
rate on the border. Are you aware if this testing is still
happening, and if those testing rates have increased, those
positive rates?
Mr. Soskin. I am not familiar with that issue, but I think
DHS Assistant IG Izzard might have more awareness about testing
on the border.
Mr. Westerman. Yes, I was going to ask him that question,
as well.
Mr. Izzard, do you have any information on that?
Mr. Izzard. I do know that we have ongoing projects. And as
I said earlier, our inspector general recently made personal
visits to the border, which has resulted in some of the
projects.
I don't know specifically the answer to that question, but
I will make sure we get you a response, directly.
Mr. Westerman. Thank you, sir. I was on the border last
weekend, down in the Rio Grande Valley, and I saw reports on
Monday that there were 671 additional COVID-positive tests in
Hidalgo County. And I have seen reports that say the COVID
infection rate is up 900 percent along the border.
One thing that I took back from the trip to the border,
along with many what I would call crisis areas, was on the
flight back out of McAllen. I noticed, in the airport, there
were several passengers that were holding manila envelopes
that, on one side, it was printed. I think it was something
like, ``Please help me. I do not speak or read English. Please
help me get on the right airplane.'' And then, on the other
side of the envelopes, it would have flights outlined on it,
departing airports, arriving airports, and the times on that.
Mr. Izzard, can you confirm if those were migrants, or was
that just a group of people carrying envelopes through the
airport?
Mr. Izzard. Sir, I can't confirm, I really don't know. I am
sorry, I just don't know the answer to that.
Mr. Westerman. So you don't know if DHS is putting migrants
on commercial airlines, and shipping them around the country?
Mr. Izzard. Well, I do know that we have an open audit at
this point that looks at that specific area. It is ongoing. So
I can't speak to the findings of that at this point, but I
certainly look forward to providing that at the point in which
the audit is finalized. We do have an audit working that
direction, though.
Mr. Westerman. So if you don't know if commercial airlines
are being used to move migrants around the country, you also
wouldn't know if those migrants are being tested for COVID, or
being vaccinated before being moved around the country.
Mr. Izzard. I don't know the answer to that. Perhaps that
is something that our project may look into. But I will make
sure to take note of that, to take that back for consideration
with our staff.
Mr. Westerman. Yes, I would appreciate that, if you could
look at that sooner than later, and get an answer back on that
issue.
And Madam Chair, I yield back.
Ms. Davids. The gentleman yields back. The Chair now
recognizes Mr. Lowenthal for 5 minutes.
Mr. Lowenthal. Thank you. Thank you, Chair. And I want to
focus on a specific program that means a lot to me that Mr.
Currie and Ms. Krause had mentioned in their testimony. And if
you could, just help me with that, and that is the Coronavirus
Economic Relief for Transportation Services, or what is known
also as the CERTS Program.
As you highlighted, none of the $2 billion provided by
Congress has been allocated. You note that Treasury faced a
huge challenge setting up a new program to support industries
where the agency had no experience, and where there were many
small stakeholders. And you pointed out that Treasury is
working to learn from its experience with the Payroll Support
Program and other pandemic relief programs to communicate
clearly, for instance, and that is very encouraging.
But I want to be clear. The relief that Congress provided
was vital to prevent dislocation and disruption in critical
infrastructure. And no matter what sector we are talking about,
aid prevented job loss, and kept businesses and agencies we all
rely on, it kept them afloat.
So my question is that climate change and many other
challenges make this world, I understand, much less
predictable, and we need to get better at responding to unique
and unexpected challenges.
So my question, then, is what can we do to build our
capacity to implement programs like the CERTS Program?
Ms. Krause. Thank you for the question. This is Heather
Krause at GAO, and my colleague can jump in, as well.
I would say, when you have an agency implementing a program
where they don't, in Treasury's case, work with this applicant
pool--and as you mentioned, it is a big, broad number of
applicants there--it is really important that they work closely
with the other Federal agencies that may have information or
knowledge of those industries.
So in this case, we are in the process of looking at the
CERTS Program. We know that Treasury has reached out to DOT,
and has worked with them to figure out--as well as the Coast
Guard--to figure out how to determine eligibility for this
program, because you do have a lot of different operators. And
DOT can look and sort of see what are the operators and
applicants that might--you know, ways to check eligibility.
As we understand, the application process just closed on
July 19th. So it is still in progress. But, in terms of
implementing programs where they are new, and it is a new
entity you work with, it is important to work with the
industry, understand the industry, and work with those Federal
agencies to better understand how you might effectively
implement the program.
Mr. Lowenthal. Is that what we have learned? If another
crisis occurred, what have we learned to expedite that process
now?
Ms. Krause. I think it is really encouraging those agencies
to work together upfront. Clearly communicating to industry
sort of the status of the timelines and what they are doing,
those are the types of things that we certainly learned are--
and expectations for the program, and sort of the timing of
when it will roll out. Those types of communications are really
important in these scenarios.
Mr. Lowenthal. Thank you. I am also wondering whether the
question can also be answered by--let me just see who that was.
I think that was Mr. Currie.
You also mentioned----
Mr. Currie. Yes, sir.
Mr. Lowenthal [continuing]. The CERTS Program. What can we
do to build our capacity to implement programs--like the CERTS
Program, which is all new--in the future, when there is a
crisis that comes up?
Mr. Currie. Yes, sir. Ms. Krause is definitely an expert on
the CERTS Program, but I cover our work on disaster response
and recovery, and one of the biggest themes that we see in the
preparedness side is that, often, gaps in capabilities at the
local level or in different industries have been identified
through prior exercises and assessments.
The problem is, because the event hasn't happened yet, we
often don't take action to address that before it happens, and
we don't close the gap that we know exists. And I think some of
that is just latency, and especially with the pandemic, of
disbelief in thinking that it is actually going to happen. And
that is----
Ms. Davids. Thank you, Mr. Currie.
Mr. Currie. That is a key theme----
Mr. Lowenthal. Thank you. I yield.
Ms. Davids. The gentleman's time has expired. The Chair
will now recognize Mr. Guest for 5 minutes.
Mr. Guest. Thank you, Madam Chair.
Mr. Horowitz, within the Federal Government's National
Disaster Recovery Framework, the EDA serves as a coordinating
agency for the economic recovery support function on behalf of
the Department of Commerce. Congress has appropriated $1.5
billion for EDA's Economic Adjustment Assistance Program in the
CARES Act and, more recently, $3 billion in EAA funding in the
American Rescue Plan. Twenty-five percent of that funding is
dedicated to addressing employment and gross productivity
losses in the travel, tourism, and outdoor recreation industry.
As an agency that received $3.5 million in fiscal year 2021
appropriations, how is the Pandemic Response Accountability
Committee working with the EDA to ensure that this large
appropriation amount that had been distributed during the
pandemic is being distributed with transparency, and reducing
waste, fraud, and abuse?
Mr. Horowitz. So Congressman, what we have been doing at
the Pandemic Response Accountability Committee is working with
the IGs who oversee the specific agencies and the specific
programs, to coordinate and make sure that we have got the
right resources and tools to take those steps and do that
oversight.
And I can follow up with the IG to see what kind of work
they have been doing with regard to that specific program.
Mr. Guest. And let me follow up on your written testimony.
You talk about the fraud task force that, as of July of this
year, that 28 agents have been assigned to that task force. Can
you talk a little bit about the work that the task force is
doing?
Mr. Horowitz. Absolutely. So one of the things that became
clear early on in the work we have been doing from a law
enforcement standpoint--and the IG community has a number of
law enforcement agencies--is that, first of all, several of the
programs, and several of the IGs were facing extraordinary
requests and resource needs to deal with some of the fraud that
they were dealing with, the SBA IG and Department of Labor IG
being at the front of that line.
In addition, what we found was that the fraud wasn't
necessarily isolated, and the wrongdoing wasn't necessarily
isolated to a specific program, but rather, it cut across
programs. And so we needed to be coordinated with each other to
share the learnings we were seeing.
And then finally, we needed to make sure that what we were
doing with that information, as we saw wrongdoing and fraud,
was interacting with the other parts of the IG community that
handled these issues, like auditors, and making sure that we
were taking steps to go back and try and prevent further fraud
and detect further fraud. So we were coordinating to do all of
those things.
Mr. Guest. And you also talk about the adoption of the
subpoena policy, and how that has contributed in efforts to
stop large-scale fraud that we are seeing in the pandemic
response programs. Can you talk a little bit about the effect
that this subpoena policy has had on what your agency is doing?
Mr. Horowitz. Yes, and I certainly appreciate Congress
giving us that authority in the CARES Act last year.
We have put in place the subpoena authority that we have
been given. IGs generally have documentary subpoena authority.
They don't, though, have--for almost all of them--testimonial
subpoena authority. [Inaudible] the House passed a bill that
would, in fact, give IGs that authority, it is pending in the
Senate, we hope it will get passed.
And so we have put in place a subpoena policy that will
allow the PRAC to assist IGs who need testimonial subpoenas to
get that authority, so they can ask recipients of the funds,
who may have evidence of wrongdoing, what they know, and help
advance those kinds of investigations.
Mr. Guest. Well, and last question; Mr. Izzard, here is a
question for you.
Several of your recent reports regarding FEMA look at
challenges that occurred during Hurricane Harvey, Hurricane
Sandy, and other large disasters. As we are once again
approaching hurricane season, and as Mississippi is one of
those States that is typically in the bull's-eye of approaching
hurricanes, what can Congress do to fix some of these ongoing
issues, as a result of the reimbursement backlogs, contract
controls, and delayed processes?
Mr. Izzard. Oh, well, thank you for that question. As you
stated, we have a number of projects that we have done with
regard to Hurricanes Harvey, Irma, and Maria, and we learned a
lot from those, and we anticipate that we will learn a lot as
we move forward. So I think, as we continue to perform our
work, we will just continue a lot of work to inform the work
that we have done in the past, and inform where we go from
here.
So we appreciate all the support that Congress has provided
so far, and we look forward to continuing----
[Audio malfunction.]
Mr. Izzard [continuing]. Regard.
Ms. Davids. Thank you. The gentleman's time has expired.
The Chair now recognizes Mr. Carbajal for 5 minutes.
Mr. Carbajal. Thank you.
Mr. Currie, the Government Accountability Office, GAO,
reported that some States had difficulty accessing the various
Federal programs available to pay for PPE and testing supplies
throughout the COVID-19 pandemic. My office heard directly from
local leaders on this issue, and many were confused about the
reimbursement and cost share responsibility. In times of
crisis, I was disappointed in the lack of clarity from the
Federal Government, and the bureaucratic redtape we had to
navigate to get the needed resources in the hands of the
American people, including my constituents.
What has FEMA done to remedy this situation so that, in
future emergencies, medical personnel around the country can
get the equipment they need in a timely, efficient manner?
Mr. Currie. Thank you, sir. I think I mentioned earlier
that one of our first recommendations in this area was early on
in the pandemic, was FEMA and its partners, to clarify with the
States and local governments how it was providing supplies,
when, and where, and why.
Across 50 States, multiple Territories, multiple Tribes,
all of which had disaster declarations, that was a little
messy, upfront. I think they have made a lot of progress since
then. But as I mentioned when Ms. Titus asked about this, my
concern is that that was--you know, the needs have decreased
significantly over the last 6 months or so for PPE. If that
need was to explode again in the coming months, I would hope
that what they have done to address some of these issues would
fix some of those early problems. But at this point, I don't
know.
Mr. Carbajal. Thank you, Mr. Currie. In light of the votes
scheduled that have been called, I have two other questions,
but I am going to submit them for the record.
With that, Madam Chair, I yield back.
Ms. Davids. Thank you. The gentleman yields back.
For the information of all Members and witnesses, we have a
long vote series on the floor, and are going to go into recess.
We will reconvene as soon as possible after the last floor
vote, and we will come back to the first panel of witnesses.
The committee stands in recess.
[Recess.]
Ms. Norton [presiding]. At the direction of the chair, in
light of the series of votes and the lateness of the day, the
committee now stands adjourned.
[Whereupon, at 5:26 p.m., the committee was adjourned.]
Appendix
----------
Questions from Hon. Salud O. Carbajal to Heather Krause, Director,
Physical Infrastructure, U.S. Government Accountability Office
Question 1. The COVID-19 pandemic exposed serious flaws in our
federal government's preparedness to keep people in the aviation sector
and travelers safe. It highlighted the need for a national aviation-
preparedness strategy to combat communicable diseases, like COVID-19.
I have introduced H.R. 2387, the Fly Safe and Healthy Act, to
establish a pilot for temperature checks and have supported Chairman
DeFazio's legislation, the Healthy Flights Act of 2021, that calls for
a national aviation strategy.
a. Can you describe the barriers the Department of Transportation
and the Federal Aviation Administration have faced in developing a
national strategy?
Answer. While the Department of Transportation (DOT) is in the best
position to develop a national aviation-preparedness plan, as we
recommended in 2015, DOT does not believe that it should lead the
development of such a plan. Rather, DOT maintains that those agencies
that have both legal authority and expertise for emergency response and
public health--namely the Department of Homeland Security (DHS) and the
Department of Health and Human Services (HHS)--are best positioned to
take the lead role in developing such a plan.\1\ However, in May 2020,
DHS stated that it had reviewed its existing national, sector, and
modal plans for pandemic preparedness and response activities and
determined that it is not best situated to develop a national aviation-
preparedness plan. In June 2020, HHS stated that it is not in a
position to develop a national aviation-preparedness plan because it
does not have primary jurisdiction over the entire aviation sector or
the relevant transportation expertise.\2\
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\1\ In 2015, we recommended that DOT work with relevant
stakeholders, such as HHS, to develop a national aviation-preparedness
plan for communicable diseases. See GAO, Air Travel and Communicable
Diseases: Comprehensive Federal Plan Needed for U.S. Aviation System's
Preparedness, GAO-16-127 (Washington, D.C.: Dec. 16, 2015).
\2\ GAO, COVID-19: Federal Efforts Could be Strengthened by Timely
and Concerted Actions, GAO-20-701 (Washington, D.C.: September 21,
2020).
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In June 2020, in the absence of efforts to develop a plan, we urged
Congress to take legislative action to require the Secretary of
Transportation to work with relevant agencies and stakeholders, such as
HHS and DHS, and members of the aviation and public health sectors, to
develop a national aviation-preparedness plan.\3\ While FAA has
provided some guidance to the aviation industry in response to the
COVID-19 pandemic, we continue to believe that DOT is in the best
position to work with its relevant stakeholders to develop a national
aviation-preparedness plan, which could guide preparation for
individual airlines and airports, as well as establish a framework for
communication and response for the next communicable disease outbreak.
Furthermore, as we reported in 2020, FAA and DOT have stronger and
deeper ties to, as well as oversight responsibility for, the relevant
stakeholders that would be most involved in such a broad effort, namely
airlines, airports, and other aviation stakeholders. In addition, DOT's
Office of the Secretary is the liaison to International Civil Aviation
Organization (ICAO) for Annex 9 to the Chicago Convention--an
international aviation treaty to which the United States is a
signatory--in which the relevant ICAO standard that obligates member
states to develop a national aviation-preparedness plan is
contained.\4\ We urge Congress to take swift action to require a
national aviation-preparedness plan, without which the U.S. will not be
as prepared to minimize and quickly respond to ongoing and future
communicable disease events.
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\3\ Priority Open Recommendations: Department of Transportation.
GAO-21-591PR. (Washington, D.C.: Jun. 25, 2021) and GAO, COVID-19:
Opportunities to Improve Federal Response and Recovery Efforts, GAO-20-
625 (Washington, D.C.: Jun. 25, 2020). As we reported in July 2021,
legislation related to a national aviation-preparedness plan has been
introduced in the current legislative session, as well as in previous
sessions. For example, in October 2020, H.R. 8712, National Aviation
Preparedness Plan Act of 2020, was introduced. If enacted, this bill
would have required the Department of Transportation, in collaboration
with DHS, HHS, and other aviation stakeholders, to develop a national
plan to prepare the aviation industry for future communicable disease
outbreaks. Further, in February 2021, H.R. 884, the National Aviation
Preparedness Plan Act of 2021, was introduced in the House of
Representatives, and in May 2021, S. 82, Ensuring Health Safety in the
Skies Act of 2021, was reported favorably out of the Senate Committee
on Commerce, Science, and Transportation. For additional information,
see GAO, COVID-19: Continued Attention Needed to Enhance Federal
Preparedness, Response, Service Delivery, and Program Integrity, GAO-
21-551 (Washington, D.C.: July 19, 2021). Since our July 2021 report,
none of these bills have advanced.
\4\ GAO, Air Travel and Communicable Diseases: Status of Research
Efforts and Action Still Needed to Develop Federal Preparedness Plan,
GAO-20-655T (Washington, D.C.: Jun. 23, 2020).
b. Can you also describe the importance of establishing a national
aviation strategy?
Answer. A national aviation-preparedness plan could help maximize
an effective response to a public health threat, while minimizing
potential inefficiencies in the national response effort and
unnecessary disruptions to the national aviation system, and could
ensure that individual airport and airline plans work in accordance
with one another, among other things.\5\ For example, while the 14
airports and 3 airlines we reviewed in 2015 had plans that address
communicable disease threats from abroad, representatives from these
airports and airlines reported facing multiple challenges in responding
to threats. These challenges included obtaining guidance; communication
and coordination among responders; and assuring employees have
appropriate training, equipment, and sanitary workplaces. A national
aviation-preparedness plan to respond to communicable disease outbreaks
could help address these challenges. In addition, as stated above,
under the Chicago Convention, the United States has obligated itself to
implement standards that include a national aviation-preparedness plan
for communicable disease outbreaks.\6\ In 2017, a joint evaluation of
U.S. capacity to prevent, detect and rapidly respond to public health
threats of a natural, deliberate or accidental nature highlighted the
absence of a comprehensive national aviation-preparedness plan aimed at
preventing and containing the spread of diseases, which would include
points of entry not already covered by the Centers for Disease Control
and Prevention (CDC).\7\
---------------------------------------------------------------------------
\5\ GAO-16-127.
\6\ Member states, including the United States, are obligated to
establish regulations or take other appropriate steps to implement
International Civil Aviation Organization standards within their own
civil aviation systems. Additionally, member states are obligated to
notify the International Civil Aviation Organization of a
``difference'' from the international standard, if they find it
impractical to fully comply with an international standard or otherwise
differ from the standard in their regulations or practices. Chicago
Convention on International Civil Aviation art. 38, Apr. 4, 1944, 61
Stat 1180, T.I.A.S. No. 1,591
\7\ World Health Organization. Joint External Evaluation of IHR
Core Capacities of the United States of America: Mission Report, June
2016. (Geneva: 2017).
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The COVID-19 pandemic has further highlighted the need for a
national aviation-preparedness plan. Stakeholders publicly highlighted
piecemeal response efforts that may have led to some of the confusion
among stakeholders and chaos at certain airports that occurred earlier
in 2020 following travel restrictions as a result of COVID-19, as well
as increased screening efforts. For example, as we reported in June
2020, stakeholders described actions taken by individual airlines in
the absence of FAA guidance, such as to cease operations to certain
countries, and a piecemeal approach to establishing standards for
safely continuing or expanding service. This piecemeal approach points
to the continued need for DOT to implement our 2015 recommendation to
develop a coordinated effort to plan for and respond to communicable
disease threats or for Congress to take legislative action, as we
recommended in 2020, to require DOT to work with relevant agencies and
stakeholders to develop such a plan. Without a national aviation-
preparedness plan, the United States remains insufficiently prepared to
respond to communicable disease threats, now and in the future.
Question from Hon. Salud O. Carbajal to Chris P. Currie, Director,
Homeland Security and Justice, U.S. Government Accountability Office
Question 1. Since 2011, the Government Accountability Office (GAO)
has called for interagency planning to address nationally significant
biological events. The ongoing COVID-19 pandemic is showing us the need
for a whole-of-government approach to address biological threats.
What steps has FEMA and the federal government taken to protect our
nation against biological threats?
Answer. Effectively preparing for and responding to biological
incidents, including infectious disease outbreaks and pandemics,
requires engagement and commitment from the entire biodefense
enterprise. At the highest level, national strategies, such as the
National Biodefense Strategy, are designed to help guide preparedness
activities by providing long-range strategic vision to guide
policymaking. The Department of Homeland Security (DHS) was one of four
agencies required by law to jointly develop a national biodefense
strategy and associated implementation plan.\1\ The Strategy outlines a
whole-of-government approach intended to help the United States
actively and effectively assess, prevent, prepare for, respond to, and
recover from all types of biological threats, whether they are natural,
accidental, or deliberate.
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\1\ Signed into law on December 23, 2016, the National Defense
Authorization Act for Fiscal Year 2017 required the Secretaries of
Defense, Health and Human Services, Homeland Security, and Agriculture
to jointly develop a national biodefense strategy and associated
implementation plan, which shall include a review and assessment of
biodefense policies, practices, programs and initiatives. Such
Secretaries shall review and, as appropriate, revise the strategy
biennially. See Pub. L. No. 114-328, div. A, title X, subtitle G, Sec.
1086, 130 Stat. 2000, 2423-24 (2016) (classified, as amended, at 6
U.S.C. Sec. 104).
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In August 2021, we issued a report on steps taken by the federal
government to protect our nation against biological threats.\2\
Specifically, we found that the key federal agencies, including the
Departments of Homeland Security (DHS), Defense (DOD), Health and Human
Services (HHS), and Agriculture (USDA), developed a range of
interagency response plans to prepare for nationally significant
biological incidents. These strategic, operational, and tactical level
plans address responding to a broad spectrum of biological threats,
including those that are natural, accidental, or deliberate. At the
time of our review, agencies were reviewing and revising a key planning
document for responding to biological incidents. Officials GAO
interviewed stated this revision would incorporate lessons learned from
the ongoing COVID-19 pandemic, as well as lessons learned from a major
biological incident exercise conducted in 2019 (Crimson Contagion).
---------------------------------------------------------------------------
\2\ GAO, Biodefense: After-Action Findings and COVID-19 Response
Revealed Opportunities to Strengthen Preparedness, GAO-21-513
(Washington, D.C., Aug. 4, 2021).
---------------------------------------------------------------------------
DHS, DOD, HHS, and USDA conducted numerous interagency exercises to
help prepare for and respond to a wide variety of biological incidents,
such as anthrax attacks, influenza pandemics, and diseases affecting
plants and animals. Specifically, GAO identified 74 interagency
biological incident exercises conducted from calendar years 2009
through 2019.
GAO also reported that FEMA's initial review of the COVID-19
response demonstrated that capabilities needed for nationally
significant biological incidents were underdeveloped. In its January
2021 assessment of its response activities during the initial phase of
the pandemic, FEMA recognized that its ability to anticipate state,
local, and other nonfederal requirements during the pandemic was
affected by an insufficient understanding of projected consequences and
capabilities of such partners.
Through the National Exercise Program, FEMA facilitates interagency
feedback and reviews after-action reports to develop priorities for the
next National Exercise Program cycle. However, analysis of after-action
reports submitted to the program do not reflect the comprehensive view
of all exercises conducted across the nation. The National Exercise
Program is only one line of effort to conduct exercises, meaning
analysis done through this effort does not encapsulate all exercise or
real-world incident findings.
In our August 2021 report, we found that the Biodefense
Coordination Team is uniquely positioned to carry out activities to
enhance preparedness and response for future biological incidents.\3\
For example, based on our analysis of after-action reports for selected
interagency biological incident exercises and real-world incidents, as
well as findings from the COVID-19 response, we found that the
biodefense enterprise has gaps in its capabilities-based approach to
response planning. Specifically, we found the biodefense enterprise
lacked elements necessary for preparing for nationally significant
biological incidents, including:
---------------------------------------------------------------------------
\3\ The Biodefense Coordination Team helps carry out the strategic
goals and objectives of the National Biodefense Strategy on behalf of
the secretaries of participating departments and agencies, including
the Secretary of Homeland Security.
---------------------------------------------------------------------------
a set of defined capabilities that account for the unique
elements specific to responding to nationally significant biological
incidents;
a process at the interagency level for agencies to assess
and communicate priorities for exercising capabilities;
a process to consistently report on those capabilities in
after-action reviews; and
routine monitoring at the interagency level of exercises
and real-world incidents in order to evaluate lessons learned across
the government, identify patterns and possible root causes for systemic
challenges, and make recommendations to address these challenges.
We made four recommendations to DHS to help ensure the Biodefense
Coordination Team develops ways to address the above stated
deficiencies. We reported that the ability to monitor and assess the
outcomes of interagency biological incident exercises and real-world
events could be instrumental in identifying persistent challenges and
their root causes before they become systemic, intractable problems.
Identifying these issues could also help agencies prioritize which
capabilities need further development or exercising.
Questions from Hon. Steve Cohen to Hon. Eric J. Soskin, Inspector
General, U.S. Department of Transportation
Question 1. In June of last year, your office sent a letter to the
Secretary of Transportation outlining key potential risk areas for the
Department in overseeing its implementation of the CARES Act and
suggesting actions to mitigate these risks. One of the areas you
identified as being subject to risk included airport grants.
a. What were the key potential risk areas that your office
identified?
Answer. We identified 5 key potential risk areas: effectively
managing grants to support the Nation's airports; adapting existing
stewardship and oversight approaches while making prudent use of
waivers in surface transportation; executing contracts and grants
effectively to achieve transportation program and project outcomes;
tracking and monitoring CARES Act funds while ensuring the availability
and integrity of DOT's financial management systems; and increasing
outreach and education to transportation agencies to prevent and detect
fraud, waste, and abuse.
b. What if anything did your office hear back from the previous
Secretary last year after sending this letter?
Answer. After sending this memorandum, we did not hear back from
the previous Secretary on this subject.
Question 2. Can you describe in detail what your office is doing to
make sure that the smaller airports that received these unusually large
grants are spending it properly and in accordance with FAA grant
requirements?
Answer. To ensure that the unusually large grants given to smaller
airports are used appropriately and in accordance with FAA grant
requirements, we are conducting a thorough audit to assess whether
FAA's policies and procedures for awarding and overseeing CARES Act
grants are sufficient to protect taxpayer interests. Our assessment of
FAA's oversight includes a review of airports' grant expenditure rates
and compliance with the Revenue Use Policy. We will also assess
airports' action plans for funds in excess of the initial grant
amount--which FAA capped at four times the airport's annual operating
expenses--as well as FAA's approach for monitoring unexpended funds. We
expect to complete this work in the winter of 2022.
Question from Hon. Stephen F. Lynch to Hon. Eric J. Soskin, Inspector
General, U.S. Department of Transportation
Question 1. We recently had a brand new N93 mask manufacturer set
up shop in my district, in Bridgewater, Massachusetts. They anticipated
they would be welcomed by hospitals, schools, businesses and State,
local and Federal Government agencies. However, they have struggled to
obtain any sizable contracts for PPE because the purchasing agents of
local hospitals, businesses and government agencies continue to
maintain contracts with Chinese suppliers. These purchasing agents have
lucrative contracts with these Chinese manufacturers and don't want to
let that go. The Chinese manufacturers have also lowered their prices
and made it more profitable for these purchasing agents and companies
and agencies.
I would like to know the terms to the actual supply contracts at
DOT. Can we have copies of their PPE purchasing contracts? These should
be a matter of public record so we know to whom and how much our
agencies are spending.
Answer. We do not have ongoing audit work related to DOT's supply
contracts and do not have copies of the referenced supply contracts in
our audit files. Copies of DOT's executed contracts or modifications to
such contracts are a matter of public record; however, the Agency would
have to gather and provide copies of these contracts and/or
modifications in order to make this information publicly accessible.
For this reason, we believe the answers to Representative Lynch's
questions could be answered more expeditiously by requesting this
information directly from DOT.
ASSESSING THE FEDERAL GOVERNMENT'S COVID-19 RELIEF AND RESPONSE EFFORTS
AND ITS IMPACT--PART 2
----------
THURSDAY, SEPTEMBER 30, 2021
House of Representatives,
Committee on Transportation and Infrastructure,
Washington, DC.
The committee met, pursuant to call, at 10:05 a.m., in room
2167 Rayburn House Office Building and via Zoom, Hon. Peter A.
DeFazio (Chair of the committee) presiding.
Members present in person: Mr. DeFazio, Mr. Larsen, Mr.
Garamendi, Mr. Carbajal, Mr. Lamb, Mr. Auchincloss, Ms.
Williams of Georgia, Mr. Crawford, Mr. Webster, Mr. Perry, Mr.
Graves of Louisiana, Mr. Rouzer, Mr. Weber, Mr. LaMalfa, Mr.
Westerman, Mr. Balderson, Mr. Burchett, Mr. Guest, and Mr.
Nehls.
Members present remotely: Ms. Norton, Ms. Johnson of Texas,
Mrs. Napolitano, Mr. Johnson of Georgia, Ms. Brownley, Mr.
Payne, Mr. Lowenthal, Mr. DeSaulnier, Mr. Brown of Maryland,
Mr. Stanton, Ms. Davids, Mr. Garcia of Illinois, Mr. Delgado,
Mr. Moulton, Mr. Carter of Louisiana, Mr. Massie, Mr. Katko,
Mr. Fitzpatrick, Miss Gonzalez-Colon, Mr. Johnson of South
Dakota, Dr. Van Drew, Mr. Gimenez, and Mrs. Steel.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
September 24, 2021
SUMMARY OF SUBJECT MATTER
TO: Members, Committee on Transportation and Infrastructure
FROM: Staff, Committee on Transportation and Infrastructure
RE: Full Committee Hearing on ``Assessing the Federal
Government's COVID-19 Relief and Response Efforts and Its Impact: Part
II''
_______________________________________________________________________
PURPOSE
The Committee on Transportation and Infrastructure (T&I) will meet
on Thursday, September 30, 2021, at 10:00 a.m. EDT in 2167 Rayburn
House Office Building and via Zoom to hold a hearing titled ``Assessing
the Federal Government's COVID-19 Relief and Response Efforts and Its
Impact: Part II.'' Part I of this hearing series was held on July 29,
2021, and testimony was received by government witnesses on the federal
government's COVID response and relief efforts. This hearing will
examine the federal response to the COVID-19 pandemic and the impact of
pandemic relief efforts on the transportation and infrastructure
sectors and their workers.
The Committee will hear testimony from the American Public
Transportation Association (APTA), the International Association of
Emergency Managers (IAEM), the Hoover Institution at Stanford
University, the Hamilton Project at the Brookings Institution, and the
Transport Workers Union of America (TWU).
BACKGROUND
In response to the COVID-19 pandemic, Congress and the Executive
Branch took a range of actions to protect the health and economic
security of American individuals and businesses. Congress included $5.9
trillion of relief and job protection measures in the CARES Act, the
Consolidated Appropriations Act of 2021, the American Rescue Plan, and
other legislation.\1\ Federal agencies, including the Federal Emergency
Management Agency (FEMA), the operating administrations within the
Department of Transportation (DOT), and the U.S. Department of the
Treasury (Treasury) are responsible for administering and overseeing
more than $200 billion in federal assistance provided for
transportation and emergency management.\2\ These agencies also conduct
other pandemic response and recovery functions. For example, FEMA
helped supply states and localities with personal protective equipment,
distributed vaccine, and testing supplies, and reimbursed for many
activities tied to the COVID-19 pandemic response.\3\ Within DOT, the
Federal Aviation Administration (FAA), the Federal Transit
Administration (FTA), and other department components provided
pandemic-related guidance and support to their respective modes to help
keep employees and passengers on our nation's transportation systems
safe.\4\
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\1\ CARES Act, Pub. L. No. 116-136 (2020); Consolidated
Appropriations Act, 2021, Pub. L. No. 116-260 (2020); American Rescue
Plan Act of 2021, Pub. L. No. 117-2 (2021).
\2\ U.S Department of the Treasury, ``Coronavirus Economic Relief
for Transportation Services (CERTS) Program,'' (accessed on July 26,
2021), available at https://home.treasury.gov/policy-issues/
coronavirus/assistance-for-american-industry/coronavirus-economic-
relief-for-transportation-services, and ``Airline and National Security
Relief Programs,'' accessed on July 26, 2021, available at https://
home.treasury.gov/policy-issues/coronavirus/assistance-for-american-
industry/airline-and-national-security-relief-programs; Federal Transit
Administration, ``Novel Coronavirus (COVID-19)'' (accessed on July 26,
2021), available at https://www.transit.dot.gov/coronavirus; National
Railroad Passenger Corporation (AMTRAK) Office of Inspector General,
Governance: Amtrak Continues to Demonstrate Good Stewardship of
Pandemic Relief Funds, OIG-MAR-2021-009, (May 12, 2021), available at
https://amtrakoig.gov/sites/default/files/reports/OIG-MAR-2021-
009%20Relief%20Act.pdf; GAO, COVID-19: Continued Attention Needed to
Enhance Federal Preparedness, Response, Service Delivery, and Program
Integrity, GAO-21-551, (July 2021), available at https://www.gao.gov/
assets/gao-21-551-highlights.pdf; Federal Aviation Administration,
``Information for Airports about COVID-19,'' (accessed on July 26,
2021), available at https://www.faa.gov/airports/special_programs/
covid-19-airports; House Committee on Transportation and
Infrastructure, ``Chair DeFazio Applauds New Round of Aid for the Hard-
Hit Transportation Sector in Omnibus and COVID Relief Legislation,''
December 22, 2020, available at https://transportation.house.gov/news/
press-releases/chair-defazio-applauds-new-round-of-aid-for-the-hard-
hit-transportation-sector-in-omnibus-and-covid-relief-legislation-;
FEMA, 100 Days of FEMA and Our Partners in Action (April 30, 2021),
available at https://www.fema.gov/blog/100-days-fema-and-our-partners-
action.
\3\ FEMA, Pandemic Response to Coronavirus Disease 2019 (COVID-19):
Initial Assessment Report, (January 2021), available at https://
www.fema.gov/sites/default/files/documents/fema_covid-19-initial-
assessment-report_2021.pdf;
\4\ FTA, ``FTA COVID-19 Resource Tool'' (May 7, 2021), available at
https://www.transit.dot.gov/regulations-and-programs/safety/fta-covid-
19-resource-tool; and FAA, Coronavirus Guidance and Resources from FAA
(April 19, 2021), available at https://www.faa.gov/coronavirus/
guidance_resources/.
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PART I OF THE HEARING: OVERSIGHT OF THE FEDERAL RESPONSE
During Part I of this hearing series, the Committee heard
testimony from the Government Accountability Office (GAO), the
Department of Transportation Office of Inspector General (DOT
OIG), the Department of Homeland Security Office of Inspector
General (DHS OIG), and the Pandemic Response Accountability
Committee (PRAC).\5\ These witnesses discussed the work they
have done to monitor agencies' use of COVID-19 relief and
response funds, assess the federal government's actions,
policies, and programs to respond to COVID-19, and identify
areas for improvement.
---------------------------------------------------------------------------
\5\ The CARES Act established the Pandemic Response Accountability
Committee (PRAC) as a committee of the Council of the Inspectors
General on Integrity and Efficiency (CIGIE), which is composed of
inspectors general from across the government. See https://
www.pandemicoversight.gov/our-mission/about-the-prac; CARES Act, Pub.
L. No. 116-136 (2020), Sec. 15010.
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IMPACT OF FEDERAL COVID-19 RESPONSE AND RELIEF EFFORTS
The policies and programs the federal government has
implemented over the course of the pandemic have had wide-
ranging and significant impacts. States and localities received
assistance to help vaccinate their residents.\6\ Businesses and
public sector agencies retained workers that they otherwise
would have laid off.\7\ The nation's transportation systems
continued to operate safely, providing transportation for
essential workers and others.\8\ Moreover, the economy as a
whole is beginning to recover as the economy opens back up with
gross domestic product expected to show an increase this year
after dropping to an annual rate of 31.4 percent in Q2 2020.\9\
However, there are concerns about the effect of inflation on
this recovery.\10\ The current Consumer Price Index (CPI) rose
5.3 percent over the year ending in August 2021.\11\
---------------------------------------------------------------------------
\6\ FEMA, 100 Days of FEMA and Our Partners in Action (April 30,
2021), available at https://www.fema.gov/blog/100-days-fema-and-our-
partners-action.
\7\ General Aviation Manufacturers Association, Protecting Aviation
Manufacturing and Maintenance Jobs, (March 10, 2021), available at
https://gama.aero/news-and-events/press-releases/protecting-aviation-
manufacturing-and-maintenance-jobs/, Amalgamated Transit Union, Relief
on the way for transit and working families with American Rescue Plan
(March 10, 2021), available at https://www.atu.org/media/releases/atu-
relief-on-the-way-for-transit-and-working-families-with-american-
rescue-plan.
\8\ Id.
\9\ Congressional Research Service, COVID-19 and the U.S. Economy
(May 11, 2021), available at https://crsreports.congress.gov/product/
pdf/R/R46606.
\10\ Rachel Siegel, Biden Says Fed `should take whatever steps it
deems necessary' to respond to inflation, Wash. Post. (July 19, 2021),
available at https://www.washingtonpost.com/us-policy/2021/07/19/biden-
powell-inflation-economy/.
\11\ U.S. Department of Labor, Bureau of Labor Statistics, Consumer
Price Index (Sept. 14, 2021), available at https://www.bls.gov/
news.release/cpi.nr0.htm.
LFEMA's Assistance to States, Localities, Tribes,
---------------------------------------------------------------------------
Territories, and Individuals
The COVID-19 pandemic posed an unprecedented challenge to
the disaster response capabilities of states, localities,
tribes, and territories. As the lead federal agency for the
COVID-19 response, FEMA has undertaken expansive efforts to
help them, and to assist individuals suffering from the
economic hardships of the pandemic.\12\ Since January 2020,
FEMA has taken the following actions, among others:
---------------------------------------------------------------------------
\12\ FEMA, 100 Days.
---------------------------------------------------------------------------
LProvided more than $4.75 billion in support of
vaccination efforts in communities across the country.\13\
---------------------------------------------------------------------------
\13\ Id.
---------------------------------------------------------------------------
LWorked with its federal, state, and local
partners to establish 1,732 new community vaccination
centers.\14\
---------------------------------------------------------------------------
\14\ Id.
---------------------------------------------------------------------------
LCoordinated with the Department of Health and
Human Services to deliver, as of September 2020, 249 million
N95 masks, 1.1 billion surgical masks, 46.7 million eye and
face shields, 432 million surgical gowns or coveralls, and more
than 28.6 billion gloves.\15\
---------------------------------------------------------------------------
\15\ Id.
---------------------------------------------------------------------------
LProvided funding to nonprofits, faith-based
organizations, and government entities that provide shelter,
food, transportation, COVID-19 testing, and medical care to
their communities.\16\
---------------------------------------------------------------------------
\16\ Id.
---------------------------------------------------------------------------
LObligated, as of the end of September 2020, $42.6
billion as a supplemental benefit for unemployment insurance
benefits.\17\
---------------------------------------------------------------------------
\17\ FEMA, Pandemic Response to Coronavirus Disease 2019 (COVID-
19): Initial Assessment Report. FEMA's Lost Wages Assistance (LWA)
program was unprecedented because it was instituted as a new program
despite another discrete Stafford Act section on disaster unemployment
assistance (Sec. 410). FEMA failed to provide the Committee with a
legal justification memo explaining why or how LWA was administered as
it was despite section 410.
---------------------------------------------------------------------------
LIn January 2021, the federal cost-share for a
majority of eligible FEMA assistance for all COVID-19 related
Emergency and Major Disasters was expanded to 100 percent and
made applicable to costs of eligible activities from the
beginning of the pandemic incident period on January 20, 2020,
to September 30, 2021.\18\
---------------------------------------------------------------------------
\18\ FEMA, FEMA Statement on 100% Cost Share (February 3, 2021)
available at https://www.fema.gov/press-release/20210203/fema-
statement-100-cost-share.
---------------------------------------------------------------------------
LAviation Industry
As a result of the pandemic, air passenger demand fell far
below prior years and, according to some industry analysts, a
return to pre-pandemic traffic levels might not occur until
2023.\19\ The number of passengers going through Transportation
Security Administration (TSA) checkpoints increased in 2021 but
remains below pre-pandemic levels. In August 2021, for example,
TSA traveler throughput was almost 23 percent lower than in
August 2019.\20\ As a result of this decline in passenger
demand and other factors, U.S. passenger airlines recorded $4.3
billion in pre-tax losses in the first half of 2021 and are
projecting pre-tax losses of $18 billion this year, according
to Airlines for America.\21\ Similarly, Airports Council
International-North America (ACI-NA) expects that U.S. airports
will lose at least $40 billion by March 2022 because of the
prolonged decline in commercial aviation traffic.\22\
---------------------------------------------------------------------------
\19\ GAO, COVID-19 Pandemic: Preliminary Observations on Efforts
toward and Factors Affecting the Aviation Industry's Recovery, GAO-21-
412T (March 2, 2021) available at https://www.gao.gov/assets/gao-21-
412t.pdf.
\20\ See, e.g., TSA, TSA Checkpoint Travel Numbers, (last accessed
September 3, 2021), available at https://www.tsa.gov/coronavirus/
passenger-throughput.
\21\ Airlines for America, Impact of COVID-19: Data Updates,
(September 2, 2021) (last accessed September 3, 2021), available at
https://www.airlines.org/dataset/impact-of-covid19-data-updates/;
Statement of Mr. Nicholas E. Calio, President and Chief Executive
Officer, Airlines For America, ``COVID-19's Effects on U.S. Aviation
and The Flight Path to Recovery'' before the United States House
Committee on Transportation and Infrastructure Subcommittee on
Aviation, (March 2, 2021) available at https://
transportation.house.gov/imo/media/doc/Calio%20Testimony.pdf.
\22\ Airports Council International, Airports Council Applauds
Passage of $8 Billion in COVID-19 Relief for Airports (March 10, 2021)
(last accessed July 19, 2021), available at https://
airportscouncil.org/press_release/airports-council-applauds-passage-of-
8-billion-in-covid-19-relief-for-airports/
---------------------------------------------------------------------------
The Payroll Support Program (PSP) was created to prevent
layoffs in this hard-hit sector. Congress has appropriated $63
billion to this program, which provides financial assistance to
airlines, manufacturers, and other related businesses for
employee wages, salaries, and benefits.\23\ According to the
General Aviation Manufacturers Association, PSP has allowed
companies to keep highly skilled workers in the industry and
supported some of the smaller companies that needed assistance
to maintain operations.\24\ Airlines were able to preserve the
jobs of flight attendants, pilots, mechanics, gate agents, and
others, according to Airlines for America.\25\
---------------------------------------------------------------------------
\23\ House Committee on Transportation and Infrastructure, Chair
DeFazio Applauds Inclusion of T&I Provisions, Including Payroll Support
Program Extension, in House Democrats' Latest COVID-19 Relief Package,
(September 29, 2020), available at https://transportation.house.gov/
news/press-releases/chair-defazio-applauds-inclusion-of-tandi-
provisions-including-payroll-support-program-extension-in-house-
democrats-latest-covid-19-relief-package; U.S. Department of the
Treasury, Airline and National Security Relief Programs (accessed on
May 7, 2021), available at https://home.treasury.gov/policy-issues/
coronavirus/assistance-for-american-industry/airline-and-national-
security-relief-programs.
\24\ General Aviation Manufacturers Association, Protecting
Aviation Manufacturing and Maintenance Jobs, (March 10, 2021),
available at https://gama.aero/news-and-events/press-releases/
protecting-aviation-manufacturing-and-maintenance-jobs/.
\25\ Airlines for America, Statement from A4A CEO and President
Nicholas E. Calio on the Passage of the American Rescue Plan (March 10,
2021), available at https://www.airlines.org/news/statement-from-a4a-
ceo-and-president-nicholas-e-calio-on-the-passage-of-the-american-
rescue-plan/.
---------------------------------------------------------------------------
Congress also appropriated about $20 billion in grant
assistance to help airports respond to the COVID-19 pandemic,
including funds for operating expenses, debt service, and other
expenses.\26\ The additional grants are helping airports offset
some of the financial damage from the abrupt, unexpected drop
in air travel that resulted from precautions to limit the
spread of COVID-19, according to ACI-NA.\27\
---------------------------------------------------------------------------
\26\ GAO, COVID-19: Sustained Federal Action Is Crucial as Pandemic
Enters Its Second Year, GAO-21-387 (March 31, 2021) available at
https://files.gao.gov/reports/GAO-21-387/index.html.
\27\ Airports Council International, Airports Council Statement on
CARES Act Grants (last accessed July 19, 2021) available at https://
airportscouncil.org/press_release/airports-council-international-north-
america-statement-on-cares-act-grants/
---------------------------------------------------------------------------
LTransit Agencies
COVID-19 and the resulting shelter-in-place orders,
business closures, suspension of tourism, increasing
unemployment, and increasing numbers of employees working from
home significantly decreased public transit and commuter rail
ridership.\28\ Nationally, transit ridership in 2020 was down a
historic 79 percent at the start of the pandemic compared to
2019 levels.\29\ Transit agencies anticipate long-term
consequences from the COVID-19 pandemic, including reduced
demand for service, increased operating costs, and limited
state and local funding.\30\ According to APTA, when the
economy does begin to recover, transit agencies will still be
challenged with severe fiscal constraints as a result of
physical distancing requirements that reduce vehicle capacity,
increased costs of facility and vehicle cleaning and
disinfection, and decreased ridership due to the dramatic
increase in telework.\31\
---------------------------------------------------------------------------
\28\ Abby Vesoulis, The Future of American Public Transit Depends
on Congress, Time (December 17, 2020), available at https://time.com/
5921917/mass-transit-covid-congress/.
\29\ American Public Transportation Association, The Impact of the
COVID-19 Pandemic on Public Transit Funding Needs in the U.S. (January
27, 2021), available at https://www.apta.com/wp-content/uploads/APTA-
COVID-19-Funding-Impact-2021-01-27.pdf.
\30\ Supra, n. 9, GAO-21-387.
\31\ American Public Transportation Association, The Impact of the
COVID-19 Pandemic on Public Transit Funding Needs in the U.S. (January
27, 2021), available at https://www.apta.com/wp-content/uploads/APTA-
COVID-19-Funding-Impact-2021-01-27.pdf.
---------------------------------------------------------------------------
The CARES Act and subsequent pandemic relief funding have
provided about $67.25 billion in grant assistance to help
transit agencies manage these fiscal constraints.\32\ So far,
$37.94 billion, or 56 percent of the funds, has been obligated
and $23.45 billion, or 35 percent, has been spent.\33\ Federal
relief funds also allowed transit agencies to keep critical
service running, avoid layoffs, and provide workers and riders
with COVID-19 protections.\34\ As a result, some transit
agencies across the country have restored previously reduced
service or have canceled plans to further cut service.\35\
Transit agencies have also used the funds to mitigate the
spread of COVID-19, including through enhanced cleaning and
sanitation and social distancing.\36\ Further, restoring
transit service is expected to help the nation's economic
recovery, such as in New York City, where the economy depends
on trains and buses to carry riders to businesses, including
theaters, retail stores, and restaurants, that have been
crippled by the pandemic.\37\
---------------------------------------------------------------------------
\32\ This includes $25 billion from the CARES Act, $14 billion from
the Consolidated Appropriations Act, 2021, and $28.25 billion from the
American Rescue Plan. See https://www.transportation.gov/mission/
budget/usdot-covid-19-relief-funding.
\33\ U.S. Department of Transportation COVID-19 Relief Funding
Status (last updated Sept. 13, 2021), available at https://
www.transportation.gov/mission/budget/usdot-covid-19-relief-funding.
\34\ Amalgamated Transit Union, Relief on the way for transit and
working families with American Rescue Plan (March 10, 2021) available
at https://www.atu.org/media/releases/atu-relief-on-the-way-for-
transit-and-working-families-with-american-rescue-plan.
\35\ Christina Goldbaum and Pranshu Verma, Transit Got $30 Billion
in Stimulus Aid. What Does That Mean for Riders?, The New York Times
(March 15, 2021), available at https://www.nytimes.com/2021/03/15/
nyregion/biden-stimulus-public-transportation.html.
\36\ Supra, n. 9, GAO-21-387.
\37\ Goldbaum and Verma, Transit Got $30 Billion.
---------------------------------------------------------------------------
LOther Transportation Sectors
Operators of motorcoaches, school buses, and passenger
vessels have also suffered the financial effects of lower
demand for their services due to the pandemic. For example,
though passenger ships operating exclusively inside the United
States have begun to resume operations, virtually the entire
U.S. domestic commercial passenger fleet, including overnight
excursions, day charters, and tours, was forced to shut down
for a year.\38\ Companies operating commuter shuttle buses and
private bus charters also were forced to suspend service due to
lack of passengers, and some went out of business entirely,
according to the American Bus Association.\39\
---------------------------------------------------------------------------
\38\ Letter from Passenger Vessel Association to Speaker Nancy
Pelosi (April 8, 2020), available at http://www.passengervessel.com/
downloads/letters/2020-CARES-ACT-2-Speaker-Pelosi.pdf; The Maritime
Executive, American Coastal and River Cruising is Resuming (March 16,
2021), available at https://www.maritime-executive.com/article/
american-coastal-and-river-cruising-is-resumming.
\39\ American Bus Association, New Report Details Motorcoach
Industry's Dire Situation (August 10, 2020), available at https://
www.buses.org/news/article/new-report-details-motorcoach-industrys-
dire-situation.
---------------------------------------------------------------------------
The Coronavirus Economic Relief for Transportation Services
(CERTS) Program was created to support companies such as
motorcoach, school bus, passenger vessel, and pilot vessel
companies that were affected by the COVID-19 pandemic.\40\
Under the program, up to $2 billion in grants is made available
to eligible companies that certify they have experienced an
annual revenue loss of 25 percent or more as a direct or
indirect result of COVID-19.\41\ Grant funds administered
through the CERTS program are primarily used to cover payroll
costs but may also be used to cover the acquisition of
services, supplies, and the cost of operating and maintaining
equipment, among other things.\42\ Applications for CERTS
grants were due to Treasury by July 19, 2021, and grants will
be paid out with two payments, the first representing
approximately 80 percent of the award amount, with the
remaining 20 percent to be paid out to the extent funds are
available.\43\ The first grant agreements were made on August
13, 2021, with 1,327 grant agreements and first payments issued
as of September 1, 2021.\44\
---------------------------------------------------------------------------
\40\ U.S. Department of the Treasury, Coronavirus Economic Relief
for Transportation Services (CERTS) Program, available at https://
home.treasury.gov/policy-issues/coronavirus/assistance-for-american-
industry/coronavirus-economic-relief-for-transportation-services.
\41\ Id., and Guidelines for the Coronavirus Economic Relief for
Transportation Services (CERTS) Grant Program (May 6, 2021), available
at https://home.treasury.gov/policy-issues/coronavirus/assistance-for-
american-industry/coronavirus-economic-relief-for-transportation-
services.
\42\ U.S. Department of the Treasury, Coronavirus Economic Relief
for Transportation Services (CERTS) Program and Guidelines for the
Coronavirus Economic Relief for Transportation Services (CERTS) Grant
Program (May 6, 2021), available at https://home.treasury.gov/policy-
issues/coronavirus/assistance-for-american-industry/coronavirus-
economic-relief-for-transportation-services. According to the CERTS
guidelines Treasury published on May 6, 2021, to be eligible for
payments under this program, companies must be established or organized
in the United States or pursuant to federal law and must have a
majority of employees in the United States, among other things.
Further, passenger vessel companies must carry out their principal
business using one or more passenger vessels of the United States (as
each is defined in 46 USC Sec. 2101) that (a) are for hire with a
capacity of 6 to 2,400 passengers and (b) have U.S. Coast Guard issued
Certificates of Inspection.
\43\ U.S. Department of the Treasury, Coronavirus Economic Relief
for Transportation Services (CERTS) Program and Guidelines for the
Coronavirus Economic Relief for Transportation Services (CERTS) Grant
Program (May 6, 2021, updated August 12, 2021) (accessed September 3,
2021), available at https://home.treasury.gov/policy-issues/
coronavirus/assistance-for-american-industry/coronavirus-economic-
relief-for-transportation-services
\44\ U.S. Department of the Treasury, Coronavirus Economic Relief
for Transportation Services (CERTS) Grant Payments, (Data set published
September 1, 2021) (accessed on September 3, 2021), available at
https://home.treasury.gov/policy-issues/coronavirus/assistance-for-
american-industry/coronavirus-economic-relief-for-transportation-
services/Coronavirus-Economic-Relief-for-Transportation-Services-CERTS-
Grant-Payments
---------------------------------------------------------------------------
LFederal Requirements for Masking on Transportation
In addition to providing financial assistance to mitigate
the pandemic's economic impact, the federal government also
took action to promote mask-wearing on transportation systems
as a way to help reduce the spread of the virus. In January
2021, the Centers for Disease Control (CDC) issued an order
requiring the wearing of masks by all passengers and workers on
public conveyances (e.g., airplanes, ships, ferries, trains,
subways, buses, taxis, and rideshares) in the United
States.\45\ Shortly thereafter, the TSA issued Security
Directives and an Emergency Amendment to implement the CDC
order and President Biden's Executive Order on Promoting COVID-
19 Safety in Domestic and International Travel that required
passengers and workers to wear face masks ``in airports, bus
and rail stations, as well as while on passenger aircraft,
public transportation, passenger railroads, and over-the-road
buses operating on scheduled fixed-routes.'' \46\ The TSA
directives currently expire January 18, 2022.\47\ The operating
administrations within DOT have also taken steps to ensure that
operators under their purview implement this requirement. For
example, in February 2021, FTA updated its Master Agreement for
grantees to include compliance with CDC's mask order, and in
May 2021, FAA released interim health and occupational safety
guidance for airlines discussing requirements for mask-
wearing.\48\
---------------------------------------------------------------------------
\45\ CDC, ``Order Under Section 361 of the Public Health Service
Act (24 U.S.C. 264) and 42 Code of Federal Regulations 70.2, 71.31(b),
71.32(b) Requirement for Persons to Wear Masks While on Conveyances and
at Transportation Hubs,'' January 29, 2021) available at https://
www.cdc.gov/quarantine/pdf/Mask-Order-CDC_GMTF_01-29-21-p.pdf.
\46\ TSA, ``TSA to implement Executive Order regarding face masks
at airport security checkpoints and throughout the transportation
network,'' (January 31, 2021), available at https://www.tsa.gov/news/
press/releases/2021/01/31/tsa-implement-executive-order-regarding-face-
masks-airport-security.
\47\ TSA, ``Face Mask Requirements: Security Directives and
Emergency Amendment,'' (last accessed September 7, 2021), available at
https://www.tsa.gov/sd-and-ea.
\48\ FTA, ``Master Agreement: For Federal Transit Administration
Agreements authorized by 49 U.S.C. chapter 53 and Title 23, United
States Code (Highways), as amended by the Fixing America's Surface
Transportation (FAST) Act, the Moving Ahead for Progress in the 21st
Century Act (MAP-21), the Safe, Accountable, Flexible, Efficient
Transportation Equity Act: A Legacy for Users (SAFETEA-LU), the
SAFETEA-LU Technical Corrections Act of 2008, or other federal laws
that FTA administers,'' (February 9, 2021) available at https://
www.transit.dot.gov/sites/fta.dot.gov/files/2021-02/FTA-Master-
Agreement-v28-2021-02-09.pdf; FAA, ``Safety Alert for Operators: COVID-
19: Updated Interim Occupational Health and Safety Guidance for Air
Carriers and Crews,'' (May 25, 2021) available at https://www.faa.gov/
other_visit/aviation_industry/airline_operators/airline_safety/safo/
all_safos/media/2020/SAFO20009.pdf.
---------------------------------------------------------------------------
CONCLUSION
These federal relief efforts have been critical to the
nation's economic and public health recovery from COVID-19.
They helped to get needed supplies to states and local
governments and financial relief to transportation workers and
U.S. businesses impacted by the pandemic. Having heard from
federal government witnesses on their oversight work to monitor
the use of COVID-19 relief and response funds in Part I of this
hearing series in July 2021, Members will now have an
opportunity to discuss the impact of the federal government's
actions on the transportation industry and its workers.
WITNESS LIST
LMr. Paul Skoutelas, President & CEO, American
Public Transportation Association (APTA)
LMr. Juan Ortiz, Director of Homeland Security and
Emergency Management, City of Austin, Texas--on behalf of the
International Association of Emergency Managers (IAEM)
LDr. Michael J. Boskin, T.M. Friedman Professor of
Economics and Senior Fellow, Hoover Institution, Stanford
University
LDr. Wendy Edelberg, PhD, Director, The Hamilton
Project, The Brookings Institution
LMr. John Samuelsen, Transport Workers Union of
America (TWU)
Mr. DeFazio. The Committee on Transportation and
Infrastructure will come to order.
I ask unanimous consent that the chair be authorized to
declare a recess at any time during today's hearing. Without
objection, so ordered.
As a reminder, please keep your microphone muted unless
speaking. Should I hear inadvertent background noise, I will
request the Member please mute their microphone.
To insert a document into the record, please email it to
[email protected]
In July, we held the first part of this hearing examining
oversight of the Government's response to the COVID-19 pandemic
within the purview of this committee.
Today, we will hear about the impact that the Government's
COVID-19 relief funding and response have had on the
transportation sector and its workers, on the ability of States
and localities to support their communities with COVID-19
testing and vaccination, and on our Nation's economy.
We will also hear from our witnesses about how these
efforts can be improved to be even more effective in the
future.
The pandemic has had devastating health consequences for
our Nation and the world. More than 42 million Americans have
been infected; 675,000 have died, and the Federal Government
was called upon to maintain a national-scale response to this
crisis for an unprecedented period of time.
The Federal Emergency Management Agency has led the way in
protecting the health and well-being of our communities. They
have helped States and local governments establish community
vaccination centers, provided relief for COVID testing,
delivered tens of millions of N95 masks, surgical gowns, and
other personal protective equipment.
States and local governments are now receiving
reimbursement from FEMA, Federal Emergency Management Agency,
for 100 percent of their costs for the safe opening and
operation of schools, hospitals, shelters, and transit systems.
In addition, to prevent the further spread of the virus and
protect the health of transportation workers and passengers,
President Biden has ordered masks to be worn on transportation
modes, including buses, airplanes, ferries, and other forms of
transportation.
It not only hit the health of our citizens; it obviously
directly impacted our economy. Commercial airline demand fell
to virtually nothing, affecting revenues for airlines,
airports, and associated businesses.
Today, passenger levels are still 25 percent lower than
before the pandemic and not looking too good in the near term.
Transit ridership on buses, subways, and commuter vanpools
across the country has been decimated. Here in DC, ridership on
Metrorail decreased 90 percent.
These declines led to devastating economic consequences for
local, regional and State governments, transit agencies,
airlines, and airports, among many others.
Companies operating shuttle buses and private bus charters
were not spared. Some were forced to suspend service due to
lack of passengers. Some went out of business altogether. It
will take our transportation networks a very long time to
recover financially, and they may be forever altered by
changing workplace practices.
Congress took unprecedented actions to help cushion the
economic blow to these transportation sectors. The programs
Congress created and the funding it authorized helped transit
and bus operators, airlines, airports, and other companies
provide paychecks to their employees and essential
transportation services to communities across the country.
Federal relief funds administered by the Federal Transit
Administration allowed transit agencies to keep critical
service running, avoid layoffs, and provide workers and bus
riders with COVID-19 protections.
In aviation, the Payroll Support Program provided financial
assistance to airlines--actually, to their employees,
administered by the airlines--manufacturers, and other related
businesses for wages, salaries, and benefits.
Airports, which also suffered revenue losses, received
additional grant assistance from the Federal Aviation
Administration for costs such as salaries and debt service.
Congress also created the Coronavirus Economic Relief for
Transportation Services, or CERTS Program, so that motorcoach,
schoolbus, and passenger vessel companies affected by the
pandemic can maintain their payroll and hire back employees who
were laid off.
These and other pandemic relief programs have helped
thousands upon thousands of workers and their families.
According to the Bureau of Labor Statistics, so far this
year, job growth has averaged nearly 600,000 new jobs each
month, although not last month.
The economy has also been growing, due in part to a boost
from pandemic relief spending with gross domestic product
expected to show a substantial increase this year.
Governors, mayors, local officials, labor, and business
have all applauded the support Congress provided through
legislation that stopped the hemorrhaging of the economy and
helped to fight the COVID epidemic.
Today we will hear from witnesses about how the Federal
Government's pandemic assistance has helped transportation
workers, emergency managers, and the Nation's economy.
We will also hear their views on how the Federal Government
can do a better job as it continues to help our country recover
from the impacts of the COVID-19 pandemic and how it can be
better prepared to respond to future disasters.
I thank all our witnesses for being here today. I look
forward to your testimony.
[Mr. DeFazio's prepared statement follows:]
Prepared Statement of Hon. Peter A. DeFazio, a Representative in
Congress from the State of Oregon, and Chair, Committee on
Transportation and Infrastructure
In July, we held the first part of this hearing examining oversight
of the government's response to the COVID-19 pandemic. Today we will
hear about the impact that the government's COVID-19 relief funding and
response efforts have had on the transportation sector and its workers,
on the ability of states and localities to support their communities
with COVID-19 testing and vaccination, and on our nation's economy. We
will also hear from our witnesses about how these efforts can be
improved to be even more effective going forward.
The COVID-19 pandemic has had devastating public health
consequences for our nation and the world. In the United States, it has
infected more than 42 million Americans and resulted in over 675,000
deaths. The federal government was called upon to maintain a national-
scale response to this crisis for an unprecedented period of time.
The Federal Emergency Management Agency (FEMA) has led the way in
protecting the health and well-being of our communities. They have
helped states and local governments establish community vaccination
centers, provided funding for COVID-19 testing, and delivered tens of
millions of N-95 masks, surgical gowns, and other personal protective
equipment. States and local governments are now receiving reimbursement
from FEMA for 100 percent of their costs for the safe opening and
operation of schools, hospitals, shelters, and transit systems. In
addition, to prevent the further spread of the virus and protect the
health of transportation workers and passengers, President Biden
ordered masks to be worn on transportation modes, including buses,
airplanes, ferries, and other forms of transportation.
The pandemic wreaked havoc not only on the health of our citizens,
but also on the health of our economy, and transportation was one of
the hardest-hit sectors. Commercial airline demand fell drastically,
affecting revenues for airlines, airports, and associated businesses.
Today, passenger levels in the U.S. are still about 25 percent lower
than before the pandemic.
Transit ridership on buses, subways, and commuter vanpools across
the country has been decimated. Here in Washington, D.C., ridership on
metro rail decreased nearly 90 percent in the spring of 2020. These
declines led to devastating economic consequences for local, regional,
and state governments, transit agencies, airlines, and airports, among
many others.
Companies operating commuter shuttle buses and private bus charters
were not spared. Some were forced to suspend service due to lack of
passengers, and some went out of business entirely. Our transportation
networks will take a long time to recover financially, and they may be
forever altered by changing workplace practices.
Congress took unprecedented actions to help cushion the economic
blow to these transportation sectors. The programs Congress created and
the funding it authorized helped transit and bus operators, airlines,
airports, and other companies provide paychecks to their employees and
essential transportation services to communities across the country.
Federal relief funds administered by the Federal Transit Administration
allowed transit agencies to keep critical service running, avoid
layoffs, and provide workers and riders with COVID-19 protections.
In the aviation sector, the Payroll Support Program provided
financial assistance to airlines, manufacturers, and other related
businesses for employee wages, salaries, and benefits. Airports, which
also suffered revenue losses, received additional grant assistance from
the Federal Aviation Administration for costs such as salaries and debt
service.
Congress also created the Coronavirus Economic Relief for
Transportation Services, or ``CERTS,'' program so that motorcoach,
school bus, and passenger vessel companies affected by the pandemic can
maintain their payroll and hire back employees who were laid off.
These and other pandemic relief programs have helped thousands upon
thousands of workers and their families. According to the Bureau of
Labor Statistics, so far this year, job growth has averaged nearly
600,000 new jobs added each month. The economy has also been growing,
due in part to the boost from pandemic relief spending, with gross
domestic product expected to show a substantial increase this year.
Governors, mayors and local officials, labor organizations, and
business associations have all applauded the support Congress provided
through legislation that thwarted the loss of American jobs, bolstered
the economic security of U.S. small businesses, and helped to slow the
spread of the COVID-19 virus.
Today we will hear from our witnesses about how the federal
government's pandemic assistance has helped transportation workers,
emergency managers, and the nation's economy. But I also hope to hear
their views on how the federal government can do a better job as it
continues to help our country recover from the impacts of the COVID-19
pandemic and how it can be better prepared to respond to future
disasters of this nature.
Thank you to all of our witnesses for being here today. I look
forward to your testimony. With that, I yield to Ranking Member Graves
for his opening statement.
Mr. DeFazio. With that, I yield to the ranking member, Mr.
Crawford.
Mr. Crawford. I thank the chair and I just want to add a
few comments. The Federal Government has spent at least $5.9
trillion to combat and respond to COVID-19. Much of this year's
$1.9 trillion relief package, masqueraded as pandemic-related
relief, was really just throwing money at various Pelosi
priorities.
House committees also just marked up another $3.5 trillion
for the majority's reconciliation bill, which, if it is jammed
through Congress, will cost American taxpayers about $50,000
per household.
Despite throwing around all this money, we still haven't
done our basic duty of funding the Government, which is
hurtling toward a shutdown.
This unchecked spending is directly contributing to rising
inflation, and Americans are feeling this hidden tax every day.
We cannot continue with inflationary increases in prices every
month as we have so far during the Biden Presidency.
Gasoline is up 42 percent. Bacon is up 17 percent. Beef is
up more than 12 percent. Eggs are up 10 percent. And the list
goes on.
What is worse is, despite the high cost of fighting this
virus, we still have done nothing to hold China accountable for
it.
I look forward to hearing from our witnesses and thank them
for their patience and returning today. And with that, I yield
back the balance of my time.
[Mr. Crawford's prepared statement follows:]
Prepared Statement of Hon. Eric A. ``Rick'' Crawford, a Representative
in Congress from the State of Arkansas
Thank you, Chair DeFazio.
The federal government has spent at least $5.9 trillion to combat
and respond to COVID-19.
Much of this year's $1.9 trillion relief package masqueraded as
pandemic-related relief was really just throwing money at various
Pelosi priorities.
House committees also just marked up another $3.5 trillion for the
Majority's reconciliation bill, which, if it is jammed through
Congress, will cost American taxpayers about $50,000 per household.
Despite throwing around all this money, we still haven't even done
our basic duty of funding the government, which is hurtling towards a
shutdown.
This unchecked spending is directly contributing to rising
inflation and Americans are feeling this hidden tax every day.
We cannot continue with inflationary increases in prices every
month as we have so far during the Biden Presidency. Gasoline is up 42
percent. Bacon is up 17 percent. Beef is up more than 12 percent. Eggs
are up 10 percent, and the list goes on.
What's worse is despite the high cost of fighting this virus, we
still have done nothing to hold China accountable for it.
I look forward to hearing from our witnesses and thank them for
their patience and returning today.
I yield back the balance of my time.
Mr. DeFazio. I thank the gentleman for his brevity, and now
we will turn to our witnesses. We will have five witnesses: Mr.
Paul Skoutelas, president and CEO, American Public
Transportation Association, APTA; Mr. Juan Ortiz, director of
the Office of Emergency Management and Homeland Security, city
of Austin, on behalf of the International Association of
Emergency Managers; Dr. Michael J. Boskin, T.M. Friedman
Professor of Economics and senior fellow at the Hoover
Institution, Stanford University; Dr. Wendy Edelberg, director
of The Hamilton Project, the Brookings Institution; and Mr.
Greg Regan, the president of the Transportation Trades
Department, AFL-CIO. Thank you for joining us here today, and I
look forward to your testimony.
Without objection, your full witness statement will be
included in the record, and with that, I would recognize Mr.
Skoutelas for 5 minutes.
TESTIMONY OF PAUL P. SKOUTELAS, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, AMERICAN PUBLIC TRANSPORTATION ASSOCIATION; JUAN
MANUEL ORTIZ, DIRECTOR, OFFICE OF EMERGENCY MANAGEMENT AND
HOMELAND SECURITY, CITY OF AUSTIN, TEXAS, ON BEHALF OF THE
INTERNATIONAL ASSOCIATION OF EMERGENCY MANAGERS; MICHAEL J.
BOSKIN, Ph.D., TULLY M. FRIEDMAN PROFESSOR OF ECONOMICS AND
WOHLFORD FAMILY SENIOR FELLOW, HOOVER INSTITUTION, STANFORD
UNIVERSITY, ON BEHALF OF HIMSELF; WENDY EDELBERG, Ph.D.,
DIRECTOR, THE HAMILTON PROJECT, THE BROOKINGS INSTITUTION, ON
BEHALF OF HERSELF; AND GREGORY R. REGAN, PRESIDENT,
TRANSPORTATION TRADES DEPARTMENT, AFL-CIO
Mr. Skoutelas. Good morning, Chairman DeFazio, Ranking
Member Graves, and members of the committee. Thank you for this
opportunity to testify today on the Federal Government's COVID-
19 relief and its impacts on public transportation.
My name is Paul Skoutelas. I am the president and CEO of
APTA, the American Public Transportation Association. We are
the only association in North America that represents all modes
of public transit. We are the voice of public transportation
for both public- and private-sector members of our industry.
Public transportation has always been an essential service
for American families. It provides essential mobility options,
supports economic growth, improves the environment, makes our
roads safer for drivers and pedestrians, and has served
critical roles during natural disasters and other emergencies.
When the COVID-19 pandemic disrupted the lives of every
American, transit, once again, served as an essential lifeline.
Public transit systems brought healthcare professionals to the
front lines, delivering groceries and medicine to at-risk
populations, and connecting essential workers to their places
of work.
Some agencies even provided exceptional services, such as
delivering COVID-19 tests, or retrofitting buses into Wi-Fi
hotspots to help students who would otherwise have difficulty
accessing remote learning.
As States and cities implemented stay-at-home orders and
encouraged social distancing, ridership for many agencies fell
to as low as 20 percent of pre-pandemic ridership levels and
many below that.
Through it all, healthcare and other essential workers
continued to rely on transit to get to their critical jobs.
Most significantly, transit workers served as heroes on the
front lines.
The public transit industry directly employs some 450,000
workers today, and I would be remiss if I did not mention the
significant toll that COVID-19 has had on transit agencies'
frontline employees. Five hundred forty-five transit workers
have been lost to COVID.
At the same time, the pandemic has devastated transit
agency budgets, and we are deeply grateful that Congress
recognized transit's essential role by passing emergency
legislation to provide significant support for transit
operating costs.
According to a recent APTA survey, nearly one-half of
transit agencies stated that the COVID-19 emergency funding
helped them avoid a complete shutdown of public transit
service.
In addition, more than 75 percent of agencies said that
COVID funding helped them avoid layoffs and furloughs. And the
agencies today are putting these emergency funds to work.
According to the Federal Transit Administration, public
transit agencies have obligated 98 percent of CARES Act funds.
More than half of the CRRSAA funds have been obligated, and
more than one-quarter of American Rescue Plan funds.
There should be no doubt that COVID relief funding is being
well spent and has been absolutely critical to the survival of
transit service during this public health emergency.
Public transit agencies are also helping to combat the
pandemic directly. Last spring, APTA created a health and
safety commitments program for public transportation agencies
to implement in their own communities.
The goal was simple--control the spread of COVID-19, keep
the riding public and our own workers healthy and safe, and win
back public trust.
The program consists of four commitments to specific
practices and policies for both transit agencies and transit
users. They include following public health guidelines from
official sources, protecting each other by taking appropriate
precautions, keeping passengers informed and empowered to
choose the safest times and routes to ride, and putting health
first by requiring riders and employees to avoid public transit
if they have been exposed to COVID-19 and feel ill.
More than 200 transit agencies participated in the program,
helping to protect millions of people every day, which is
leading to increased public confidence.
At the same time, public transit agencies have made it a
priority to do everything they can to help Americans get
vaccinated.
Transit agencies have done everything from ensuring that
their transit employees had access to vaccines to helping the
public get to vaccines by establishing clinics onsite or
providing free rides to vaccine facilities.
The Federal emergency funding makes all of that possible.
Just as transit agencies have served Americans during this
ongoing public health emergency, transit is well-poised to be a
key driver of building a 21st-century transportation system
that will address the challenges of our time: economic
recovery, equity, climate change, and global competitiveness.
As the Nation emerges from the pandemic, transit ridership
continues to climb each month. About 6 months ago, the
ridership levels compared to pre-pandemic were about 41
percent; 3 months ago, national transit ridership was at 50
percent of pre-pandemic levels; and today, transit ridership is
almost two-thirds, about 63 percent of 2019 levels.
We expect increasing transit ridership to continue as
Americans return to offices and become more comfortable
resuming normal activities in their communities.
As we look to the future, we urge Congress to provide the
necessary funding to address the $105 billion state-of-good-
repair backlog that exists which is needed to modernize our
systems and meet the growing and evolving demands of our
communities, large and small, all over the country.
APTA strongly supports the Infrastructure Investment and
Jobs Act, which makes critical investments in surface
transportation, including $107 billion for public transit----
Mr. DeFazio. Thank you, Mr. Skoutelas. If you could
summarize very briefly.
Mr. Skoutelas. Sure. Let me conclude with just three facts
that we always need to keep in mind with regard to transit
investment. Every dollar invested in public transportation
[inaudible] in economic returns; 50,000 jobs are created for
every $1 billion of investment.
Thank you, Mr. Chairman, and I look forward to answering
any questions that the committee may have.
[Mr. Skoutelas' prepared statement follows:]
Prepared Statement of Paul P. Skoutelas, President and Chief Executive
Officer, American Public Transportation Association
Introduction
Chairman DeFazio, Ranking Member Graves, and Members of the
Committee on Transportation and Infrastructure, on behalf of the
American Public Transportation Association (APTA) and its public- and
private-sector member organizations that directly employ 450,000
transit workers and support several million private-sector jobs, thank
you for the opportunity to testify on ``Assessing the Federal
Government's COVID-19 Relief and Response Efforts and its Impact--Part
II''.
My name is Paul Skoutelas, and I am the President and Chief
Executive Officer of APTA, an international association representing
all modes of public transportation--bus, paratransit, light rail,
commuter rail, subways, waterborne services, and high-performance
intercity passenger rail.\1\ I am pleased to have the opportunity to
discuss how public transit agencies have used federal COVID-19
emergency funding during the ongoing pandemic.
---------------------------------------------------------------------------
\1\ APTA members include public transportation systems; planning,
design, construction, and finance firms; product and service providers;
academic institutions; state transit associations; and state
departments of transportation.
---------------------------------------------------------------------------
Transit's Essential Role During the Pandemic
Transit has always been an essential service, providing mobility
options for Americans, supporting economic growth, improving the
environment, making our roads safer for drivers and pedestrians, and
serving critical roles during natural disasters and other emergencies.
When the COVID-19 pandemic disrupted the lives of every American,
transit served as an essential lifeline. Public transportation systems
brought healthcare professionals to the frontlines, delivered groceries
and medicine to at-risk populations, and connected essential workers to
their places of work. Some agencies even provided exceptional services
such as delivering COVID-19 tests or retrofitting buses into Wi-Fi
hotspots to help students who would otherwise have difficulty accessing
remote learning.
Given official declarations to close businesses and impose stay-at-
home orders, as well as other measures such as a dramatic increase in
remote work, public transit agencies across the nation faced severe
ridership declines and state and local revenue losses. Public
transportation continued to serve our communities despite significantly
increased operating costs and dramatically reduced sources of funding,
including fares and other revenues. In most places, fare collection was
suspended for safety reasons. State and local transit funding was
diverted to address other COVID-related needs. Most significantly,
transit workers served as heroes on the front lines. The public transit
industry directly employs 450,000 workers, and I would be remiss if I
did not mention the significant toll that the COVID-19 pandemic has had
on transit agencies' frontline employees--545 transit workers have been
lost to COVID.
We thank Congress for recognizing transit's essential role by
passing emergency legislation to provide significant support for
transit operating costs that was essential for the very survival of
many agencies. The Coronavirus Aid, Relief, and Economic Security Act
(CARES Act), the Coronavirus Response and Relief Supplemental
Appropriations Act (CRRSAA), and the American Rescue Plan Act (ARP)
each provided critical support for public transportation. COVID relief
funds helped stabilize agency budgets, which allowed them to continue
their capital and construction programs, maintain jobs, and help the
economy recover.
According to a recent APTA survey, almost one-half of public
transit agencies (44 percent) stated that COVID-19 emergency funding
helped them avoid a complete shutdown of service. In addition, the
overwhelming majority of agencies said that COVID-19 funding helped
them avoid layoffs (77 percent) and furloughs (79 percent).\2\
---------------------------------------------------------------------------
\2\ APTA Policy Brief, Covid Relief Funding Critical to Transit
Survival (APTA Policy Brief) (July 2021), at 2. This survey was
conducted of APTA transit agency members in July 2021. One hundred
thirty-six (136) members responded to the survey, with those agencies
carrying more than three-quarters of U.S. transit ridership.
---------------------------------------------------------------------------
In addition, COVID-19 relief funding has enabled public transit
agencies to ramp up service as people start traveling more and return
to offices. Today, two-thirds of public transit agencies (65 percent)
are operating at 75 percent or more of their pre-pandemic service
levels.\3\
---------------------------------------------------------------------------
\3\ Id. at 1.
---------------------------------------------------------------------------
Emergency federal funding was vital to keeping public
transportation systems operating, but this does not mean those dollars
were used to simply maintain pre-pandemic functions. Transit agencies
pivoted to address urgent needs during the pandemic, such as:
Redesigning routes and revising schedules to better serve
riders who most heavily rely on transit;
Keeping transit workers on the job, often deploying
employees in different jobs that had become priorities due to COVID-19;
Reallocating resources to ensure essential workers--such
as front-line responders, health care employees, pharmacists, hospital
staff, grocery store clerks, and community service providers--could
reach their places of employment;
Delivering meals and critical supplies to those without
resources and carrying individuals with chronic health issues to life-
saving treatments; and
Ensuring that vaccines were available to transit
employees as soon as they were eligible, and providing free, convenient
travel to vaccination sites for the general public.
Transit agencies are investing these emergency funds in services
that are absolutely vital in their communities. To date, public transit
agencies have obligated 98 percent of CARES Act funding. Transit
agencies have also obligated more than one-half of CRRSAA funds and
one-quarter of ARP funds. According to APTA's survey, one-half of
responding agencies (51 percent) expect to exhaust all of their COVID-
19 relief funds by January 2023 and the vast majority of agencies (82
percent) expect to expend all of their funds within the following
year.\4\
---------------------------------------------------------------------------
\4\ Id at. 3.
* Please note that the percentages obligated represent the percentage
of formula funds allocated under the COVID-19 emergency funding acts.
There should be no doubt that COVID-19 emergency funding was
critical to the survival of transit service during the pandemic.
Agencies that responded to our survey had this to say about the impact
of COVID emergency funding:
``COVID relief funding has prevented the outright
cancelation of our commuter bus program. It has also been a valuable
tool to pay front-line staff to self-isolate/quarantine when they
showed symptoms of COVID. As a result, we have had no outbreaks amongst
staff that have been tied to work.''
``The biggest benefit we saw was the preservation/
continuation of employment and pay for our employees and contract
teams, and the provision of essential service to our community
(especially essential workers).''
``COVID-related funding has been a major factor in being
able to pay for PPE, purchase of ion electric cleaners, driver
compartment plexiglass barriers, adding bus/facility cleaners for
heightened cleaning to keep our employees and the public as safe as
possible.''
Finally, one agency summed it up as follows: ``Receiving the CARES,
CRRSAA, and ARP monies literally saved our region's public
transportation system.''
APTA members have also done their part in ensuring that their
systems were ready to welcome passengers back, as detailed below.
APTA Safety & Health Commitments Program
At the outset of the pandemic, APTA members established a Mobility
Recovery & Restoration Task Force, which developed a Health & Safety
Commitments Program for public transportation agencies to implement in
their own communities. The goal was simple: control the spread of
COVID-19, keep the riding public and our own workers healthy and safe,
and win back public trust. The APTA program consists of four
commitments to specific practices and policies for both transit
agencies and transit users to follow:
More than 200 public transit agencies participate in this program,
helping to protect millions of people every day.
Keeping buses on streets and trains on rails--where and when they
were needed most--was our mission, but we also needed to make sure
these operations were safe for passengers and transit employees.
As a result of our agencies' concerted efforts, ridership continues
to climb, albeit slowly. According to the Federal Transit
Administration (FTA), some smaller transit systems are reporting
ridership nearing 80 percent or more of pre-pandemic levels.\5\ This is
a positive development to see riders return as public transit is
essential for economic recovery and the nation's well-being.
---------------------------------------------------------------------------
\5\ See FTA Press Release, Americans Riding Public Transportation
in Greater Numbers [https://www.transit.dot.gov/about/news/americans-
riding-public-transportation-greater-numbers] (July 21, 2021).
---------------------------------------------------------------------------
Transit Agencies Helping Vaccinate Americans
Public transportation agencies and organizations are helping people
get to COVID-19 vaccination sites by providing free rides, and in some
cases, transit facilities have become vaccination clinics. These
efforts have been made possible because of federal emergency funding
provided to the public transit industry. There are countless examples
of transit agencies going above and beyond the call of duty to help in
the vaccination effort, and I will describe a few here.
The Tri-State Transit Authority (TTA) (Huntington, WV) has
partnered with the Cabell-Huntington Health Department to provide free
rides to and from any vaccine clinic in Cabell County, available on any
TTA bus or dial-a-ride service.
The Jacksonville Transportation Authority (JTA) (Jacksonville, FL)
partnered with a non-profit health center to provide ``Wellness on
Wheels'', a mobile vaccination service to bring the COVID-19 vaccine
directly to seniors and at-risk citizens throughout Jacksonville,
specifically targeting areas where there are gaps in health equity.
In May, the North Carolina Department of Transportation (NCDOT)
reported that its state's transit systems had taken more than 8,500
residents to vaccine appointments. It credited federal COVID-19
emergency funds for enabling 82 North Carolina transit agencies to
provide rides to vaccine sites.\6\
---------------------------------------------------------------------------
\6\ According to NCDOT, ``Since January, NCDOT and NCDHHS have been
administering $2.5 million in Coronavirus Relief Funding to local
transit agencies in every county. The funds are being used to offset
the operating costs associated with transit rides to and from
vaccination sites for people who are receiving or assisting someone in
receiving the COVID-19 vaccine. To date, 82 transit agencies have
reported using the federal funds to take people to and from vaccine
sites in North Carolina. Those agencies have traveled more than 100,000
miles to take people to vaccine appointments.'' https://www.ncdot.gov/
news/press-releases/Pages/2021/05-11-2021-transit-agencies-8500-
vaccine-sites.aspx
---------------------------------------------------------------------------
The Santa Clara Valley Transportation Authority (VTA) (San Jose,
CA) offered free rides on its buses and light rail to Levi's Stadium in
Santa Clara, which hosted a mass vaccination site. VTA also increased
the frequency of seven bus routes to help relieve the impact of
passenger pass-ups due to limited capacity necessitated by the
requirements to social distance.
Again, there are countless other examples of transit agencies
supporting their communities in this way, and the work is ongoing
across the country.
Transit's Essential Role in Rebuilding our Economy
As the nation emerges from the ongoing COVID-19 public health
emergency, transit is poised to be a key driver of building a 21st
century transportation system that will support economic recovery,
address equity and climate change, and increase our global
competitiveness. Transit ridership continues to climb each month. Three
months ago, national transit ridership was at 50 percent of pre-
pandemic levels. Today, transit ridership is almost two-thirds (63
percent) of 2019 levels. Increasing transit ridership is expected to
continue as Americans return to offices and become more comfortable
resuming normal activities.
I again express our deep gratitude for the federal COVID-19
emergency funding that supported operations during a time that posed an
existential threat to public transit. While the COVID-19 emergency
support was designed to support the operating budgets of transit
agencies,\7\ we look forward to continuing to work with Congress to
invest in transit capital programs. APTA strongly supports the
Infrastructure Investment and Jobs Act (IIJA), which makes critical
investments to surface transportation infrastructure, including $107
billion for public transportation and $102 billion for commuter rail,
Amtrak, and other high-performance rail. APTA also strongly supports
this Committee's title of the Build Back Better Act, which creates a
new, innovative program to provide $10 billion for competitive grants
for public transit access to affordable housing and to enhance mobility
for low-income riders and residents of disadvantaged communities.
---------------------------------------------------------------------------
\7\ According to APTA's July 2021 survey, 90 percent of transit
agencies have used their COVID emergency funding exclusively or mostly
for operations.
---------------------------------------------------------------------------
Taken together, these critical investments in public transportation
prioritize equity, health, job creation, and climate action. Investing
in public transit will significantly reduce greenhouse gas emissions,
improve air quality and public health, and help transform our nation's
transportation network for a sustainable future. Together, the bills
reflect key pillars of APTA's Surface Transportation Authorization
Recommendations,\8\ addressing the $105 billion state-of-good-repair
backlog and providing the necessary investment to meet the growing and
evolving demands of our communities.
---------------------------------------------------------------------------
\8\ In October 2019, the APTA Board of Directors adopted APTA's
Recommendations on Surface Transportation Law [https://www.apta.com/
advocacy-legislation-policy/federal-legislative-issues/authorization/].
The Recommendations detail a funding proposal and programmatic reforms
that will create or sustain more than two million jobs.
---------------------------------------------------------------------------
We believe that passing both the IIJA and the Build Back Better Act
will provide the transformational investment in infrastructure that the
country so desperately needs to recover from the COVID-19 pandemic and
thrive in the future.
Conclusion
On behalf of APTA, thank you for giving me the opportunity to
testify about the tremendous work that transit agencies have been doing
throughout this pandemic. Public transit will continue to be essential
for our economic recovery. We stand ready to work with you on these
important infrastructure initiatives and other issues related to public
transportation.
Mr. DeFazio. OK. I thank the gentleman.
Mr. Ortiz, you are recognized for 5 minutes.
Mr. Ortiz. Chair DeFazio, Ranking Member Graves, and
members of the committee, thank you for the opportunity to
testify at today's hearing. My name is Juan Manuel Ortiz. I
serve as the director of the city of Austin's Homeland Security
and Emergency Management Department. I am testifying today on
behalf of the International Association of Emergency Managers,
as well as the city of Austin.
The city of Austin's Office of Homeland Security and
Emergency Management is responsible for preparedness, response,
recovery, and mitigation for emergencies and disasters, among
many other services.
In the past 18 months, we have responded to a category 4
hurricane, a devastating pandemic, a major winter storm that
crippled our State's power grid, and many other emergencies.
My testimony today will provide examples of constructive
comments with the goal of strengthening Federal, State, and
local emergency management, and improving our ability to meet
our core mission in protecting our community in emergency
situations.
Today, I will cover inconsistencies in the application of
Federal rules and law, the necessity for adequate funding for
grant operations, and if time permits, supply chain management.
During the COVID-19 pandemic, providing temporary
protective shelters for Austin's most vulnerable and at-risk
residents proved to be one of our most difficult and most
expensive challenges.
In the wake of an outbreak at Austin's primary congregate
shelter facility, the city took quick action and leased six
hotels to provide noncongregate, protective shelter and
isolation facilities for people at high risk of severe disease
from COVID-19, including people experiencing homelessness.
The city implemented these shelter spaces on the
established rules and guidance from the CDC and FEMA, and staff
worked closely with FEMA region 6 to establish the
noncongregate shelter program in accordance with their policies
and guidelines.
Regrettably, it became very clear months into the process
that although the rules and guidance published by the agencies
allowed the local expenditures to protect our most vulnerable
population, our reimbursement from FEMA for the program was at
risk because of the inconsistent enforcement of rules from
regional FEMA offices throughout the Nation.
After pursuing the program for over a year, we have
received strong indications from FEMA region 6 that our
reimbursement request for our pandemic noncongregate shelter
program may be denied.
An adverse FEMA decision on noncongregate shelter
reimbursement poses serious risk to public health and our
budget.
The city of Austin has spent $40 million in noncongregate
shelters, and as you can imagine, our frustration has grown
with the thought of no reimbursement as we have learned that
expenditures identical to ours are being reimbursed in other
FEMA regions. This showcases the inconsistencies in the
application of laws across the country.
It is critical that FEMA approve pandemic-related,
noncongregate shelter project applications and other requests
uniformly across all 10 FEMA regions. Consistency in the
application of policy from FEMA on these decisions is critical
to improving efforts to protect our residents.
I recognize that I am addressing the authorizing committee
and that annual funding decisions are the responsibility of the
Appropriations Committee, but I must include a discussion about
our funding, specifically regarding the Emergency Management
Performance Grant, EMPG, the Urban Area Security Initiative,
UASI.
To improve the Federal, State, and local partnership and
our ability to meet our joint emergency missions, it is
essential that Congress increase funding for these core
programs. EMPG and UASI are the foundation of the local
emergency management efforts.
Regrettably, the sequester and the budget austerity that
followed the 2011 budget agreement did not spare these core
programs, and funding has not kept pace with population growth,
inflation, and, most importantly, need. Essentially, local
governments are being asked to do more with much less.
I know that you are all too familiar with what it means for
a community to be at the margins of inclusion in UASI. However,
Austin has not participated in UASI since Congress reduced
funding for the program in fiscal year 2011.
Austin should be a UASI participant just as we were one
decade ago. For metropolitan areas such as ours, the best
answer lies not in tweaking the UASI threat risk assessment,
but in Congress increasing funding for the program to ensure
that many more Americans benefit from UASI.
Local emergency management programs are historically
understaffed, most consisting of just one person, and are
struggling to keep up with the new demand placed upon them with
the pandemic.
EMPG funding flows to the local communities through the
State as a subaward. However, there are no requirements for a
State to allocate funds to local communities, and as a result,
access to EMPG funding varies from State to State.
Even in my State, which is one of the only to have a
process to support local programs, we have seen consistent
reductions ranging from 30 to 60 percent in funding over the
past 10 years.
As you all know, the benefits of UASI and EMPG are
considerable. Communities that are fortunate to participate in
the program are not just better prepared, equipped, and
trained, but also able to benefit from the regional
collaboration and cooperation that the UASI----
Mr. DeFazio. If you could summarize, please, sir.
Mr. Ortiz. In conclusion, that concludes my testimony, and
as I mentioned previously, I am grateful for the opportunity to
discuss these issues with you today. My written testimony
provides much more detail on these issues as well as others. I
am happy to answer any questions you may have for me today.
Thank you.
[Mr. Ortiz's prepared statement follows:]
Prepared Statement of Juan Manuel Ortiz, Director, Office of Emergency
Management and Homeland Security, City of Austin, Texas, on behalf of
the International Association of Emergency Managers
Introduction
Chair DeFazio, Ranking Member Graves, and members of the Committee,
thank you for the opportunity to testify at today's hearing. My name is
Juan Manuel Ortiz. I serve as the Director for the City of Austin's
Office of Homeland Security and Emergency Management [https://
www.austintexas.gov/department/homeland-security-and-emergency-
management].
I am testifying today on behalf of the International Association of
Emergency Managers (IAEM) [https://www.iaem.org/]. IAEM is the premier
professional organization for emergency management, with more than
6,000 members worldwide. The mission of IAEM is to advance our
profession by promoting the principles of emergency management; and, to
serve our members by providing information, networking, and development
opportunities. We are a non-profit educational organization dedicated
to promoting the ``Principles of Emergency Management'' and
representing those professionals whose goals are saving lives and
protecting property and the environment during emergencies and
disasters. IAEM was founded in 1952 as the U.S. Civil Defense Council,
becoming the National Coordinating Council of Emergency Managers
(NCCEM) in 1985, and the International Association of Emergency
Managers in 1997. Today, IAEM continues to drive the development of the
profession of emergency management through its promotion of the
Principles of Emergency Management [https://www.iaem.org/About/
Principles-of-EM], Certified Emergency Manager (CEM) Program [https://
www.iaem.org/certification/intro] and IAEM Scholarship Program [https:/
/www.iaem.org/Resources/Scholarships]. The Student Council [https://
www.iaem.org/council/student/home] now has chapters at universities
around the world and works to engage with future professionals as they
choose their career paths.
The City of Austin [https://www.austintexas.gov/] is a home rule
local government covering 271 square miles and serving nearly 1 million
residents and more than 30 million annual visitors each year. Austin is
the heart of one of our nation's fastest growing (32.4% population
growth over the past decade) and most dynamic metropolitan areas, which
is home to 2.2 million people. In addition to state government, the
University of Texas, and major regional health care institutions, we
are the proud home of the Army Futures Command [https://www.army.mil/
futures/?from=org] and of numerous national and regional corporate
headquarters, including such well-known names as Apple, Dell, eBay,
IBM, Oracle, NXP Semiconductors, VRBO, Whole Foods, and Yeti. Austin
annually hosts numerous events that draw tens of millions of visitors,
including major internationally known events such as South by Southwest
[https://www.sxsw.com/], the Formula 1 Aramco United States Grand Prix
[http://circuitoftheamericas.com/f1/tickets], and Austin City Limits
[https://www.aclfestival.com/], in addition to countless other events
that draw large crowds and visitors from around the nation and the
world.
The City of Austin Homeland Security and Emergency Management
Office is one of several public agencies charged with keeping our city
and metropolitan area safe. The 14 employees of our Office plan and
prepare for emergencies, educate the public about preparedness, develop
volunteers, manage grant funding to improve homeland security and
public safety capabilities, coordinate emergency response and recovery,
support planned events, and work with public and partner organizations
to protect our whole community when it needs us the most. We were the
first local emergency management agency in Texas to earn full
accreditation under the Emergency Management Accreditation Program,
placing us among the nation's leading emergency management agencies.
That distinction is the result of our broad-based work and our
innovative programs, such as Disaster Ready Austin [https://
www.austintexas.gov/department/homeland-security-and-emergency-
management/disaster-ready-austin], a collaborative initiative to
educate and empower residents to be prepared for emergencies and
disaster that provides households, businesses, and schools with
emergency planning and preparedness tools, and a recognition of our
comprehensive emergency management program.
We are a comprehensive emergency management operation. In addition
to planning and preparing for events that draw tens of millions of
visitors and large crowds, our work addresses all aspects of emergency
management. Indeed, although large events constitute a sizable portion
of our workload, the top five hazards that Austin and Central Texas
residents face and that keep our staff perpetually busy are floods
(Austin is in the heart of ``flash flood alley''), wildfires, severe
weather, hazardous materials spills, and, especially over the past 18
months, a pandemic.
Our 2020 Annual Report [http://www.austintexas.gov/sites/default/
files/files/HSEM/2020%20Annual%20Report_Web.pdf] provides a good
snapshot of our work. Quoting from my opening message in the report:
``2020 proved to be anything but a normal year, not only for
emergency management, but the Austin community with the
challenges we faced. It was a year that brought struggles for
many but was also a year that saw Austinites and other
communities come together and lead the way in tackling a global
pandemic.
On March 1, 2020, the Austin-Travis County Emergency
Operations Center (A-TCEOC) was activated in response to COVID-
19. In truly historical times, emergency operations have now
been sustained well into 2021--over a yearlong activation. The
COVID-19 response has brought together partners and
organizations across the region to provide support and care for
individuals.
While COVID-19 was the headline for 2020, our staff has
continually met additional challenges head on as other events
unfolded throughout the year--staff pursued training and
learning how to combat new emergencies that our community faces
and handled numerous severe weather events ranging from extreme
heat to bitter cold. Additionally, Austin became a shelter for
many Hurricane Laura evacuees.
In 2019, we began redevelopment our emergency plans to ensure
that our team maintains both its focus and readiness posture to
mitigate, respond to and recover from all-hazards emergencies
that affect our community, and that mission did not end with
COVID-19. These processes carried on well into 2020 as we
adapted and modified plans to meet growing challenges and is a
process that will continue every year.
The lessons learned from 2020 will be invaluable to our
vision of being a disaster-prepared and resilient community and
will shape the future of emergency management responses.
The partnerships forged during the trying year will ensure
that we are more prepared than ever.'' \1\
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\1\ http://www.austintexas.gov/sites/default/files/files/HSEM/
2020%20Annual%20Report_
Web.pdf
In 2020, we added nearly 50 temporary staff to help us respond to
COVID-19, created a disaster reserve team to support response needs ,
logged 1.1 million response hours, sheltered thousands of Gulf Coast
residents displaced by category 4 Hurricane Laura, coordinated the
regional response to record breaking cold that crippled our state's
power grid, distributed 71,676 units of hand sanitizer, distributed
nearly 12 million pieces of personal protective equipment, housed 536
severely at-risk individuals in temporary protective shelter, housed
more than 2,000 people in an isolation facility for COVID-19,
established an alternate care site for COVID-19 patients, coordinated
medical staffing to 31 area hospitals and launched a mobile phone
application to help residents be better prepared for disasters.
Of course, we do not do this on our own. In addition to our City of
Austin and our regional partners, our partnership with the Texas
Division of Emergency Management (TDEM) and with the Federal Emergency
Management Agency (FEMA) are critical to our efforts. We greatly
appreciate their partnership and their support as our work would not be
possible without it.
As this Committee and Congress look at how the federal government
can better support local emergency management efforts, my testimony
will aim to provide constructive guidance with the aim of strengthening
these partnerships and improving our ability to meet our core mission.
Recent Laws: FACE Act of and Disaster Recovery Reform Act of 2018
I would be remiss if I did not begin with a recognition of what
Congress has done in recent years to improve the federal-state-local
emergency management partnership. The Federal Advance Contracts
Enhancement Act (FACE Act/PL 116-272) and the Disaster Recovery Reform
Act of 2018 (PL 115-254) made important improvements to the federal-
state-local emergency management partnership. The full Transportation &
Infrastructure Committee worked hard on these laws, and we deeply
appreciate those efforts.
Enacted in response to a 2018 General Accountability Office (GAO)
report \2\, the FACE Act makes several improvements to the advance
contracts process whereby FEMA provides its state and local partners
with goods and services ahead of disasters so that they can be rapidly
deployed. The bill implements GAO's recommendations to improve the
advance contracts process, including providing state and local partners
with updated and full information about available advance contracts,
updating program guidance, and regular communication with congressional
oversight committees.
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\2\ https://www.gao.gov/assets/gao-19-93.pdf
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The Disaster Recovery Reform Act of 2018 made even more important
improvements. It made it more difficult for FEMA to recapture disaster
assistance funds based on technicalities and put a statute of
limitations to recapture disaster assistance funds. There is no
question that FEMA should have full authority to recapture disaster
assistance funds that were willfully or carelessly misspent. However,
FEMA all too often recaptures disaster assistance funds on the pretext
of small violations of arcane procedural rules and regulations, the
complexity of which are exacerbated by policy inconsistencies across
regions and from year to year. That situation not only creates an
adversarial relationship between FEMA and its state and local partners,
but it leads to trepidation among state and local emergency managers
and officials and a focus on bureaucratic minutiae when state and local
emergency managers and officials should be focused on a bold and
comprehensive disaster response effort. These provisions in the 2018
law went a long way towards reducing that adversarial relationship and
to allowing for a more robust state and local response in the immediate
aftermath of a disaster.
More importantly, Section 1234 of the 2018 law overhauled and
bolstered FEMA's pre-disaster mitigation efforts, creating the Building
Resilient Infrastructure and Communities (BRIC) and Flood Mitigation
Assistance (FMA) programs. This may be the most important change
Congress has made to FEMA programs in a generation. For too many years,
there was much study, discussion, and debate about how our nation
needed to shift from responding to disasters, usually in an ad hoc and
increasingly expensive manner, to creating more resilient communities
that are better protected from and prepared for disasters. BRIC and FMA
put words into action, providing a major increase in federal funding
for pre-disaster mitigation and better focusing that funding on local
governments that implement local policies to make their communities
more resilient.
Austin has an excellent pre-disaster mitigation story I can share
with the Committee. As I mention above, a major challenge facing Austin
and other central Texas communities is the ever-present danger of flash
floods. The combination of local topography, a rocky landscape, and
rainfall events that are often severe and localized lead to flash
floods that can quickly turn quiet streams into raging torrents with
little or no warning. It is for good reason that Austin and Central
Texas have been dubbed ``flash flood alley''.
The City of Austin has taken a proactive approach to this problem,
establishing a Watershed Protection Department [http://
www.austintexas.gov/department/watershed-protection] charged with
protecting lives, property, and the environment by reducing the impact
of flood, erosion, and water pollution. Where practicable, City policy
favors a ``natural'' approach to flood damage protection that focuses
on removing households and people from repetitive risk flood areas.
Similarly, City policy promotes a ``natural'' approach to watershed
protection and stormwater management that uses green infrastructure and
natural elements to protect riparian areas and water quality.
For example, in the Onion Creek watershed in a low- and moderate-
income neighborhood in south Austin, the City has partnered with the
Army Corps of Engineers and FEMA to buy out and relocate more than 800
households from a severely flood-prone neighborhood of single-family
homes. After completion of those buyouts, the City and our federal
partners restored the flood plain and its riparian areas to their
natural state and created a new park that provides an array of
recreational opportunities.
The City combines these ``natural'' approaches with traditional
grey infrastructure in areas where relocations are not practicable and
natural, green infrastructure approaches are not practicable or
sufficient. For example, to address flooding along Waller Creek, which
runs from the University of Texas through the heart of downtown Austin
before emptying into Lady Bird Lake, the City constructed the Waller
Creek Flood Control Tunnel \3\ in downtown Austin. For years, severe
flooding, erosion and water quality problems have beset Waller Creek.
The Project consists of a stormwater bypass tunnel that will address
high priority flooding, erosion, and water quality problems along lower
Waller Creek. The mile-long tunnel will safely convey floodwaters by
capturing and redirecting floodwater, creating an opportunity to
restore the creek and revitalize the Waller Creek District. The Waller
Creek Tunnel protects lives from the dangers of flash flooding, removed
more than 28 acres of downtown from the floodplain, protects 42
structures, 12 roadways and creates an environment suitable for
redevelopment in the heart of downtown Austin, a centrally located area
that is well served by existing infrastructure and provides easy and
sustainable access (pedestrian, bicycle, and transit) to jobs,
education, services, and other opportunities.
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\3\ http://www.austintexas.gov/department/waller-creek-tunnel
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However, the City has been unsuccessful in obtaining much-needed
BRIC funding for mitigation projects, despite the strong benefit cost
analysis addressing an area that has been impacted multiple times, and
where power and water plants are cut off from access. We feel this may
be due in part because the State of Texas does not facilitate the
adoption and enforcement of the latest published editions of Building
Codes (IBC/ IRC 2015/ 2018). However, this reduction in points does not
factor in the higher building standards at the local level, and this
points system denies funding opportunities for worthy mitigation
projects.
Recent Austin Experience & How it Can Inform Efforts to Improve the
Federal-State-Local Partnership
As mentioned above, in 2020, HSEM added nearly 50 temporary staff
to help us respond to COVID-19, logged 1.1 million response hours,
sheltered thousands of Gulf Coast residents displaced by category 4
Hurricane Laura, coordinated the regional response to record breaking
cold that crippled our state's power grid, distributed 71,676 units of
hand sanitizer, distributed nearly 12 million pieces of personal
protective equipment, housed 536 severely at-risk individuals in
temporary protective shelter, housed more than 2,000 people in an
isolation facility for COVID-19, established an alternate care site for
COVID-19 patients, and launched a mobile phone application to help
residents be better prepared for disasters.
Providing temporary protective shelter for the most vulnerable and
at-risk residents of Austin proved to be one of our most difficult and
most expensive challenges. In the wake of an early COVID-19 outbreak at
our congregate shelter facility, the City acted, fearing that future
outbreaks among people experiencing homelessness would pose a risk to
those people and to the larger community, especially in terms of
hospital capacity. Specifically, the City leased six hotels to provide
protective shelter and isolation facilities to provide non-congregate
shelter for people at high-risk of contracting COVID-19, including
people experiencing homelessness.
The Austin-Travis County Interim Health Authority established the
non-congregate shelter program to provide quarantining and isolation to
individuals exposed to, carrying, or at high-risk for severe illness
from COVID-19. The City's actions were in accordance with FEMA policy
allowing reimbursement for non-congregate shelter and support services
on a case-by-case basis. In addition, the City closely consulted with
FEMA Region VI and the State and hewed closely to CDC guidance.
The COVID-19 pandemic represents the first time in U.S. history
that every County, State and Territory is under identical and
concurrent major disaster declarations. This unprecedented dynamic has
FEMA regions making eligibility determination on similar issues, which
has unfortunately resulted in inconsistent and non-uniform application
of policy across the different regions. Public Assistance (PA) funding
requests funnel through a series of reviews at the regional,
Consolidated Resource Center (CRC) and headquarter levels. Given the
complexity in program and policy, each region is given the latitude to
apply certain discretionary interpretations of eligibility. For COVID-
19, this has resulted in certain FEMA Regions applying a more flexible
eligibility interpretation than others. For the City of Austin within
FEMA Region VI, this has resulted in an unfavorable situation where
FEMA Region VI has indicated in writing that certain significant non-
congregate sheltering costs are ineligible for PA. Within FEMA Region
IV and Region III similar costs have been approved and obligated.
The City is incurring costs of approximately $3 million per month
to lease six hotels to provide these services: one Isolation Facility
(ISOFAC) for individuals who have been exposed to or tested positive
for COVID-19 that do not require hospitalization but require quarantine
or isolation; and five facilities that provide temporary protective
sheltering facilities for asymptomatic, high-risk individuals who
require emergency non-congregate sheltering as a social distancing
measure (PROLODGE).
FEMA has only approved the City's non-congregate sheltering request
for June, citing the following concerns in response to requests for
additional months:
1. Sheltering of individuals identified as homeless, ``high-
risk,'' or ``at-risk'' because they do not have secure housing
arrangements would not be eligible for PA.
The City of Austin contends that its ProLodges are an
effective public health measure that is in alignment with FEMA, Center
for Disease Control (CDC), and Local Health Authority guidance.
Consistent with CDC guidance, and based on the direction the Public
Health Authority for Austin-Travis County, the City identifies
individuals over the age of 65; individuals of all ages with certain
underlying medical conditions; and individuals without the ability to
safely self-isolate, including those experiencing unsheltered
homelessness, at increased risk for severe illness from COVID-19 and
constitutes the designation of ``high-risk'' category. Providing
temporary non-congregate sheltering to high-risk individuals is an
effective public health measure that mitigates the transmission of
COVID-19 and reduces the threat of inundating our area hospitals.
2. Individuals that have been identified as needing NCS must
remain in the facility full-time. Sheltering costs incurred for
individuals leaving the facility periodically during the day or night,
and then returning, does not protect those individuals at the facility
or the public at large, and, therefore, would not be eligible for PA.
The City would like to clarify that at the at the IsoFacs,
which are for individuals who have been exposed to or tested positive
for COVID-19 that require quarantine or isolation, guests are not
permitted to enter and leave at-will. At the ProLodges, which are a
form of protective sheltering for asymptomatic high-risk individuals
who cannot otherwise effectively socially distance, guests are
encouraged to remain sequestered in their rooms and avoid other travel,
unless deemed essential. The City has taken efforts to incentivize
guests to remain in their rooms. However, as these individuals are not
confirmed, or suspected carriers of COVID-19, the City does not and
cannot legally restrict their movement.
3. Sheltering of individuals that exceeds 14 calendar days will
require justification upon submission of request for reimbursement that
identifies that the length of sheltering for individuals is based on
health guidance and is limited to what is needed to address the
immediate threat to public health and safety. CDC guidance recommends a
14-day isolation or quarantine period for those that test positive or
have been in contact with a person that tested positive.
The City of Austin is in compliance with the CDC's recommended
14-day maximum period for isolation or quarantining at the IsoFacs.
Historically, the average length of stay at the IsoFac has been between
6 and 7 days. There is not a specified timeframe for a guest duration
at the ProLodges because there continues to be sustained virus
transmission within the community and the Local Health Authority has
regularly reassessed and ordered protective non-congregate shelters
necessary to protect public health and safety. According to FEMA
guidance the length of non-congregate sheltering depends on the needs
in each area and should be in accordance with the guidance and
direction from appropriate health officials. Following this guidance,
the ProLodges are a form of protective shelter--not a quarantine or
isolation site--meant to shelter high-risk individuals who are unable
to social distance as a precautionary measure and deemed appropriate by
Austin public health officials. Further, the City is providing case
management for these individuals to find alternate housing solutions
through a myriad of programs to relocate them from the non-congregate
shelters.
We greatly appreciated President Biden's January 21 and February 2
Presidential Memoranda instructing FEMA to provide 100 percent
reimbursement for state and local government emergency protective
measures taken for the safe opening and operation of schools,
hospitals, shelters, and transit systems. We were especially pleased
that the Memoranda included 100 percent reimbursement for provision of
non-congregate shelter, which has been a critical component of local
prevention and response efforts, helping to contain transmission of
COVID-19 among the most vulnerable and at-risk residents of our
communities, helping contain community spread and preserving critical
health care capacity.
However, Austin is deeply concerned that FEMA has not consistently
approved requests for reimbursement for non-congregate shelter, putting
many local governments at risk of having to absorb significant costs.
It is therefore critical that FEMA flexibly approve pandemic-related
non-congregate shelter reimbursement requests uniformly across all FEMA
regions.
Cities, including Austin, established non-congregate shelter
programs to specifically prevent and respond to COVID-19. They are not
permanent programs and they have not replaced the homeless assistance
efforts. They are a well thought out response to a temporary crisis
that addresses the stark, on-the-ground reality that failing to shelter
high-risk and vulnerable individuals during a pandemic poses a grave
threat to public health and to healthcare capacity.
An adverse FEMA decision on reimbursement requests for non-
congregate shelter reimbursement pose a serious risk to public health
and our budget. The City of Austin has spent $40 million on non-
congregate shelter. The City acted in good faith to protect public
health and to serve a very vulnerable population during this crisis. An
adverse determination from FEMA would leave the City liable for
considerable costs at a time of uncertain budgets.
Supply Chain Management
Supply chain management is another subject that requires
improvements to benefit the partnership between federal, state and
local governments. As Austin sought out supplies, such as PPE, in
response to COVID-19, it became clear that adequate levels of critical
supplies would be a challenge, and the distribution of those supplies
would be difficult as well.
The need for a national strategy for supply chain management during
a pandemic quickly became apparent as we found ourselves competing with
our state and other cities for the same limited supply of PPE. Further,
these limited supplies lead to price increases and unequal distribution
patterns that were bad for our recovery efforts and ultimately bad for
the taxpayer.
At the outset of the COVID-19 pandemic, Austin needed to gather PPE
quickly to provide the necessary supplies for our frontline workers,
workforce, and general residency. after Austin was told by multiple of
the nation's largest suppliers that orders of PPE for the City of
Austin were not large enough, we found it necessary to partner with the
City of Houston and the Texas Medical Center in Houston to purchase a
massive supply of masks in Florida that would help accommodate our
needs. After confirmation of the PPE purchase and as we were about to
begin obligation the funds for the purchase, we were told by the
supplier that the Texas Department of Emergency Management took
possession of the supplies, before we could close the deal. In this
situation, we found ourselves competing not only against other cities
attempting to mitigate a disaster, but even our own state.
This is the consequence of inequitable distribution of necessary
supplies and a lack of a national strategy for supply chain management.
Had there been a prioritization on the supply chain and we had been
able to seek out one specific source for our necessary supplies, our
efforts to provide PPE could have been much more effective and
efficient.
With that said, the City of Austin appreciates that in the wake of
Hurricane Katrina, Congress enacted legislation to address supply chain
issues, however, the COVID-19 pandemic has illustrated that there is
much room for improvement and that empowering and trusting local
partners could be an important part of the solution.
Resources
My final plea is likely one you hear from stakeholders on a wide
array of issues, but it is one I cannot leave out of my testimony. I
recognize that I am addressing an authorizing committee and that annual
funding decisions are the domain of the Appropriations Committee, but I
must close my testimony with a discussion of funding.
If Congress and FEMA address the concerns raised above, it would
significantly improve the federal-state-local partnership and our
ability to meet our joint emergency management mission and serve our
community. However, sometimes the best answer is also the simplest one.
If Congress really wants to bolster local emergency management, I urge
you to increase funding for core programs such as Emergency Management
Performance Grants (EMPG), the Urban Area Security Initiative (UASI),
and the State Homeland Security Grant Program (SHSGP).
Annual appropriations for the FEMA Disaster Assistance Account and
emergency supplemental appropriations bills enacted in response to
disaster garner the most attention (and money), but EMPG, UASI, and
SHSGP are the foundation of local emergency management efforts.
Unfortunately, the sequester and budget austerity that followed the
2011 Budget Agreement did not spare these core programs. Funding for
these programs has not kept pace with population growth, inflation,
and, most importantly, need.
Congress provided $350 million for EMPG in FY 2021,
barely above its FY 2010 level of $340 million.
Congress appropriated $615 million for UASI in FY 2021,
well below its FY 2010 level of $887 million.
Congress appropriated for $610 million for SHSGP, well
below its FY 2010 level of $950 million.
The EMPG program is the primary source of funding available to
local communities to support preparedness, response, recovery, and
mitigation. Local Emergency Management Programs are understaffed most
consisting of just one person and are struggling to keep up with the
new demand placed upon them with the pandemic and climate change. EMPG
fund flows to local communities through the state as a sub award. There
are no requirements for state to allocate funds to local communities
and as a result, access to EMPG funding varies from state to state.
Even in my state which is one of the only to have a process to support
local programs, we have seen consistent reductions from 30 to 60%.
Enhancement to EMPG should also include mandate on minimum pass through
to local governments or a separate process.
On UASI, I know that committee members are fully aware of what it
means to serve a community at the margin of participation in the
program at the current, reduced funding levels. Austin falls on the
wrong side of the participation margin each year. We have not
participated in UASI since Congress reduced funding for the program in
FY 2011. Even communities, such as Las Vegas and Orlando, that are
fortunate to remain on the right side of that margin saw considerable
drops in their allocations and face annual uncertainty about whether
they will receive federal funds to sustain investments made with UASI
funds.
I would be happy to outline the reasons why I think Austin should
be a UASI participant. Indeed, my testimony in many ways makes that
argument. At the end of the day, every community can do an excellent
job of outlining the ways that they are vulnerable and how they would
benefit from participation in UASI. For metropolitan areas such as
ours, which face real threats and have real needs, the best answer lies
not in tweaking the UASI threat risk assessment but in Congress
increasing funding for the program to ensure that many more Americans
benefit from UASI.
For Committee members who represent large metropolitan areas that
face little to no threat to their participation in the UASI program, I
discourage you from pursuing or supporting ill-advised attempts to
limit participation in the UASI program to the largest metropolitan
areas. Such a policy would leave tens of millions of Americans more
vulnerable. In addition, it would significantly reduce support for the
program in Congress, especially in the Senate, where the needs of
metropolitan areas already struggle for recognition.
The benefits of UASI are considerable. Communities that are
fortunate to participate in the program are better able to not only
meet their equipment, training, and preparation needs, but they benefit
from the regional collaboration and cooperation that the UASI program
encourages. The UASI program benefits urban areas by assisting
communities to develop regional solutions, creating mission ready
capabilities which can make our communities more resilient. An Austin
UASI award would allow our region to develop strategies to establish
capabilities like alternate care sites, mass care and sheltering,
develop evacuation plans and reception centers and regional resource
staging strategies.
Conclusion
I am pleased that the Committee is looking at how Congress can
improve the federal-state-local emergency management partnership so
that state and local emergency managers can better prepare and protect
our communities. I am happy to answer questions and to provide any
additional information that the Committee might find helpful as you
work on this issue. Thank you for the opportunity to testify.
Mr. DeFazio. OK. I thank the gentleman. Dr. Boskin?
[Pause.]
Dr. Boskin, you are recognized for 5 minutes.
Mr. Boskin. Chairman DeFazio, Ranking Member Graves, other
members of the committee, it is a pleasure to be here and speak
to you about the macroeconomics of the COVID relief program and
prospective new spending.
Let me start by saying I support policies to mitigate
short-run economic pain caused by a crisis like the COVID-19
pandemic and help spur recovery, as long as the long-run cost
is reasonable.
As the economy has recovered considerably since those
horrible days of spring 2020, the potential short-run
macroeconomic benefits of additional spending are much lower
now than then, and other additional spending is better focused
on long-run, societal benefits with spending levels,
allocations among projects, and financing methods designed to
pass rigorous national cost-benefit tests.
The macroeconomic literature suggests that spending
``multipliers,'' quote/unquote, are much lower than had been
traditionally assumed, and the best academic evidence of what
the 2009 stimulus bill did had multipliers about one-third of
what was originally thought by those who analyzed the bill, a
spending multiplier of about 0.6.
But America certainly has infrastructure needs. We need to
get good, productive, long-run infrastructure investments. I
attached a table in my written testimony that gives some idea
of the scope and breadth and depth of America's infrastructure
enterprise, and it is only a modest fraction of proposed
spending these days.
Done well, the program can produce considerable societal
benefits, but done to excess or with poor design incentives, a
plethora of poor-return projects, even boondoggles, would
likely result.
As a general guide, the larger the appropriated spending,
the greater the likelihood of the laws of diminishing returns
and unintended consequences creating a large set of substandard
projects.
Ditto the further the financing method deviates from one of
already appropriated funds, and especially user fees or their
gas and vehicle-miles traveled, a tax equivalence that tie the
benefits received to the payments made.
It should be known that the economy is now above its pre-
pandemic level and is growing solidly. While risks remain, and
we should have a close eye on job growth to make sure
unemployment continues its downward momentum to full
employment--it seems to be perhaps around two or three
percentage points of employment below where it could be--it
does not appear likely to need considerable additional short-
run stimulus on top of that already provided and in process.
Some argue that additional substantial spending would
dramatically spur growth and employment. With Government
borrowing rates low, the argument goes, deficit finance amounts
to a cheap way to increase employment.
In fact, existing research suggests that is a misguided
conclusion. While infrastructure spending may have made for
good short-run stimulus in the 1930s with much higher excess
capacity of unemployment and different technologies for public
projects, that is not the case today as Harvard's Ed Glaeser
has compellingly argued.
The best evidence suggests that every dollar of spending
would increase GDP about 60 cents, even in a soft economy.
Of course, when the dollar is financed with taxes, those
have costs too, and that hasn't been emphasized enough. When we
raise a dollar in taxes today, or in the future, at present
discounted value of a dollar, to cover the interest payments on
any debt issued, the cost rises with the square of tax rates.
If we double the tax rates, the harm from the distortions
of decisions to work, save, invest, innovate, hire, et cetera,
quadruples. This has nothing to do with doctrinal issues. It
has purely to do with the area under supply and demand curves
that every student learns in ``Economics 1.''
The CBO estimates also that the return on public
infrastructure projects is around 5 percent. It is below that
for private investments. It should be careful to have very good
projects chosen that pass rigorous national, as opposed to
local, cost-benefit tests.
A good example of the mismanagement of that is California
high-speed rail. Using $3 billion from the 2009 Recovery Act, 6
years later, that was used to build a tiny initial start of
what was supposed to be a high-speed rail project but is now
blended-speed rail because they have to use a lot of existing
track, much slower, meaning massive technical difficulties,
epically mismanaged, and the total cost seems to have at least
tripled. So we have to be very careful about what we do.
In addition, inflation risks are rising. I think everybody
understands the short-run inflation. Economists are still
debating how much of that will continue and be entrenched in
expectations, and continue, I think, some of it will, far from
all of it.
And we should realize that debt is already not only high,
but we have large, unfunded liabilities in Social Security and
Medicare, which when combined, are more than three times the
regular national debt.
Also important to note that when we have funding too
abundant and not closely tied to national, as opposed to local,
benefits, the political incentives exacerbate the tendency to
fund too many low-return projects.
Finally, I would say that infrastructure spending, because
it seems to be one area that is subject to bipartisan interest,
and is likely to be passed at some point, I assume, we need to
be careful about doing these projects in a way that adds to
long-run productivity.
When I am talking about a national cost-benefit test, as
opposed to something purely internal and [inaudible]----
Mr. DeFazio. OK. All right. Dr. Boskin, if you could
summarize, that would be great.
Mr. Boskin. OK. Thank you. A good example would be
decongesting ports which have national, international goods
flowing through them, good for the whole country.
So while I believe that the stimulus of COVID relief
packages helped cushion the economy and spur recovery, it has
limited, modest, macroeconomic benefits but considerable
humanitarian justification, and that is the main basis on which
it did good. Thank you.
[Mr. Boskin's prepared statement follows:]
Prepared Statement of Michael J. Boskin, Ph.D., Tully M. Friedman
Professor of Economics and Wohlford Family Senior Fellow, Hoover
Institution, Stanford University, on behalf of himself
The ``Covid-recession'' was unprecedented in its cause and in its
depth and speed as dated by my colleagues on the NBER Business Cycle
Dating Committee. The $5 trillion dollar cumulative Covid response
spending by the federal government thus far and related FED policies
certainly both helped the economy recovery more quickly and cushioned
the hardship experienced by many. Given the immense ex ante uncertainty
that accompanied the rapid lockdown of much of the economy and the
early massive unemployment, it should be expected that the policy
response likewise was unprecedented.
I support policies to mitigate short-run economic pain caused by a
crisis like the COVID-19 pandemic and help spur recovery, as long as
the long-run cost is reasonable. As the economy has recovered
considerably since those horrible days of March and April 2020, the
potential short-run macroeconomic benefits of additional spending are
much lower now than then and any additional spending is better focused
on long-run societal benefits with spending levels, allocations among
projects and financing methods designed to pass rigorous national cost-
benefit tests.
It is early days in the detailed evaluations of the economic
effects of the several responses to the Covid crisis and recession, and
their many components, by independent scholars, I will address my
comments to the desirability of additional spending, and its methods of
finance under consideration for traditional infrastructure. I present
what I believe are the best estimates based on leading academic
research on the short-run impacts of government spending, especially on
infrastructure (as opposed to, say, transfer payments, for which
whatever the desirability may be on other grounds, the macroeconomic
benefits are far less). Much of the research I cite below is based on
evaluations of the 2009 ARRA, but some focus as well as other data and
periods.
But first, America certainly has infrastructure needs. The American
Society of Civil Engineers, serious if somewhat self-interested, rates
the nation's infrastructure a C-. Some claim there is a multi-trillion
dollar ``infrastructure deficit'' and others have long blamed
inadequate public investment in infrastructure for holding back U.S.
economic productivity (e.g., Aschauer, 1991). Yet others argue that a
closer analysis shows U.S. infrastructure in much better shape, and
advocate for improving the allocation of funding over massive new
expenditures (Duranton, Nagpal, and Turner, 2020). In a similar vein,
the World Economic Forum rates U.S. infrastructure 13th out of 141,
behind top rated Singapore and Hong Kong, but ahead of countries like
Sweden and Denmark.
At even a fraction of some of the infrastructure spending being
discussed today, there is ample opportunity to do considerable
productive long-run infrastructure investment (the attached Table is my
attempt to give a sense of the scale of the nation's infrastructure).
But only some of that is appropriately a governmental, and only a part
of that is appropriately a federal, responsibility. And the long-run
net economic effects of a new federal infrastructure program, following
the expiration of the 2015 FAST ACT and the impending exhaustion of the
Highway Trust Fund will depend not just on the level of spending, but
also the ex-ante quality of the projects funded, their ex post
execution and their financing method(s).
Done well, the program can produce substantial societal benefits;
but done to excess or with poor design incentives, a plethora of poor
return projects, even boondoggles, would likely result. As a general
guide, the larger the appropriated spending, the greater the likelihood
of the laws of diminishing returns and of unintended consequences
creating a large set of sub-standard projects. Ditto the further the
financing deviates from use of already appropriated funds and user fees
or their gas and vehicle miles driven tax cousins. In short, the
federal infrastructure program should fund projects that pass rigorous
national cost benefit tests and the better aligned the incentives for
state and local officials, federal authorities and private citizens,
the more likely that result becomes.
It should be noted that the economy is now back to its pre-pandemic
level and is growing solidly. While risks remain and we should keep a
close eye on job growth to make sure unemployment continues its
downward movement to full employment, it does not appear likely to need
considerable additional short-run stimulus on top of that already
provided and in process. And some argue the risk of entrenching longer-
term some of the considerable recent inflationary pressures are a
greater risk. Certainly the larger the program and the more front-
loaded, the bigger that risk.
Some suggest that huge additional infrastructure spending will
dramatically spur growth and employment. With government borrowing
rates low, the argument goes, deficit finance amounts to a cheap way to
increase employment. In fact, existing research suggests that is a
misguided conclusion. First, while infrastructure spending may have
made for good short-run stimulus in the 1930s, that is not the case
today (Glaeser 2016). The best evidence (Ramey (2019, 2020) is that
each dollar of infrastructure spending would increase GDP only 60
cents--even in a soft economy, there are no magically large
multipliers.
And, of course, when the dollar is financed with taxes (now, or in
the event debt-finance is used, later), the tax hikes exact a cost on
the economy. Students learn in Economics 1 that cost rises with the
square of tax rates; doubling rates, quadruples the harm from the
distortion of private decisions to work, hire, save, invest, innovate,
etc. Thus, the incremental cost rises with the tax rate. This is not a
doctrinal issue; it has to do with the area under supply and demand
curves. A rough estimate would be that each dollar of taxes (now or in
discounted present value terms later to pay interest on the debt) costs
the economy about $1.25-$1.30. So the projects chosen for funding
really do need to be prospectively high societal return, yet the CBO
estimated the return on public infrastructure investment at 5%, just
half of the return on the private investment likely to be crowded out
by taxes or debt. The best way to minimize these distortionary costs is
to finance the spending with user fees or, where applicable, their tax
cousins, the gas tax and vehicle miles driven tax, that tie the
responsibility for payment closely to the benefits received.
Debt finance of the Covid relief funding was certainly justifiable
in a deep recession and early in an uncertain recovery, but is unwise,
even risky (Boskin, 2020) in normal times. Historically, huge debt
buildups have usually been followed by serious problems: sluggish
growth, an uptick in inflation, a financial crisis, or all of them. We
cannot be certain which problems will occur or what debt-to-GDP ratio
will signal trouble for which countries. And the US does have the
advantage of issuing the world's leading reserve currency, at least for
time being. But inflation risks are rising--a trend that more deficit-
financed spending will only accelerate. To be sure, I support policies
to mitigate the short-run economic pain caused by a crisis like the
COVID-19 pandemic and help spur recovery, as long as the long-run cost
is reasonable. But be careful not to run huge deficits that persist
long after the economy is back to full employment (the Administration
projects the unemployment rate to be down to 4.1% next year and a low
of 3.8% thereafter).
It is also important to realize that only a very small fraction of
those unemployed today have the skills and experience for the kind of
work required by today's infrastructure challenges; we cannot instantly
train the unemployed to safely and effectively operate tower cranes or
giant excavators, for example. There are few public infrastructure
projects that require only a shovel. Additionally, planning and
approval hurdles that were absent in the 1930s are omnipresent today,
slowing the speed with which funds can be disbursed and infrastructure
built. As a result, research has found that large increases in
infrastructure spending within a short window of time may lead not to
increases in employment, but to backlogs that result in higher profits
for a relatively small set of contractors (Balat, 2017).
Worse yet, when federal funding is too abundant and not closely
tied to national, as opposed to local, benefits, political incentives
exacerbate the tendency to fund too many low return projects. A prime
example is the boondoggle of California's High-Speed Rail project,
which originally used a grant from the 2009 ARRA to pay, six years
later, for a tiny initial rail line. The entire project is mired in a
tripling of cost estimates, technical problems and epic mismanagement
for what is now prospectively blended speed rail amid widespread lack
of support and outright hostility in the Central Valley where
billboards clamor to ``Build Dams Not Trains.''
Second, large public infrastructure projects--highways, dams,
etc.--are designed to last many decades, and eventually interest rates
on government debt will rise and render rolling over the larger debt
much more expensive. CBO (2021) estimates net interest payments as a
share of (rising) GDP will increase sharply beginning in the middle of
this decade and more than triple in the following two decades, with
interest costs exceeding even rapidly growing spending on Social
Security, and dwarfing all discretionary spending, including on
defense. Thus, the view that infrastructure spending in today's low-
interest rate environment is essentially a free lunch is misguided.
While large changes in interest rates are unlikely in the near
term, the is fact financial markets and government and private
forecasters have often failed to anticipate them--for example, during
the inflation of the 1970s and the disinflation of the early 1980s.
After 2008, all grossly underestimated how long the Fed would keep its
target interest rate at zero.
Infrastructure spending seems to be one of a few areas of potential
bipartisan agreement. As mentioned above, there is ample room for a
considerable well-crafted infrastructure spending program that is
economically beneficial. Some policymakers, interest groups, and
constituents still view infrastructure spending as shovel-ready work
that is both desperately needed and great at creating new jobs. As
President Obama eventually stated ``there's no such thing as shovel-
ready projects.'' The New Deal did not end the Great Depression, nor
did Japan's massive ongoing infrastructure expenditures spare it from
its ``lost decades.'' To repeat, most of the unemployed do not have the
skills or experience to operate modern equipment such as giant
excavators and tower cranes.
Recent academic evidence on the matter, however, does suggest that
better allocation of infrastructure spending is more important for
long-run productivity than increased spending (Duranton, Nagpal, and
Turner, 2020), and casts doubt on whether a large allocation of federal
funds for infrastructure will work as an effective stimulus (e.g.,
Balat, 2017; Gallen and Winston, 2019; Ramey, 2020).
Garin (2019) studies how funding allocated by the federal
government for road construction projects through the 2009 American
Recovery and Reinvestment Act (ARRA) affected local employment. He
finds that every dollar of ARRA spending increased local construction
payrolls by thirty cents, but had virtually no effect on employment.
Balat (2017) analyzes the effect of ARRA spending on highway-related
procurement in California, finding that the sudden infusion of cash
into an industry that was already working near capacity did not grow
the number of construction firms or construction employment, but
resulted in higher procurement prices. This capacity constraint is
directly at odds with a 1930s vision of what infrastructure spending
can accomplish. The highly specialized and technologically advanced
nature of the work now requires skills, experience, and certifications
that make it difficult to quickly expand the number of firms and
workers. In California, Balat (2017) finds that the government paid
6.2% more on stimulus projects and 4.8% more on other projects as a
result of ARRA, stimulating the economy by increasing construction
company revenues, but forgoing about $335 million that could have been
spent on other road projects.
Additional work, such as Ramey (2020), demonstrates that
infrastructure spending is usually slow to move from appropriation to
implementation to actual use, making even the most productive and most
shovel-ready projects poor candidates for short-run economic stimulus.
In fact, as Gallen and Winston (2019) argue, disruptions that come from
a slew of highway infrastructure projects can even result in negative
short-run effects on total employment. Studies of the ARRA also provide
cautionary tales on the ability of infrastructure spending to create
jobs in the short-run and on the cost of doing so. Leduc and Wilson
(2017), for example, find a cost of $500,000 per job in 2010,
considerably costlier than the roughly $125,000-$200,000 per job that
other papers have attributed to ARRA spending overall (Wilson, 2012;
Conley and Dupor, 2013).
Long-run productivity is a different story, but the devil is in the
details. As discussed above, the research literature generally stresses
that quality and rigor behind fund allocation and incentive preserving
funding mechanisms are key to large enough long-run returns to justify
the spending, much more so than the sheer volume of spending. In
particular, repairs and maintenance seem to have consistently higher
returns than new construction.
In conclusion, the evaluation of government spending in response to
previous recessions suggests quite limited short-run macroeconomic
benefits. The ex-post estimates of spending ``multipliers'' for ARRA
was one-third that of Administration economists is 2009.The response to
the unprecedented Covid pandemic and recession likely did somewhat
better, and the humanitarian case given the widespread suffering was
compelling. But as the economy approaches full employment, the case for
additional spending as ``stimulus'' is far weaker and tax and deficit
financed spending likely will be quite costly in the longer-term. The
most compelling case for additional federal spending is simply to find
good projects and methods of financing that pass rigorous national (not
local) cost-benefit tests based on sensible estimates of the factors
affecting benefits and costs. That should conceptually govern the size
of the spending. But given the budgetary process, the headline number
will undoubtedly be determined by other factors. But then the federal,
state and local agencies involved need to hew as closely as possible to
the dictates of cost-benefit tests to maximize the opportunity for
reasonable returns on the (current and/or future) taxpayers'
investment.
References:
Aschauer, David A. 1991. ``Infrastructure: America's Third Deficit,''
Challenge, 34(2), pp.39-45.
Balat, J., 2017. ``Highway Procurement and the Stimulus Package:
Identification and Estimation of Dynamic Auctions with Unobserved
Heterogeneity.'' Working Paper.
Boskin, Michael J. 2020. ``Are Large Deficits and Debt Dangerous?''
NBER Working Paper No. 26727 (condensed version published in
American Economic Association Papers and Proceedings, Vol. 110,
May, pp145-48).
Brooks, Leah and Liscow, Zachary. 2019. ``Infrastructure Costs,''
Hutchins Center Working Paper No. 54, Brookings Institution.
Brooks, Leah and Liscow, Zachary. 2020. ``Can America Reduce Highway
Spending? Evidence from the States'' in Economic Analysis and
Infrastructure Investment. University of Chicago Press.
Congressional Budget Office, The 2021 Long-Term Budget Outlook, March.
Conley, Timothy G. and Dupor, Bill. 2013. ``The American Recovery and
Reinvestment Act: Solely a Government Jobs Program?'' Journal of
Monetary Economics, Vol. 60, Iss. 5, pp. 535-549.
Duranton, Gilles, Nagpal, Geetika, and Turner, Matthew A. 2020.
``Transportation Infrastructure in the US,'' in Economic Analysis
and Infrastructure Investment. University of Chicago Press.
Gallen, Trevor and Clifford Winston, 2019. ``Transportation and its
Effects on the U.S. Economy: A General Equilibrium Approach.''
Technical report, Purdue University.
Garin, A. 2019. ``Putting America to Work, Where? Evidence on the
Effectiveness of Infrastructure Construction as a Locally Targeted
Employment Policy,'' Journal of Urban Economics, 111, 108-131.
Glaeser, Edward L. 2016. ``If You Build It . . . Myths and Realities
About America's Infrastructure Spending,'' City Journal.
Leduc, Sylvain, and Daniel Wilson. 2017. ``Are State Governments
Roadblocks to Federal Stimulus? Evidence on the Flypaper Effect of
Highway Grants in the 2009 Recovery Act.'' American Economic
Journal: Economic Policy, 9 (2): 253-92.
Ramey, Valerie A.2019. ``Ten Years After the Financial Crisis: what
Have We Learned From the Renaissance in Fiscal Research?'' Journal
of Economic Perspectives, Vol. 33, No. 2.
Ramey, Valerie A. 2020. ``The Macroeconomic Consequences of
Infrastructure Investment'' in Economic Analysis and Infrastructure
Investment. University of Chicago Press. http://www.nber.org/
chapters/c14366
Wilson, Daniel J. 2012. ``Fiscal Spending Jobs Multipliers: Evidence
from the 2009 American Recovery and Reinvestment Act,'' American
Economic Journal: Economic Policy, Vol. 4, Iss. 3, pp. 251-282.
America's Vast and Varied Infrastructure Enterprise
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Mr. DeFazio. Dr. Edelberg, you are recognized for 5
minutes.
Ms. Edelberg. Chairman DeFazio, Ranking Member Graves, and
members of the committee, my name is Wendy Edelberg, and I am
director of The Hamilton Project, and a senior fellow at the
Brookings Institution. Before coming to Brookings, I was Chief
Economist at the Congressional Budget Office.
Thank you for this opportunity to discuss the economic
outlook as the committee and the Congress consider significant
infrastructure legislation. I will make three points in my
remarks.
First, the enormous fiscal support enacted by Congress has
been essential to getting the economic recovery on track.
Second, the pace of economic recovery, which was rapid in
the first three quarters of this year, is creating both
opportunities and challenges.
And third, more robust Federal investment in infrastructure
in the coming years will improve our longer term economic
prospects.
Real GDP has recovered to its pre-pandemic level, and
growth has consistently surpassed consensus expectations.
Notably, in the third quarter of 2020, actual GDP was about 5
percent above the projection that CBO published at the
beginning of that quarter.
Indeed, CBO now projects that by the end of 2023, GDP will
actually be higher than its pre-pandemic path.
One primary factor behind the surprising strength in
economic output has been the fiscal support enacted by
Congress. Despite a continued shortfall in employment,
disposable personal income has, so far, been higher than its
recent trend by a cumulative $1.4 trillion since March 2020.
With the ongoing efforts and fiscal support, as well as
pent-up demand from consumers for face-to-face services, and a
sharp increase in asset prices, economic growth is poised to
grow roughly 6 percent in 2021.
Of course, the strength of the economy is entirely
contingent on the pace of vaccination and our ability to
control the pandemic.
It is also contingent on Congress avoiding a crisis that
could be triggered by not raising the debt ceiling.
Under current law, the boost to DPI from Government
benefits should fully wane by early next year. As this and
other factors boosting household spending dissipate, I expect
real GDP growth to slow significantly, being just above 1
percent in 2023 under current law. This brings me to my second
point.
Although my baseline projection is for a soft landing with
GDP merely moving sideways for a couple of quarters, there is a
risk that the slowdown could be more abrupt and painful.
With growth and demand for workers outstripping growth and
supply, we have seen upward pressure on some wages. Wages for
those in the bottom 25 percent of the distribution are up more
than 7 percent from the pre-pandemic level.
At the same time, we have seen bottlenecks and supply chain
disruptions for a variety of goods that have resulted in sharp
increases in some prices, most notably, new and used vehicles.
With greater inflation, workers' purchasing power is rising
much slower than nominal wages. Real wages, for the bottom
quartile, are up 2\1/2\ percent from the pre-pandemic level.
As production has increased, and growth and demand abates,
I expect inflation to slow overall. Nonetheless, one risk
created by the pace of recovery is that certain factors will
continue to create inflationary pressure.
Thinking beyond the next couple of years brings me to my
last point.
One channel through which fiscal policy influences long-run
economic growth is Federal investment in infrastructure,
education and training, and research and development.
The consensus of the economic literature strongly supports
that increases in such investment lead to greater productivity
and greater economic growth.
Since 1980, the decline in Federal investments, as a share
of GDP, has been driven by declining investment in physical
infrastructure. Indeed, in 2019, Federal investment in
infrastructure, as a share of GDP, was at its lowest level
since the mid-1950s. The result has been a less robust and less
resilient economy.
To wrap up, the expected rapid economic recovery from the
COVID-19 recession creates risks to which policymakers should
be attentive. Fiscal support has been essential to accelerating
the recovery, but now, it is appropriate for fiscal policy to
turn toward solving more structural, long-term challenges. That
includes more robust Federal investment. The expected slowness
in outlays that is inherent to Federal investment is a benefit
given the current economic projection.
Most importantly, an ambitious increase in Federal
investment in infrastructure is key to improving our long-term
economic prospects.
Thank you, and I look forward to your questions.
[Ms. Edelberg's prepared statement follows:]
Prepared Statement of Wendy Edelberg, Ph.D., Director, The Hamilton
Project, The Brookings Institution, on behalf of herself
Chairman DeFazio, Ranking Member Graves, and Members of the
Committee:
Thank you for the opportunity to discuss the economic outlook as
this Committee and the US Congress consider enacting significant
infrastructure legislation this year.
A founding principle of The Hamilton Project's economic strategy is
that long-term prosperity is best achieved by promoting economic
security, economic growth, and broad participation in that growth.
Through our research, policy papers, and public events we examine ways
to realize those goals based on sound economic theory and evidence. For
more than 15 years, The Hamilton Project has focused on policies to
increase investment in public infrastructure--highlighting strategies,
financing mechanisms, the economic returns on infrastructure
investment, and the role of such investment in creating prosperity in
local and state economies.
Introduction
Despite the headwinds created by the Delta COVID-19 variant, the
economy is recovering. Economic growth during the pandemic has
generally surpassed consensus expectations while households and
businesses have maintained a surprising amount of activity and spending
while social distancing.
The strength in economic output was, in part, a result of the
enormous legislative response to both the pandemic and to the human
hardship it caused. This includes laws passed in 2020 and 2021 by
Congress, chief among them the Coronavirus Aid, Relief, and Economic
Security Act (CARES Act), the Consolidated Appropriations Act, and the
American Rescue Plan Act. Successive rounds of substantial fiscal
support have boosted economic activity since March 2020 and are
projected to continue to do so through 2023. To give a sense of the
potential impact of federal action on the economy, Edelberg and Sheiner
(2021a) estimated that a package of similar magnitude to the American
Rescue Plan would boost economic output by 4 percent in 2021 and 2
percent in 2022.
I draw the following conclusions at this point in the economic
recovery. First, the initial rapid economic recovery and expected
slowing creates risks that policymakers should heed. Second, fiscal
support has been essential to accelerating the recovery. Third, greater
federal investment in infrastructure, both physical and human, is key
to improving the country's longer-term economic prospects. It is the
right time to enact an ambitious federal investment package to put in
place public infrastructure that is once again a vital factor in
improving productivity and economic growth.
The Economic Recovery
With the ongoing effects of fiscal support, pent-up demand from
consumers for face-to-face services, and the strength in labor markets
and asset prices, economic growth is poised to be strong for the
remainder of 2021. Indeed, the Congressional Budget Office (CBO)
projects that real GDP will grow 7.4 percent from the fourth quarter of
2020 to the fourth quarter of 2021 (CBO 2021c). Moreover, CBO predicts
that, by the middle of 2022, real GDP will exceed its sustainable level
by 2.5 percent. The sustainable level of GDP, also known as potential
output, is not a ceiling. Instead, it is the estimated level of output,
given current laws and underlying structural factors, that the economy
can achieve without putting upward pressure on inflation. As the
factors boosting growth in the short term begin to wane, I expect real
GDP growth to slow significantly, to just above 1 percent in 2023.
CBO's projection is subject to a great deal of uncertainty. In
particular, the resurgence in the pandemic stemming from the Delta
variant, vaccine hesitancy, and the slowness in vaccinating children
ages 12 and younger appear to have dampened the growth of consumer
demand and employment. Recent data suggest that the latest COVID-19
wave might be waning. However, if the Delta variant--or others that
take its place--continue to affect consumer behavior and supply chains,
the economic recovery will be notably slower.
In addition, although my projection is for a soft landing,,
including a couple of quarters with GDP roughly moving sideways, the
slowdown could be more abrupt and painful than those projections
suggest. There are actions that Congress could take to help avoid a
painful slowdown in activity--both by fine-tuning the timing of
spending and by focusing resources on policies that boost potential
output. For example, changes in policy that repurpose fiscal support
from boosting current aggregate demand to policies that would boost the
economy's potential (such as federal investment in infrastructure that
would increase labor supply and human capital) would increase the
chances of a soft landing, in part by raising the landing area to a
higher level.
The Uneven Nature of the COVID-19 Pandemic and Economic Recovery
As of September 26, 2021, more than 687,000 people in the United
States have died from COVID-19; and more than 4.7 million have died
worldwide (Johns Hopkins 2021). At the onset of COVID-19, the virus
displayed clear geographic trends, beginning in densely populated
coastal cities then spreading to more rural parts of the country
(Desjardins 2020). With the pandemic first hitting the Northeast, in
April of 2020 New York and New Jersey accounted for more than 60
percent of deaths and more than 40 percent of hospitalizations from
COVID-19. The Delta variant and vaccine hesitancy have changed the
geographic patterns: as shown in figure A-1, since mid-July 2021
patients hospitalized with COVID-19 in the South have risen to account
for nearly two-thirds of the US total, with half of those patients in
Florida and Texas (broken out from the rest of the region in the
figure).
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
The economic downturn caused by the pandemic has created widely
different experiences across sectors and demographic groups. In the
spring of 2020, spending on consumer services sharply contracted and
has yet to fully recover. Indeed, of the 22 million total jobs lost in
March 2020, nearly 19 million were in service-providing businesses,
including a decline of 8 million in leisure and hospitality. Leisure
and hospitality has added back more than 6.5 million jobs so far; as a
result, it is still 10 percent short of returning to its pre-pandemic
level, and even farther below its expected level in the absence of the
pandemic. Other industries, such as financial services, that
experienced shallower dips in employment during the onset of the
pandemic, have also been the quickest to recover as their workforces
were better able to shift to remote work.
Those sector dynamics disproportionately hurt women, non-white
workers, lower-wage earners, and those with less education (Stevenson
2020). Because workers among those groups were more likely to be
employed in the services sector, and in particular in the leisure and
hospitality sector, they experienced job losses at much higher rates.
For example, the gap in the rates of unemployment between Black and
white men jumped from 3 percentage points to 6 percentage points during
the initial downturn. By July, that gap had partially fallen back and
was 4 percentage points.
The uneven recovery is also evident when we focus on consumer
spending at retail establishments. Between February and April 2020,
overall retail sales sank 22 percent before quickly recovering to their
pre-pandemic level just a few months later. As people began social
distancing, spending shifted to at-home consumption, benefiting
businesses like online retailers, grocery stores, and suppliers of
building and garden materials. Indeed, spending on total retail sales
has averaged 16 percent higher than its pre-pandemic level so far this
year. At the same time, some categories of retail sales were severely
depressed until showing signs of recovery in March of this year; those
include in-person dining and spending on clothes, electronics, and
appliances.
Overall, the pandemic continues to weigh on aggregate demand for
goods and services. In addition, bottlenecks and supply shortages have
created challenges for businesses to meet consumer demand for some
products, particularly as consumer demand has shifted wildly. Also, the
pace of hiring has not kept up with the pace of labor demand, as job
matching has been held back by a number of factors described below.
Those developments have led to a notable increase in inflation.
Because prices fell in 2020, one-year changes from August 2020 to
August 2021 overstate the increase in inflation since the pandemic
began. Instead, focusing on the annualized rate of inflation since
February 2020 shows that inflation through August 2021 (as measured by
the core consumer price index) was 3.1 percent, substantially lower
than the one-year trend but still higher than any annual increase since
the early 1990s.
There are two primary reasons why the rise in inflation is unlikely
to persist. First, the significant shifts in demand and bottlenecks are
a function of the recent, temporary pace of economic activity. For
example, demand for automobiles recovered quickly during the pandemic
to high levels even as production was curtailed, in part due to
disruptions in the supply chain for critical semiconductors. The result
has been a sharp increase in prices for new and used vehicles. Second,
as production is increased (with normalization of global supply chains)
and growth in demand abates, inflation should slow overall.
Nonetheless, certain factors will continue to create inflationary
pressure; even with the slowdown, economic activity over the next year
or so will continue to exceed the sustainable level. We might also see
price spikes in certain services as demand shifts. For example, from
March 2021 through July sales at restaurants were up 14 percent while
sales at building materials and garden stores were down 11 percent.
Such changes could lead to price surges at restaurants that more than
offset softer prices at stores selling building materials and garden
supplies. In addition, the rapid rise we have seen in home prices will
likely translate into significantly higher rental costs across the
country.
Federal Investment
One way that fiscal policy can boost potential output is through
increases in federal investment. Both the Office of Management and
Budget (OMB) and CBO define ``federal investment'' as federal outlays
on physical infrastructure, research and development, and education and
training. The economic literature tightly ties spending in those areas
to future economic growth. To be sure, other types of spending may
deliver that result as well--such as spending that improves health-care
outcomes and nutrition. However, in contrast to the three categories we
define as federal investment, those types of services also have
significant effects at the same time as when the spending takes place--
and the more narrow working definition of federal investment is a good
starting point.
Investments in physical infrastructure, research and development,
and education and training produce social benefits beyond those that
could be captured by a private investor. For example, it is generally
difficult for a private entity to capture the economic rewards from
investment in basic research and development--which often adds to the
overall body of knowledge in a field. As a result, firms may be
reluctant to undertake this type of work. When the federal government
supports such research, it can create enormous social benefits and
improve economywide productivity for decades to come. Federal
investment in high-quality childcare increases the earning potential
for affected children long into the future and it lowers the cost of
working for parents of young children and thus increases the potential
supply of labor. Those positive economic effects are recognized in
several legislative proposals currently before Congress.
As figure A-2 shows, as a share of GDP the federal government's
investment (limited to such spending that is not for national defense)
has been notably lower since 1980 than it was in prior years--even
during years after enactment of the American Recovery and Reinvestment
Act of 2009, which boosted federal investment in large part through an
increase in federal grants to state and local governments. That
shortfall has been driven by a reduction in federal investment in
physical infrastructure as a share of GDP. In fact, in 2019 federal
investment in physical infrastructure as a share of GDP was at its
lowest level since the mid-1950s, when President Eisenhower increased
such spending by signing the Federal-Aid Highway Act into law.
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The reduction in federal investment as a share of GDP is important
for productivity over the long term. In 2016, CBO published a brief
summary of the literature describing the economic effects of federal
investment. The best evidence of those effects is found in the link
between physical public capital and real GDP growth. Using that
evidence, ``CBO estimates that an increase in public investment that
increases public capital by 1 percent boosts private-sector output by
about 0.06 percent in the long term, on average'' (CBO 2016).\1\ That
0.06 elasticity implies that a $100 increase in public capital boosts
GDP in the long run by $8 every year, using the size of the public
capital stock relative to output to translate the elasticity to a per-
dollar effect.
---------------------------------------------------------------------------
\1\ The relationship between the increase in output and investment
implies an elasticity of 0.06. CBO puts that estimate in context of its
literature, finding, ``Research that estimates the effect on output of
a particular kind of investment in physical capital, highway spending,
similarly suggests that the elasticity ranges from 0.04 to 0.09'' (CBO
2016).
---------------------------------------------------------------------------
Unequivocally, that evidence suggests that an increase in federal
investment--all else equal--leads to higher economic output in the long
term. The corollary is that the lack of investment in infrastructure in
recent years has reduced the economy's potential.
However, this does not mean that a $100 increase in federal
investment leads immediately to an $8 increase in output from higher
productivity. First, public infrastructure takes time to put into
place. CBO estimated that, for an illustrative policy that would boost
federal investment by $500 billion, roughly one-third of the money
would be outlaid within the first five years, roughly another half in
the next five years, and the remaining amounts in future years (CBO
2016). Moreover, for large-scale physical infrastructure projects
requiring extensive designing, permitting, and construction, the timing
can be longer.
Second, once the federal investment is put in place, it takes time
for the economy to respond fully. This is clearly true in the case of
research and development and early childhood education. But even
physical infrastructure--a new airport, for example--does not achieve
its full benefits to society immediately.
Finally, public capital, just like private capital, depreciates and
requires service and maintenance to continue to be productive. Without
such upkeep, the increase in GDP from the initial $100 in public
investment is smaller over time.
Given the current economic projection, the slowness in outlays that
is inherent to federal investment is a benefit. The level of economic
activity is on track to be quite strong--and to exceed its sustainable
level--over the next couple of years. That activity will include a high
level of demand for private sector resources--such as building supplies
and construction workers. Since federal investment competes for those
resources, the slower pace of federal infrastructure spending will be
less likely to cause shortages, bottlenecks, and unwanted inflation.
1. In the second quarter of 2021, GDP returned to its pre-pandemic
level.
Since the economy hit bottom in the second quarter of 2020,
economic growth has surpassed consensus expectations formed at the
beginning of the pandemic. As a result, in the second quarter of 2021
real GDP exceeded its pre-pandemic level. With economic growth boosted
by the ongoing effects of the fiscal support enacted by Congress in
2020 and 2021, pent-up demand from consumers for face-to-face services,
and the strength in labor markets and asset prices, real GDP appears on
track to grow at the rapid pace of roughly 6 percent in 2021. To be
sure, the Delta variant threatens that projection. However, even in the
initial stages of the pandemic, when people had far less information
and fewer mitigation resources, consumer spending and overall economic
activity was remarkably resilient.
The surprising strength in GDP and the improvements in expectations
are evident from CBO's upward revisions to its projections (shown in
figure 1). In the third quarter of 2020 the level of GDP was 4.8
percent above the projection that CBO published at the beginning of
that quarter. Moreover, since July 2020 CBO has revised up projected
GDP for 2023 by nearly 7 percent, where the projected level of GDP at
the end of 2023 is now 2 percent above CBO's pre-pandemic forecast.
Nonetheless, through 2023 the cumulative shortfall in real output
relative to a pre-pandemic projection is expected to total about $400
billion in 2012 dollars (CBO 2020a, 2021c). Note that CBO's projections
show a soft landing, with real GDP showing only modest growth by late
2022. The slowdown could be more abrupt and painful than those
projections suggest.
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2. The sharp decline in employment in spring 2020, which was largely
concentrated in the services sector, has only partially
reversed.
Figure 2 shows the percent difference in overall employment from
the peak month prior to recent economic downturns through the month
where employment recovered to its previous business cycle peak. Across
the labor market, employment is still down 5.3 million from February
2020 and down about 9 million from where trends in employment were
headed to prior to the pandemic.
From February to April of 2020, employment declines in the leisure
and hospitality sector accounted for about 40 percent of the total 22
million jobs that were lost. Conversely, a partial recovery in that
sector has fueled employment growth since then. Overall, from February
through July of this year, monthly employment rose by more than 700,000
on average. In August that pace slowed significantly, however. The
resurgence of the pandemic likely held back the recovery in the leisure
and hospitality sector, which saw no net gain in employment in August.
In that sector, employment is still down 1.7 million jobs from February
2020.
In comparison to previous recessions, the COVID-19 recession has
been worse for the services sector relative to the goods sector.
Consider the average outcomes across the four recessions from 1981 to
2019, 18 months from when the different recessions began: employment in
the service sector was 1 percent below its pre-recession peak and
employment in the goods sector was 10 percent below its peak. In
contrast, as of August 2021 employment in the service sector was still
4 percent below its February 2020 level and employment in the goods
sector was 3 percent below.
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3. Millions of workers are no longer eligible for Unemployment
Insurance.
Over the summer of 2021 in some states, and in the first week of
September 2021 in the remainder of states, enhanced UI expired. That
set of policies had significantly expanded eligibility to workers not
covered by regular UI (Pandemic Unemployment Assistance [PUA]),
extended the number of weeks that a worker could receive UI (Pandemic
Emergency Unemployment Compensation [PEUC]), and increased the
generosity of benefits (Federal Pandemic Unemployment Compensation
[FPUC]). Prior to the CARES Act, which created PUA, PEUC, and FPUC,
only 30 percent of workers were eligible for unemployment compensation.
Figure 3 shows the total number of unemployed workers superimposed
over weekly continued UI claims for regular UI benefits and Extended
Benefits, which automatically extends weeks of eligibility based on a
state's economic conditions, as well as claims for emergency programs:
PUA and PEUC.
Note that the level of unemployment greatly underestimates the
number of people who lost jobs during the pandemic. To be described as
officially unemployed, a person must be actively looking for work;
however, millions of people effectively have left the labor force since
March 2020 but were eligible for the expanded UI benefits. At the time
that the emergency programs expired, there was a gap of more than 5.5
million workers who were in the labor market and unemployed, but not
receiving UI. We project that gap to close only modestly through the
end of this year.
Fiscal support has helped people prioritize their health over labor
market income, which was certainly one of the goals when the support
was put in place in the spring of 2020 and when it was reauthorized
several times. Preliminary analysis suggests that UI generosity had a
modest effect on recipients' job-finding rates (Petrosky-Nadeau and
Valletta 2021). Nonetheless, we see no compelling evidence that the
cancellation of those benefits so far has led to significant increases
in aggregate employment (Coombs et al. 2021; Pardue 2021). On the other
hand, the abrupt elimination of access to UI benefits for millions of
people creates financial hardship for those who are unable to work
owing to health risks or other constraints.
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4. The number of job openings and the number of workers quitting their
jobs is higher now than in the past 20 years.
Despite job openings being their highest since the end of 2000 (the
earliest available data), several factors are holding down employment
gains. One factor is that the share of workers quitting jobs each month
is at a series high. As figure 4 shows, the quit rate generally moves
with the job opening rate, since workers are more likely to switch jobs
in a strong labor market. Moreover, in the current environment the
composition of labor demand is changing, and workers may be taking time
to move from temporary jobs they took during the pandemic. Taken
together, record job openings, the slowness of job matching, and the
depressed level of labor force participation has created wage pressure,
particularly for workers in the service sector, for younger workers,
and for workers with less formal education.
In addition to the depressed rate of job matching, also worrying is
the lack of recovery in the labor force participation rate, which is
the share of the population working or actively seeking work. That rate
fell from 63 percent to 60 percent between February and April of last
year, when nearly 8 million workers left the labor force. The
participation rate recovered about halfway by June 2020, but has
remained stubbornly depressed since then.
Factors unique to the pandemic have disproportionately affected
labor force participation among certain groups even if these changes do
not meaningfully affect aggregate levels (Furman, Kearney, and Powell
2021). For example, among mothers of elementary school-aged children--
which is the demographic likely bearing the brunt of school closures
(Amuedo-Dorantes et al. 2020)--the share that is employed fell more
than that of mothers who did not have children in elementary school
(Bauer, Dube, et al. 2021). Consequently, addressing the child-care
crisis moves in the right direction but will not on its own make up the
ground that has been lost in aggregate labor force participation.
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5. Even with recent jumps in inflation, lower income workers are seeing
increases in real wages.
Upward pressure on wages has been good news, particularly for low-
income workers and workers in certain industries. As shown in figure 5,
wages for those in the bottom quartile of the wage distribution are up
7.0 percent from their pre-pandemic level, or 4.6 percent at an annual
rate. That rate of growth is close to what that group experienced in
2019, when the consensus held that the labor market was relatively
tight. Some sectors have seen particularly strong wage gains. For
example, over the past 12 months average hourly earnings in the leisure
and hospitality sector have grown nearly twice as fast as the overall
private industry average. Other sectors seeing strong gains in hourly
earnings include retail trade, transportation and warehousing, and
financial activities.
Because of recent increases in the rate of inflation, workers'
purchasing power is not rising as fast as nominal wages. Price
increases in recent months led to declines in real wages from March to
June 2021. Those declines partly offset increases in real wages earlier
in the pandemic for wage-earners in the bottom quartile, when inflation
was soft and nominal wages were rising. In July and August real wages
for that group notably accelerated. Overall, from February 2020 to
August 2021 real wages for the bottom quartile have risen 2.4 percent,
or 1.6 percent at an annual rate. That is considerably below the rate
we saw in 2019 when real wage growth was 2.4 percent at an annual rate
for the bottom quartile. Moreover, real wages are roughly unchanged for
those in the highest quartile, in contrast to a gain of 0.8 percent in
2019.
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6. Post-pandemic, income after government taxes and transfers, as well
as household saving, have been above their recent trends.
Disposable personal income (DPI, or total aftertax income) in 2020
and so far in 2021 has been higher than if DPI had simply grown at its
trend rate of the previous five years. In aggregate, DPI has so far
been higher than trend by a total of $1.4 trillion since the start of
the pandemic.
In 2020 weak aggregate compensation of employees was more than
offset by a sharp increase in government benefits, leaving total DPI a
cumulative $630 billion above its trend level over the course of that
year (figure 6). As a result of additional dispensation of government
social benefits to households in January and March of this year, DPI
has been higher, on average, by about $115 billion each month since
January than if it had grown at its trend pace. Since March of this
year those benefits have come down sharply but remain elevated. Under
current law, the boost to DPI should fully wane by early next year.
(See Alcala Kovalski et al. 2021 for related information about the
waning fiscal support.)
As a result of the significant boosts to DPI and restrained
services spending during the pandemic, aggregate household saving has
skyrocketed. In every month from March 2020 through April of this year,
the rate of saving was higher than in the past four decades; in some
months it was roughly double the previous post-World War II peak. In
total, households have roughly $2.5 trillion more in savings than if
DPI and spending had grown in line with trend rates in the five years
prior to the pandemic. Moreover, home prices and stock market prices
have surged, leading to large increases in household wealth. Those
resources will help to finance the pent-up demand for forgone spending.
Ultimately, households will view the increase in savings and wealth as
financial resources to support long-term, relatively steady consumer
spending.
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7. Fiscal support led to a reduction in poverty in 2020.
By the Official Poverty Measure (OPM), poverty increased from 10.5
percent to 11.4 percent from 2019 to 2020. After taking into account
the enormous fiscal support provided to households in 2020, the
percentage of the US population in poverty, as measured by the
Supplemental Poverty Measure (SPM), fell from 12 percent to 9 percent
(figure 7). While poverty as measured by the SPM is typically lower
than OPM for children, 2020 was the first time that SPM was lower than
the OPM overall.
The two policies that had the most significant effects relative to
earlier years, because they were the most changed from prior policy,
were the expansion of unemployment compensation and checks to
households. If Congress had not enacted relief for families, SPM
poverty would have risen to 12.7 percent rather than falling to 9.1
percent.
Another factor behind the decrease in poverty was the relatively
strong wage growth for those at the bottom of the income distribution
who remained employed (see fact 5). Notably, those wage gains came on
the heels of strong wage growth in 2018 and 2019, when the tight labor
market benefited lower-wage workers.
In 2021 continued fiscal support--particularly the full
refundability of and the increase in the child tax credit and increases
to the Supplemental Nutrition Assistance Program (SNAP) maximum
benefit--as well as the continued labor market recovery should help to
lift households out of poverty. Sustained progress in reducing post-
tax-and-transfer poverty as measured in the SPM is possible through
making permanent some of the policies enacted to counter the COVID-19
recession.
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8. To date, 36 states have made progress in catching up on delinquent
rent and mortgage payments.
To help Americans struggling to make mortgage and rent payments in
the midst of a sharp contraction in labor income in the spring of 2020,
policymakers put in place several relief programs. Those programs
initially took the form of foreclosure and eviction moratoria and later
also included financial support.
Delinquent mortgage borrowers experiencing economic hardships
related to the pandemic, who had a federally backed mortgage, which
includes mortgages backed by Federal Housing Administration, Veterans
Administration, Fannie Mae, and Freddie Mac loans, were automatically
eligible for forbearance through September 30, 2021. The government put
in place help for mortgage servicers who are generally required to make
payments to investors regardless of whether borrowers are delinquent.
According to the Federal Reserve Bank of New York, forbearance plans
disproportionately benefitted low-income borrowers, especially those
holding FHA-insured loans and those living in disadvantaged
neighborhoods (Haughwout, Lee, Scally, and van der Klaauw 2021). In
addition, Congress's American Rescue Plan provided nearly $10 billion
to help homeowners who were behind on their mortgage and utility
payments.
The federal eviction moratorium expired in August 2021, although
some states have extended such protections. The federal government has
allocated $46.5 billion in relief to help renters make their back
payments and to help landlords who are owed those payments. State and
local grantees had provided only $5.1 billion of the first $25 billion
allocated for emergency rental assistance through July 2021 and news
reports (Siegel 2021) suggest distribution of aid continues to be slow,
even with recent US Department of the Treasury (2021) guidance to
expedite delivery. With regard to the money that was distributed in the
first quarter of 2021, more than 60 percent of households who received
aid had household incomes under 30 percent of typical incomes in their
geographic area.
Nonetheless, the broader fiscal support and the partial recovery in
the labor market has helped to reduce the number of people who are
behind on their payments. Figure 8 shows how much progress has been
made in getting caught up on rent or mortgage payments by state, from
each state's peak to the most recent data spanning July and August.
Three-quarters of the states reached their highest share of missed rent
or mortgage between December 2020 and March 2021. Since peaking, the
share of residents who reported missing rent or mortgage payments is
lower in 36 states by statistically significant amounts.
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9. The strength in durable goods spending and weakness in spending on
consumer services stands in sharp contrast to previous
recoveries.
Together, social distancing and substantial support to households
led to a surge in spending on durable goods even as households
curtailed spending on services--a dramatic departure from behavior in
more-typical recessions. As shown in figure 9a, overall real spending
on goods initially sank 13 percent from February to April of 2020, but
then quickly rose and had exceeded its pre-pandemic level by June. This
rise included purchases such as vehicles, household furniture, and
recreational equipment; after adjusting for inflation, so far in 2021
purchases of those durable goods have averaged 25 percent higher than
pre-pandemic spending. In contrast, spending on services--many of those
being face-to-face transactions such as live entertainment and dining
at restaurants--fell steeply during the pandemic. Real services
spending dropped more than 20 percent in the spring of 2020 and has yet
to recover to pre-pandemic levels.
These patterns diverge from prior recessions. In most prior
recessions, spending on durable goods remains subdued for an extended
period, as in the case of the Great Recession where 18 months into the
recovery, goods expenditures remained 7 percent below the pre-recession
peak. In addition, figure 9b shows that, in each of the prior three
recessions, spending on services temporarily plateaued in the first
year of recovery before resuming growth. But in none of these prior
recessions did services dip below their pre-recession levels for any
sustained period--another sign of the uniqueness of the COVID-19
recession.
In recent months, demand has begun shifting back toward services as
people begin resuming normal activities. From March to July, goods
purchases declined moderately, while spending on services climbed 3
percent; notably, spending on live entertainment, hotels, and public
transportation collectively increased by 35 percent over those four
months.
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10. Retail inventories are unsustainably low.
Through August 2021, much of the consumer demand for goods has been
met by drawdowns of inventory. As shown in figure 10, the retail
inventory-to-sales ratio spiked at the beginning of the pandemic when
spending plummeted. Since then, however, the ratio has fallen
precipitously. This is particularly true for the automotive sector,
where shortages of semiconductors have constrained production. Even
outside of that sector, production has been insufficient to keep up
with demand. Indeed, unfilled orders and delivery times are elevated
across the manufacturing sector. Disruptions in global supply chains
have been a continuing obstacle, in particular backlogs at ports that
have increased the cost of shipping to historic highs.
On the one hand, capacity utilization in the manufacturing sector
has recovered close to its pre-pandemic level. On the other hand,
historical patterns and recent surveys of manufacturers suggest that
they will increase utilization well beyond that level to replenish
inventories as demand recovers.
In addition to investment in inventories, survey data suggest that
investment to expand capacity and productivity is poised to increase.
Private investment in equipment and structures has partially rebounded
since the second quarter of 2020 but has not yet returned to pre-
pandemic trends. As of the first quarter of 2021, investment in
business equipment had rebounded as a share of potential output, but
additional investment is required to make up for lost investment during
the pandemic. A rebound in investment in structures is more than
accounted for by investment in residential structures; in fact,
investment in residential structures as a share of output is back to
levels not seen since 2007. Nonresidential structure investment,
however, is still down as a share of potential output.
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11. There were more new business applications and fewer bankruptcies in
2020 and 2021 than in 2018 and 2019.
Newly created businesses appear to be a major source of production
of the goods and services that households are demanding. Figure 11a
shows new business applications of firms that the Census Bureau
characterizes as having a high propensity to employ workers. Since the
summer of 2020, we have seen the highest level of applications since
the agency began to track the series in 2004. Applications have perhaps
reflected new business opportunities in the wake of the pandemic. The
prospective new businesses are concentrated in online retail, which
makes up a third of the increase in total new applications, and in
service sector industries, which suffered some of the largest
employment losses early last year (Haltiwanger 2021).
In the past year and a half, fewer firms have failed than initially
feared, due in part to fiscal support like the Paycheck Protection
Program that offered forgivable loans to small- and medium-sized
businesses. Figure 11b compares cumulative commercial bankruptcies for
the past four years. The full year 2020 ended with 17 percent fewer
bankruptcies than in 2019, while 2021 is currently on track to record
the fewest commercial bankruptcy filings since at least 2012 (when the
data became available). More specifically, Chapter 7 filings and
Chapter 13 filings, which represent asset liquidation and those of sole
proprietorships, were 16 percent and 45 percent lower in 2020 than
2019, respectively. In contrast, Chapter 11 filings, which historically
have reflected the reorganizations of large firms, jumped 29 percent in
2020. That increase also likely reflects legislation enacted in
February 2020 and then expanded under the CARES Act, which offered
smaller businesses the ability to reorganize under Chapter 11 and thus
remain viable.
Although the business sector appears to have done well overall,
some acutely affected sectors have seen more closures. For example,
early evidence shows an elevated rate of exits for heavily COVID-
affected businesses, such as barber shops and hair salons (Crane et al.
2021).
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Coombs, Kyle, Arindrajit Dube, Calvin Jahnke, Raymond Kluender, Suresh
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Crane, Leland D., Ryan A. Decker, Aaron Flaaen, Adrian Hamins-
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Davis, Elizabeth E., and Aaron Sojourner. 2021. ``Increasing Federal
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Desjardins, Jeff. 2020. ``Visualizing the Growth of COVID-19 in the
U.S., Organized by State Peak Date.'' Visual Capitalist, Vancouver,
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Dube, Arindrajit. 2021. ``A Plan to Reform the Unemployment Insurance
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Edelberg, Wendy, Sara Estep, Stephanie Lu, and Emily Moss. 2021. ``A
Comparison of Renters and Homeowners in Recent Decades.'' The
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Edelberg, Wendy, and Shambaugh, Jay. 2020. ``How the Pandemic Is
Changing the Economy''. Brookings Institution. Washington DC.
Edelberg, Wendy, and Louise Sheiner. 2020. ``What Could Additional
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Implications of Biden's $1.9 trillion fiscal package'' Up Front
(blog), Brookings Institution, Washington, DC. January 28, 2021.
Edelberg, Wendy, and Louise Sheiner. 2021b. ``A Macroeconomic Analysis
of a Senate Republican COVID Relief Package.'' Blog. Brookings
Institution, Washington, DC. February 3, 2021.
Epiq. 2021. ``AACER Bankruptcy Statistics and Trends: All Commercial
Chapters Bankruptcy Statistics by Month, 2011-YTD.'' Epiq, Kansas
City, KS.
Federal Reserve Bank of Atlanta. 2021. ``Wage Growth Tracker.'' Center
for Human Capital Studies, Federal Reserve Bank of Atlanta,
Atlanta, GA. Accessed September 15, 2021 at https://
www.atlantafed.org/chcs/wage-growth-tracker.aspx
Furman, Jason, Melissa Kearney, and Wilson Powell III. 2021. ``How Much
Have Childcare Challenges Slowed the US Jobs Market Recovery?''
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Gilarsky, Melanie, Ryan Nunn, and Jana Parsons. 2020. ``What is Work
Sharing and How Can It Help the Labor Market?'' Blog. The Hamilton
Project, Brookings Institution, Washington, DC. April 16, 2020.
Grooms, Jevay, Alberto Ortega, and Joaquin Alfredo-Angel Rubalcaba.
2020. ``The COVID-19 Public Health and Economic Crises Leave
Vulnerable Populations Exposed.'' Blog. The Hamilton Project,
Brookings Institution, Washington, DC. August 13, 2020.
Haltiwanger, John C. 2021. ``Entrepreneurship During the COVID-19
Pandemic: Evidence from the Business Formation Statistics.''
Working Paper 28912, National Bureau of Economic Research,
Washington, DC.
Hamilton, Steven. 2020. ``From Survival to Revival: How to Help Small
Businesses through the COVID-19 Crisis.'' The Hamilton Project,
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Hardy, Bradley L., and Trevon Logan. 2020. ``Racial Economic Inequality
Amid the COVID-19 Crisis.'' The Hamilton Project, Brookings
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Klaauw. 2021. ``Keeping Borrowers Current in a Pandemic.'' Blog.
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Institution, Washington, DC.
Mr. DeFazio. Mr. Regan.
Mr. Regan. Good morning. Thank you, Chairman, thank you,
Ranking Member Graves, for having me here today. I speak on
behalf of 33 unions who represent America's frontline
transportation workforce.
You know these workers. You see them every day, building
our roads, driving our buses, flying our planes, moving our
freight, and connecting our communities.
Frontline transportation workers are and always have been
essential. The COVID-19 pandemic has put renewed light on what
that really means.
During the darkest days of the pandemic, these dedicated
professionals never had the luxury of working from home. Often
they were forced to do their jobs without adequate safety
protections, like face masks, social distancing, and other PPE.
As a result, tens of thousands became ill, scores had to be
hospitalized, and tragically workers across all modes lost
their lives to the virus.
Despite the risks they face, transportation workers
reported for duty and helped see us through this crisis.
Because of their efforts, hospitals had the critical supplies
they needed, healthcare and other essential workers made it to
their jobs on the front lines of the pandemic, and the vaccine
has been distributed to every corner of our country.
These efforts were possible because of the dedication of
transportation workers, and also because of your support.
Congress provided nearly $200 billion to transit agencies,
airlines, Amtrak, State departments of transportation,
schoolbus operators, and motorcoaches to keep these systems
open and workers on the job.
The majority of this aid was included in bipartisan
packages that nearly every member of this committee supported.
On behalf of TTD and our affiliated unions, I thank you for
delivering the Federal aid needed to respond to this crisis.
In our domestic aviation industry, for example, passenger
volume dropped 96 percent, and U.S. carriers recorded massive
losses in 2020. The economic damage that could have stemmed
from the collapse of this industry would have been
catastrophic.
However, Congress' provision of three rounds of the Payroll
Support Program saved thousands of jobs, prevented carriers
from entering bankruptcy, guaranteed that airlines remain
capable of transporting essential workers and eventually
vaccines, and ensured that this industry would be prepared to
respond and recover as demand returned.
I want to thank Chairman DeFazio, in particular, for his
efforts in creating and championing this program.
Similarly, in the early days of the pandemic, Amtrak lost
its ridership overnight. A shocking 97-percent drop in
passengers translated into an unsustainable decrease in
operating revenues.
Without the Federal Government's support, Amtrak, its
passengers, the communities it serves, and its workforce would
have faced devastating losses.
However, three rounds of financial support with improving
labor protections, resulted in the recall of all furloughed
employees, the return of suspended, long-distance services, and
assurances that Amtrak would keep running through the worst of
the pandemic.
Public transportation was also devastated by this crisis.
Many of those working on the front lines of the pandemic,
including medical professionals, public safety workers, and
other employees deemed vital to the continuance of our society
and economy, relied on these services to get to their jobs.
Unfortunately, COVID-19 placed an incredible strain on our
ability to provide this public service to those who rely on it
most. Across the three COVID relief bills, Congress provided
nearly $70 billion to ensure the continued operation of our
public transportation system.
In order to accept this funding, transit agencies across
the country had to certify that they would not furlough
workers. It is not an exaggeration to state that without this
Federal support, the public transportation industry would have
been utterly decimated, leaving all those who counted on it
throughout the pandemic, in rural and urban communities alike,
without the transportation access that they need.
The keys to the success of all these investments were the
strong labor protections and the focus on worker welfare. Most
transportation workers and their families kept their health
insurance and were never forced onto unemployment lines.
Now, as we climb out of this pandemic, they are on the job,
ready to grow our economy once again.
While Congress and the Biden administration have taken
historic steps to preserve jobs and save our transportation
system, unmet challenges remain that still must be addressed.
Frontline workers across all modes continue to face the
serious and sometimes deadly threat of assaults for simply
enforcing face mask and other safety mandates. This is
especially true for workers in public transit, onboard Amtrak,
and in aviation.
These workers all have safety-sensitive jobs and should not
be expected to perform them while under the threat of physical
violence.
The need to move a tremendous amount of cargo at U.S. ports
placed longshore, shipbuilding, and other on-deck workers
squarely in harm's way of the virus. Language in the revised
HEROES Act and the American Rescue Plan temporarily revised the
Longshore and Harbor Workers' Compensation Act to ensure that
employees who have contracted COVID-19 on the job can collect
workers' compensation benefits.
Unfortunately, this was left out of the final bill, but it
must be enacted while this virus still persists.
As we move through the pandemic toward recovery, there is
no doubt that our transportation system and the frontline
workers who build, operate, and maintain it, will continue to
play a vital role in ensuring our economy and our country come
out of this crisis stronger and better than ever.
Unfortunately, we are still not out from under the shadow
of this virus, and until we are, we must continue our efforts
to ensure the cooperation between working people,
transportation entities, and lawmakers.
Thank you again, and I look forward to your questions.
[Mr. Regan's prepared statement follows:]
Prepared Statement of Gregory R. Regan, President, Transportation
Trades Department, AFL-CIO
Good morning. Thank you, Chairman DeFazio and Ranking Member Graves
for inviting me to testify before the Committee today.
I speak today on behalf of 33 unions who collectively represent
millions of frontline workers across every mode of transportation. You
know these workers--you see them every day building our roads, driving
our buses, flying our planes, moving our freight, and connecting our
communities.
Working people represented by TTD unions are pilots, flight
attendants, air traffic controllers, mechanics, and transportation
security officers. They are bus and subway operators, station agents
and ticket handlers, freight rail conductors, food and beverage
workers, ship captains, and port workers. They are building and
repairing our roads and bridges. They are found in every corner of our
country in cities both large and small, and together they power the
most complex transportation system on earth.
These workers are and always have been essential, but the COVID-19
pandemic put a renewed light on what that actually means.
During the darkest days of the pandemic, frontline transportation
workers did not have the luxury of working from home. These skilled
professionals reported for duty even when our government instructed
other Americans to stay home. Often, these workers were forced to do
their jobs without adequate safety protections like social distancing,
face masks, and other critical PPE. As a result, they risked bringing
the virus home to their families or contracting it themselves. Sadly,
that's exactly what happened. Tens of thousands of transportation
workers became ill from COVID-19. Scores had to be hospitalized, or
stay home. Tragically, workers across all modes of transportation lost
their lives because of this virus.
Strong Federal Investments Saved Jobs, Lives, and our National Economy
The pandemic greatly tested our transportation systems and our
country. Federal aid and intervention have been the saving grace for
transit, airlines, Amtrak, highway and bridge construction, and other
modes of transportation over the past 19 months as Congress provided
tens of billions of dollars in aid to transportation workers at transit
agencies, airlines and airline contractors, Amtrak, school bus
operators, state departments of transportation, motorcoaches, private
transit providers and others.\1\ The vast majority of this aid was
included in bipartisan packages that nearly every member of this
committee supported. On behalf of TTD and our affiliate unions, I want
to thank the members of this committee for all your work and support
delivering federal aid to the transportation workforce in response to
this crisis.
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\1\ Including but not limited to $69.4b for public transit, $63b
for airline and airline contractor workers through the payroll support
program, $3b for aviation manufacturing payroll support, $29b in
additional aid to airlines through loans and loan guarantees, $4.7b for
Amtrak, $2b through the Coronavirus Economic Relief for Transportation
Services (CERTS) program directed to motorcoach, school bus, and other
companies, and $10b for activities eligible under the Surface
Transportation Block Grant Program. This funding came through the
Coronavirus Aid, Relief, and Economic Security (CARES) Act (March 27,
2020), the Coronavirus Response and Relief Supplemental Appropriations
Act (December 21, 2020), and the American Rescue Plan Act (March 11,
2021).
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Importantly, Congress's bold investments in our transportation
network came with an extraordinary focus on the welfare of its
workforce. Many of you here today worked hard to ensure that all of the
emergency federal investment in transportation came paired with some of
the strongest worker protections ever included in a response and relief
bill. Airlines and airline contractors were not allowed to
involuntarily furlough their workers or diminish wages under the
payroll support program.\2\ Transit agencies had to certify that they
hadn't furloughed any workers.\3\ And Amtrak was directed to prevent
furloughs, ultimately return furloughed workers to the front lines, and
restore suspended services.\4\ The benefits of this approach have been
apparent from the beginning. Many workers and their families kept their
health insurance--which is essential during a public health crisis--and
were never forced onto unemployment insurance. And now, as we are
climbing out of the pandemic, they are already on the job ready to grow
our economy again. That would not have been possible without your
support.
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\2\ P.L. 116-136 Section 4114; P.L. 116-260 Section 404; P.L. 117-2
Section 7301
\3\ P.L. 116-260 Division M Title IV--Federal Transit
Administration; P.L. 117-2 Section 3401
\4\ PL. 116-260 Division M Section 401
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Aviation
The domestic aviation industry was deeply affected by the pandemic,
with passenger volumes initially dropping by 96%. As a result, U.S.
carriers would go on to record massive losses in 2020, as revenue
dropped by 62% compared to the year prior.\5\ The economic damage that
could have stemmed from the collapse of the industry in light of these
conditions would have been catastrophic.
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\5\ https://www.bts.gov/newsroom/preliminary-air-traffic-data-
april-2020-96-reduction-us-airline-passengers-2019
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However, Congress's provision of three rounds of the Payroll
Support Program (PSP) prevented the loss of hundreds of thousands of
jobs, including pilots, flight attendants, mechanics, ground crew,
baggage handlers, customer service agents, and others. It prevented
carriers from entering bankruptcy, guaranteeing that airlines remained
capable of fulfilling immediate needs like transporting essential
workers and eventually vaccines, and ensured that the aviation industry
would be prepared to respond and recover as demand returned. We owe our
strongest thanks to Chairman DeFazio for the creation of the program
and for his steadfast support through each iteration.
Critically, the PSP was engineered as an employee-first program,
whose funding exclusively covered employee payroll and benefits and
prevented involuntary furloughs, all without inviting federal
interference in collective bargaining relationships at U.S. airlines.
This stands in stark contrast to previous airline assistance programs
that provided no such assurances to workers, and resulted in massive
losses in wages and benefits, to the benefit of carriers. The
deployment of the program, and its two extensions, is responsible for
avoiding both large-scale furloughs and loss of benefits during a
global pandemic. As a result, the vast majority of airline employees
pre-pandemic remain in the industry, with collectively bargained
benefits intact. In fact, total airline employment, per the most
recently reported data, has surpassed pandemic lows as several carriers
have announced hiring for certain positions.\6\ While the pandemic and
its effects are certainly not over, this is a welcome sign. However, if
the PSP had not been extended at any stage, this would assuredly not be
the case, and we would be faced with a decimated airline industry and
untold thousands of displaced aviation workers.
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\6\ DOT Form 41, Schedule P-1(a), as of 9/29/21
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In addition to the airline PSP program, the American Rescue Plan
also included a PSP-like Aviation Manufacturing Jobs Protection
program, designed to support aviation industry manufacturers in
response to reduced demand for new aircraft and fewer aircraft in
operation. TTD was strongly supportive of the program and appreciated
Congress' acknowledgment of this critical role of the airline
manufacturing sector and its employees.
Maritime
The U.S. Maritime Industry has continued to be an invaluable part
of our national economic security and sealift capability. The pandemic
has greatly impacted the various functions in the industry and just
like other transportation modes, expenses have increased due to COVID-
19 protocols put in place to ensure the health and safety of crews and
to keep supply chains open. In addition, there has been a high demand
for container shipping and maritime labor and U.S. Flag shipping
companies have been working together to ensure that our nation's
shelves remain well-stocked. However, there has not been any dedicated
federal assistance provided for the maritime transportation system in
any of the COVID relief packages passed by Congress.
We thank Chairman DeFazio and the committee for their work on the
Maritime Transportation System Emergency Relief Authority (MTSERA)
program, which aims to provide comprehensive maritime emergency relief
to the U.S. Maritime Administration and stabilizes the reliable
function of the Marine Transportation System in any national emergency
disaster or public health emergency. MTSERA was authorized in the FY
2021 National Defense Authorization Act for the first time last year,
and we call for full support of the program in the appropriations
process going forward.
Passenger Rail
In the early days of the pandemic, Amtrak lost its ridership nearly
overnight. A shocking 97% drop in ridership ultimately translated into
a 31.9% decrease in operating revenues for Amtrak over the course of FY
'20.\7\ While ridership is beginning to recover, the financial losses
that Amtrak stood to incur without the support of the federal
government would have had disastrous consequences for passengers,
communities, and the Amtrak workforce.
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\7\ https://www.amtrak.com/content/dam/projects/dotcom/english/
public/documents/corporate/businessplanning/Amtrak-Service-Line-Asset-
Line-Plans-FY21-26.pdf
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As the pandemic took hold in early 2020, Congress stabilized the
carrier with an infusion of approximately $1 billion via the CARES Act.
However, upon the exhaustion of these funds, the impact of COVID on
Amtrak became clear as it made damaging changes to its workforce and
service beginning on October 1, 2020. Amtrak laid off approximately
2,500 workers and suspended daily service on almost all of its long-
distance routes. Further assistance in the Coronavirus Response and
Relief Supplemental Appropriations Act of 2021 prevented Amtrak from
laying off additional employees or contracting the work of furloughed
employees, and the final round of support in the American Rescue Plan
crucially provided for the recall of all furloughed employees and the
restarting of daily service on the National Network. TTD strongly
supported this aid and the increasing degree of protection for workers
in these bills.
Without this support, October 1st would have been only the
beginning, as Amtrak would have furloughed additional thousands of
employees as ridership remained well below historic levels. Amtrak
likely would have further reduced or even eliminated services, causing
rural communities across the nation to lose access to reliable
passenger rail. Not only would this have been immensely harmful to
workers and passengers at the time, but the loss of skilled Amtrak
employees and the costs associated with restarting dormant service
would have delayed Amtrak's recovery. While Amtrak is not clear of the
impacts of the pandemic as some travel has been slow to recover,
Congress's assistance was essential to its survival and continued
operations over the last eighteen months.
Public Transportation
Throughout the COVID pandemic, millions of Americans relied on
public transportation services, including buses, subways, light- and
commuter rail, and ferries, as their only source of transportation to
their jobs, food, and other critical services. Many of those people
were working on the front lines of the pandemic, including medical
professionals, public safety workers, and other employees deemed vital
to the continuance of our society and economy. Unfortunately, the
direct costs and revenue losses resulting from the impacts of COVID-19
placed an incredible strain on our ability to provide this public
service to those who rely on it the most.
Across the three COVID relief bills, Congress provided $69.4b to
ensure the continued operations of our public transportation systems.
It is not an exaggeration to state that, without this federal support,
the public transportation industry would have been utterly decimated,
leaving all those who have counted on it throughout the pandemic
without transportation access in rural and urban communities alike.
Moreover, the flexibility provided to public transportation systems
to use federal assistance for operating funds and the strong labor
protections tied to that federal assistance to guarantee continuance of
payroll received top priority, and ensured that workers were kept on
the job and that our recovery was not further and arbitrarily hampered
by the need to restart this major component of our national
transportation system.
State and local funding, and support for federal employees
The cumulative impact of the pandemic's halt on commerce and
transportation services hit state and local budgets hard. Without the
usual vehicle ridership and the accompanying revenue from sales taxes,
gas taxes, fare box collection, and tolling, communities struggled to
maintain the critical transportation services that moved essential
workers to their jobs and connected patients to care. According to the
American Association of State Highway and Transportation Officials
(AASHTO), state departments of transportation will suffer a $28 billion
loss in state transportation revenues through fiscal year 2024.\8\
---------------------------------------------------------------------------
\8\ https://policy.transportation.org/wp-content/uploads/sites/59/
2021/02/AASHTO-Covid-Revenue-Analysis-2021-02-01.pdf
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While not fully covering the predicted revenue losses, Congress
provided $10 billion in emergency aid to state departments of
transportation in the Coronavirus Response and Relief Supplemental
Appropriations Act of 2021 and offered broad flexibility--covering
operations and personnel costs, allowing routine maintenance to
continue, and filling in the gaps for localities so that when our
economy did recover, the transportation network would be ready to move
people and goods safely and efficiently. The economic rebound and
commercial activity we have seen this year could not have been as
expansive without this support.
TTD also commends the inclusion of Emergency Leave Funds for
federal employees in the American Rescue Plan, in particular the
creation of a paid leave program for FAA employees and Transportation
Security Officers. The ability to access paid leave when required to
quarantine or care for a relative due to COVID-19 concerns has allowed
these employees the necessary ability to balance health-care and
employment responsibilities without fear of missing wages.
Other Transportation Sectors
In addition to the modally targeted programs discussed above, a
number of other sectors, including motor coach operators and school bus
providers, have seen substantial losses and layoffs as travel ground to
a halt and schools went remote. Over the course of the pandemic, the
motor coach industry has shed nearly 85,000 employees alone. Seeking to
address these and other struggling industries, Congress provided a
needed $2 billion in the Coronavirus Response and Relief Supplemental
Appropriations Act of 2021. While there was a substantial delay between
enactment and implementation, we are encouraged that the Treasury has
begun to issue grants from the program.\9\
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\9\ Coronavirus Economic Relief for Transportation Services (CERTS)
program
---------------------------------------------------------------------------
With our transportation system moving freight, tourists, and
commuters, and providing real wages and benefits for working families,
the United States saw rapid economic growth in 2021.\10\ With federal
assistance, transit agencies were able to maintain service and
ridership has begun to stabilize, airline workers stood ready to meet
rising tourism demand, and intercity passenger rail maintained service
and connected rebounding economies.\11\ These strong investments in
both transportation systems and their workers meant that consumers had
places to go and the means to spend, and infrastructure projects could
resume and make way for greater activity.\12\ Industries that did not
receive direct federal assistance, such as freight rail and our ports
of entry, were able to survive due to the downstream benefits of these
investments.
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\10\ https://www.oecd.org/economy/united-states-economic-snapshot/
\11\ https://transitapp.com/apta
\12\ https://www.nytimes.com/2021/07/29/business/economy/consumer-
spending-gdp.html
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While these investments, paired with strong labor protections, and
the lawmakers who supported them should be celebrated, there remain
glaring failures of government and outstanding needs that must also be
addressed.
The Trump Administration Failed Workers
At the very outset of the pandemic, workers pushed for strong,
uniform protections from their federal government. Instead, the Trump
administration chose to endanger workers by publishing little more than
unenforceable, voluntary guidance to employers, while transportation
workers were dying every day of COVID-19 infections they acquired on
the job.
When it became clear that the administration would not act on its
own and that the patchwork of state, local, and other guidelines was
inadequate, TTD filed a petition with the Department of Transportation
requesting the absolute bare minimum--that passengers on our nation's
transportation systems, including on airlines, bus, rail, and ferries,
be required to wear masks.\13\ Gallingly, the Trump DOT rejected the
petition.\14\ While we are grateful that the Department rightfully
changed course under the Biden administration, we are unequivocal that
the lack of meaningful federal action and standards directly resulted
in unnecessary infections and deaths among transportation workers and
their families, passengers, and members of the communities where those
individuals lived and worked.
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\13\ https://ttd.org/policy/federal-comments/ttd-petitions-dot-for-
passenger-face-mask-mandate/
\14\ https://ttd.org/news-and-media/ttd-in-the-news/trump-
administration-rejected-a-mask-mandate-on-the-day-trump-was-
hospitalized-for-covid-19/
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Great Needs Remain Across all Transportation Sectors
While Congress and the Biden administration have taken historic
steps to preserve jobs and save our transportation system, unmet
challenges remain that must still be addressed.
Unconscionable assaults on transportation workers remain a serious
safety threat
Frontline workers across all modes of transportation continue to
face the serious, and sometimes deadly, threat of assaults simply for
enforcing mask and other safety mandates.
Transit workers have faced the threat of assault on the job for
years. Throughout 2020, as ridership fell to historic lows, the number
of assaults in these systems remained at roughly the same level as
2019. Now that ridership is returning, assaults are on the rise. In New
York City, for example, hundreds of transit workers have been harassed
or assaulted for asking passengers to wear masks--and those are just
the cases that have been reported. Similar savage attacks have been
reported across the country, from Durham to Lubbock to San
Francisco.\15\
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\15\ https://www.thecity.nyc/2020/9/7/21426632/new-york-city-bus-
drivers-mask-rules-mta; https://www.wral.com/coronavirus/godurham-bus-
drivers-attacked-after-telling-riders-to-mask-up/19887910/; https://
www.star-telegram.com/news/coronavirus/article244316857.html; https://
abcnews.go.com/Health/wireStory/san-francisco-bus-driver-assaulted-bat-
mask-order-71980686
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We have also seen a significant increase in assaults in our
airlines and on Amtrak. The FAA has received more than 4,385 reports of
unruly passenger behavior and has launched formal investigations into
789 of these cases--nearly quadruple the previous record number of such
cases in a year and we are only in September.\16\ In a membership
survey conducted by the Association of Flight Attendants-CWA, 85% of
flight attendants reported dealing with an unruly passenger in the
first half of 2021, and 17% reported a physical incident.\17\ Violent
attacks on gate and customer service agents, flight attendants, and
transportation security officers have become pervasive, threatening
both the wellbeing of the employees and air safety.
---------------------------------------------------------------------------
\16\ https://www.faa.gov/data_research/passengers_cargo/
unruly_passengers/
\17\ Testimony of Sara Nelson, International President of the
Association of Flight Attendants-CWA, House Transportation and
Infrastructure Committee, September 23, 2021.
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At Amtrak, disorderly conduct incidents increased 29% in FY '21,
and onboard service workers and conductors are reporting threats and
unsafe behavior on trains regularly.\18\
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\18\ Data provided by the Amtrak Police Department
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Transportation workers all have safety-sensitive jobs that they
cannot, and should not, be expected to perform while under the threat
of physical violence. The increased threat of assault demands a federal
response across all modes of transportation to protect the workforce,
as well as passengers and other road, rail, and air users.
Maritime and Longshore
The need to move the tremendous amount of cargo that arrives at
U.S. ports and harbors necessitated that longshore workers,
shipbuilders, and other on-dock workers across the nation continue to
work in conditions where exposure to COVID-19 was possible if not
likely. Recognizing the essential nature of these employees, the House
of Representatives included language in both the revised HEROES Act and
the American Rescue Plan that temporarily revised the Longshore and
Harbor Workers' Compensation Act to ensure that covered employees who
contracted COVID-19 on the job were able to collect worker's
compensation benefits. Disappointingly, the provision was disallowed by
the Senate Parliamentarian. In response, Education and Labor Chairman
Bobby Scott and Representative Frank Mrvan introduced the stand-alone
Longshore and Harbor Workers' COVID-19 Compensation Act of 2021. We
thank Chairman Scott and Rep. Mrvan for their leadership and encourage
support of the legislation.
Congress should also be aware that the pandemic has exacerbated the
processing of credentials and course approvals from the U.S. Coast
Guard's merchant mariner credentialing program. These credentials are
needed for Merchant Mariners to report to work but are often extremely
delayed due to a number of ongoing health safety, technical, and
staffing restraints. Unfortunately, the backlog is adversely affecting
the ability of our unions to find crew members for ships and also
limits the ability of workers to find work and advance their careers.
Mariners will receive word they passed their exams, but they experience
severe delays before they receive the credentials that allow them to
get a job. This backlog must be resolved in order to maintain the
employment levels needed to sustain the supply chain and provide
essential goods, food, and equipment to folks across the country.
Rail
Unlike most of the nation's employees, rail workers receive
benefits such as unemployment payments through the Railroad Retirement
Board, as opposed to state-run programs. As Congress created badly
needed extended and enhanced UI benefits, it was forced to consider
that, unlike regular UI, railroad unemployment benefits are unfairly
subject to the effects of the sequester. As a result, rail workers were
subject to an approximately 7% cut to their benefits at a time they
could least afford it. The Coronavirus Response and Relief Supplemental
Appropriations Act suspended the application of the sequester until 30
days after a Presidential declaration to end the national emergency
concerning the COVID-19 pandemic. While this common-sense fix was
welcome, Congress must pursue avenues to permanently remove
sequestration restrictions on the RRB.
Workers and our economic recovery will be damaged by government
shutdowns
Finally, we must point out that all of the good work this and the
previous Congress have done to help workers and shore up our economy in
the wake of this global pandemic will be needlessly harmed if elected
leaders fail to perform their most basic Constitutional responsibility
of funding government operations. The shutdown imposed upon the
American people by Congress in 2019 wreaked havoc on our transportation
system, forced federal workers and contractors to stay at home or work
without pay, and cost our economy billions of dollars that we will
never get back. Know that we will not sit by idly while Congress uses
our workers as a political pawn in a partisan squabble.
Moreover, later today you will be asked to vote on a long-term
reauthorization of our nation's surface transportation programs--the
largest ever single investment in our infrastructure and one that is
desperately needed and supported by your voters. While the
Infrastructure Investment and Jobs Act may not tick every box on each
of your wish lists, it is your duty to ensure we do not enter another
period of short-term reauthorizations that do little more than create
uncertainty, slow down construction, and harm our economic recovery.
Conclusion
As we move through the pandemic toward recovery, there is no doubt
our transportation system and the frontline workers who build, operate,
and maintain it will continue to play a vital role in ensuring our
country and economy come out of this crisis stronger and better than
ever. Achieving those goals, however, will require additional
cooperation between working people, transportation entities, and
lawmakers. For starters, it must be understood that the programs I have
outlined today will remain essential for months and years to come. We
also cannot let our guard down: strong mandatory health and safety
guidance will be central to keeping transportation workers safe and
encouraging the return of passengers. Congress correctly intended for
these programs to extend until the end of the pandemic. Working people
and the traveling public are counting on that commitment for their
safety and security.
Thank you again for the opportunity to testify today and I look
forward to your questions.
Mr. DeFazio. Thank you, Mr. Regan, for your exactly 5-
minute testimony.
I will begin with a question to direct to both Mr.
Skoutelas and Mr. Regan because you both lead organizations
that represent one heck of a lot of people--in terms of APTA,
1,500 public- and private-sector member organizations, all
modes of public transportation, and then Mr. Regan, TTD, an
organization representing 33 unions who work across the
transportation sector.
And I guess I would just like you both to say, and if you
can be brief, what was the most important part of the COVID
Federal relief efforts and the impact they had, and where do
you think your industries that you represent, or workers, would
be today if we hadn't had that assistance?
Mr. Skoutelas. Mr. Chairman, this is Paul Skoutelas. Let me
address that if I may. First of all, the nearly immediate
infusion of Federal aid that Congress approved for public
transit was absolutely essential. It meant that services could
continue, bus and rail services to communities, to essential
workers, uninterrupted, and that was essential in terms of
maintaining continuity and maintaining the vibrancy of not only
getting people to their jobs, but continuing some level of
economic activity.
If those dollars were not forthcoming in the quick fashion
that they were, we would have seen enormous dislocation,
shutdown of entire systems, and that has been evidenced through
the surveys that we have done.
Going forward, this gives an opportunity for these agencies
to stabilize their operations, continue to operate, and begin
to plan for the future, and that is what is going on today.
It also provided for a continuation of many of the capital
investment programs that these agencies were undertaking. So it
meant that the private sector would continue to employ people,
to construct projects, which were in jeopardy if those funds
were not available to them.
So in all, it provided for stability, it provided for a
future that they could plan for with some reasonable degree of
certainty.
Mr. Regan. I agree with what Paul said, and what he said
remains true for aviation and Amtrak in addition to public
transit.
But to me, I think one of the most important parts of the
relief was how it was directed toward workers. It made sure
that we were not furloughing people, we weren't ever getting
collective bargaining agreements. We were making sure that
people retained their credentials, to make sure they were
trained and up to speed and able to return to work when they
were there.
The fact that we did not have massive layoffs, we did not
have restructuring of collective bargaining agreements, we did
not have reduction in service, all of this was vital to making
sure that we were going to come out of the end of this better,
or as good as we were beforehand.
Mr. DeFazio. Dr. Boskin, I am just a bit bemused by your
saying, best evidence, every dollar of infrastructure spending
would increase GDP by 60 cents. S&P last year did a major
report, and they said, if we expended $2.1 trillion over 10
years, that the return would be about $2.70 for every dollar
invested. The IHS has a study that has an even higher number
than that.
That is the lowest ball number I have ever seen, and you
are talking about we are at capacity, and you know, skilled
workers and all that. When we invest, like the Recovery Act,
under Obama, which I opposed, all we did was go out and put
down a layer of pavement.
It didn't have secondary economic impacts. Contractors
didn't go out and buy sophisticated expensive machinery
because, again, they only had these little crappy contracts.
And it was only about 4 percent of the recovery package. So
if we are working off that, it is not a good measure. Where do
you get the 0.60--60 cents? It is the lowest I have seen.
Mr. Boskin. Well, it is actually a consensus of the best
macroeconomic evidence, for example, the review essay by a
highly regarded macroeconomist, Valerie Ramey, in the Journal
of Economic Perspectives. She reviews all the studies, makes
them consistent.
Mr. DeFazio. So Standard & Poor's just made theirs up? Or
IHS just made up their numbers?
Mr. Boskin. No, I am not accusing anybody of trying to make
up numbers. I think people tend to have their own way to
analyze this. I am trying to report the scholarly research.
It is also, as I said in my testimony, likely that the
effect of the CARES Act spending and the COVID relief was
somewhat higher than this because of the great uncertainty that
was created, the size of the short-run collapse, et cetera.
As to the long-run benefits, there can be certainly
substantial long-run benefits as I emphasized in my testimony.
CBO's estimate of the rate of return on public investment is
about 5 percent, not as in one study you suggested, a doubling
of the value per dollar.
Undoubtedly, there are some projects that is true of. There
are others like California high-speed rail, which if anything
had a negative----
Mr. DeFazio. Yeah. Well, that is--I will grant you that
example, but my time is expired. With that, Mr. Crawford?
Mr. Crawford. Thank you, Mr. Chairman.
I want to stick with you, Dr. Boskin. As we have discussed,
Government spending in response to COVID-19 has reached the
trillions. We are continuing to debate even more spending
today.
However, back home and across the transportation industry,
I keep hearing from employers that they have an abundance of
jobs and nobody to fill those jobs. Has any of this spending
incentivized Americans to get back to work, or do you
anticipate more of the same, employers struggling while people
continue to stay home?
Mr. Boskin. Well, it is an important question. There are
over 10 million job openings listed by American employers, and
there are millions of workers still on the sidelines who have
not come back into the labor force to find productive
employment. Many reasons for that.
Some of it should abate with school reopenings, and so on
and so forth, and greater vaccinations, less fear, but probably
some people retired and won't come back.
So we have, in some sectors in particular, a substantial
worker shortage. There are also bottlenecks globally that are
causing problems.
So, I think that many of these things were payments
unrelated to work incentives, made it, in my view, ex ante, a
very sensible thing. Given the crisis, the uncertainty, the
massive suffering, I think it was quite reasonable to try to
flood the system and, you know, to try to cushion things.
And even at 0.6, you know, $6 trillion of spending does
something for GDP and output of the demand for labor. So I
don't mean to suggest that--it is not zero and it is not
negative. It is a modest amount.
But I do believe that as we look at these new things that
are being proposed, it is a substantial concern that they are
not better targeted, less costly, and some of these things have
work requirements or training requirements or education
requirements, so people are getting the assistance, are doing
something to encourage their future productivity and work.
Mr. Crawford. You addressed this in your comments, but I
want to drill down on it a little bit more. What are the risks
from higher debt, and when would you expect that to really
start to manifest? When would we expect to see that start to
occur?
Mr. Boskin. Well, I think the only honest answer to that is
nobody can be sure. Large build-ups and sustained build-ups in
debt have often in history, and in many different countries and
time periods, been followed by sluggish growth, inflation, even
financial crises.
We already faced a very daunting task with the unfunded
liabilities of Social Security and Medicare hitting us as we
are population aging and other factors. And so, there is going
to be a lot of pressure on the budget and everything else and
on private incomes to try to deal with that.
And so adding additional debt on top of that, I view as
considerably risky.
We do have the advantage that the U.S. dollar is the global
reserve currency, so we probably have a bit of a cushion
relative to other places and times. They are not perfectly
comparable.
But I think the best way to think about it is, it is a
considerable risk, and under the current macroeconomic
environment, it is particularly a risk for entrenching
inflation that hopefully will at least considerably be
transitory. Although there is some probably already built into
the cake for the medium term, we shouldn't be trying to add to
that.
Perhaps among the bad outcomes that could come from all of
this is to get back to an inflation stop-go episode where we
wind up having to slam on the brakes to deal with inflation and
risk another recession.
Mr. Crawford. Let me ask you this, and you just addressed
this. Our status as the reserve currency, the U.S. dollar being
the reserve world currency, is that in jeopardy?
Mr. Boskin. I think there is some risk, medium and long
term. I don't think in the short-term. To be a reserve
currency, which means that when the Malays trade with
Australia, things are mostly invoiced in dollars, not their
domestic currencies. So the dollar plays that reserve role.
The problem is that that is not immutable, but what you
really need for that is to have very large, liquid markets with
very thin bid-ask spreads and futures and options and things
like that, so people can readily hedge their bets.
No other currency is yet able to substantially replace
that. Although there is a risk with various ways that renminbi
is being used, with the euro, et cetera. There is some risk
that we will migrate over time to something that is not as the
dollar, is not so pre-eminent.
If done very gradually over a very long period of time,
that wouldn't be a big problem. If it was done more abruptly,
that could be a big, big issue for us.
Mr. Crawford. Thank you, Dr. Boskin, and I yield back.
Mr. DeFazio. The chair of the subcommittee, Eleanor Holmes
Norton?
Ms. Norton. Thank you, Mr. Chairman, and thank you for this
important hearing. My question is for Mr. Samuelsen of the
Transport Workers Union. Mr. Samuelsen, according to your
organization, more than 95 percent of your members, almost all
of them considered essential workers, never lost a paycheck
during the pandemic as a result of COVID-19 emergency relief
funds from the Government.
Can you highlight which Federal programs helped your
members the most in dealing with the pandemic, and do you
believe the transportation sector would have suffered greater
consequences without the Federal assistance, and if so, in what
way?
Mr. Regan. As the labor leader substituting for Mr.
Samuelsen, I will answer that. In totality, the aid, the three
tranches of aid to public transit agencies with the requirement
they do not furlough workers was critical to that industry, and
the same was true for PSP on the airlines side and the aid to
Amtrak as well.
Those three programs combined made sure that our entire
supply chain was in place and that people who needed to use
those services and the people that needed to ship goods and
services were able to do it, especially our critical workforce
in the healthcare industry and with food and medical supplies.
Ms. Norton. That is certainly important to understand.
Mr. Skoutelas, as you know, the House-passed surface
transportation bill, the INVEST in America Act, provided more
than $100 billion through the Federal Transit Administration to
enhance and support transit services in communities across the
Nation.
How could this funding have helped transit operators
recover from the challenges posed by decreased ridership and
revenues, and the increased costs brought about by the COVID-19
pandemic?
Mr. Skoutelas. Well, thank you, Congresswoman. Let me just
say that we, as APTA, and our transit industry have been
staunch supporters of the INVEST in America Act for some of the
reasons that you touched on, the level of investment for public
transit to upgrade and modernize our transit systems and put
them on a stable foundation.
The American Society of Civil Engineers, in its report card
of infrastructure of all modes and of all types, which comes
out every few years, gives the public transit industry a D-
minus. That is a reflection of the condition of our public
transit infrastructure.
So the INVEST in America Act, and now what is before you,
the Infrastructure Investment and Jobs Act, would go a long way
to helping the industry modernize, and that is what is needed
here. It is long overdue.
The investment levels certainly are at a level that we
think begin to make progress, and quite frankly, even at the
levels that they are proposed are not totally adequate in terms
of the need that has been documented, both by the Federal
Government in terms of the U.S. Department of Transportation
studies but also by----
[Video conferencing malfunction.]
Ms. Norton. What happened to the--what happened? Could you
pause the time? What happened?
Mr. DeFazio. We cannot hear you responding to the question.
We saw Mr. Katko for--what is that?
Voice. Paul may be on mute.
Mr. Skoutelas. I am here. I started to hear one of the
Representatives speaking, so I stopped. So I don't know if you
heard my----
Mr. DeFazio. OK. Well, continue. Finish what you were
saying.
Mr. Skoutelas. Well, I did conclude simply by saying that--
--
Mr. DeFazio. OK. All right. OK.
Mr. Skoutelas [continuing]. We support the Infrastructure
Investment and Jobs Act that is before you.
Ms. Norton. Well, can you discuss steps your members plan
to take to ensure that they use this funding in the most
efficient way possible to get the maximum benefit of these
taxpayer dollars?
Mr. Skoutelas. Absolutely. I think our agencies are
committed to that. They understand the public nature of what
they do, the importance to our communities and cities, and the
requirements that they have to deliver those dollars in an
efficient way.
And there is no change from that. That has been a
longstanding principle and a way of doing business for the
agencies. I am very confident that you will see that with any
additional resources that come for public transit investment.
Ms. Norton. Thank you very much. I think my time is expired
by now.
Mr. DeFazio. Well, you still have 37 seconds. But if the
gentlelady would yield to me?
Ms. Norton. Yes, I am glad to yield to the chairman.
Mr. DeFazio. OK. Yeah. Great.
Dr. Boskin, I would like to ask you a real brief question.
We were talking about the dollar as the reserve currency. What
would happen if the United States defaulted on its past debts,
which is now being threatened on the other side of the aisle?
What would that do to our status in the world and the reserve
currency status and inflation?
Mr. Boskin. Well, I think it would cause at least a very
severe temporary disruption in financial markets, and that
could be--the ripple through the real economy, if we weren't
careful, I think would be very damaging.
I am not going to get into the politics of how to get the
ceiling raised, but at this stage, it would be wise to do so.
Mr. DeFazio. Thank you.
Now I would recognize Garret Graves.
Mr. Graves of Louisiana. Thank you, Mr. Chairman.
Mr. Boskin, I appreciate you joining us today. I was
looking through some of the Government Accountability Office
reports that showed that we had, I think, over $1 trillion--$1
trillion with a ``T''--dollars left in COVID relief from the
previous year. In fact, we did legislation as recently as
December of last year that provided funds for COVID.
Yet this year, as early as January and February, folks were
trying to pass a $1.9 trillion additional package under the
auspices of COVID. I understand your comments about the debt
limit, but is it advisable for us to be dumping more money on
top of dollars that have been unspent to even--you know, to
where we really don't even know where things are needed and
where the true impacts or unaddressed areas are?
Mr. Boskin. The least harmful to the economy would
certainly be to make sure that the unspent funds come first and
are spent wisely.
Mr. Graves of Louisiana. Right now, if I go and add things
up, if I remember right, let's see, we have a $1.9 trillion
package that was done earlier this year. We now have a $1.2
trillion infrastructure package, a $4.3 trillion reconciliation
package, and the annual appropriations process will be
somewhere around $4 trillion.
Add all that up, it is $11.4 trillion, and we are not even
through the year. I understand your comments about honoring our
debts, and I certainly understand that, but at the same time,
is it advisable for us to be spending that kind of money and
further incurring greater debts?
Mr. Boskin. The macroeconomics are not advisable. They
could be somewhat mitigated by a smaller amount spread out, as
much of this is spread out over a number of years.
There are obviously a variety of things that have been
called budget gimmicks about things starting late or ending
early and things of that sort.
But the basic idea of having the general scale of the size
of our Government [inaudible] to my view is probably not wise.
We see--there are many studies documenting that one of the
several but an important part of the reason our standard of
living is considerably higher than most Europeans, is, we have
a more modest-size Government spending and taxes [inaudible].
We are at about one-third. They are at about one-half.
[inaudible] all of the large difference in taxes, I think that
is an exaggeration, but a considerable [inaudible], to put it
in just [inaudible] talk about very much, America's real GDP
per capita are just [inaudible] after tax is 50 percent higher
than [inaudible] Denmark.
You don't want to go down the road of a lot of headwind to
future prosperity, especially [inaudible] coming in the labor
force by slowing growth on [inaudible]. That means we are going
to face funding Social Security and Medicare, having to deal
with their unfunded liabilities in the coming decade, those
programs [inaudible] Social Security retirement [inaudible] in
a decade or slightly more [inaudible]----
Mr. Graves of Louisiana. Mr. Boskin, we are having trouble
with your audio. I am going to go ahead and reclaim my time
here and hopefully perhaps get answers for the record.
I want to turn to the transit issue. You know, we talked
about all the spending of funds. I believe when you add up the
COVID funding from last year, and you add all the COVID
packages, we had $69 billion in transit funding. We have, I
think, $90 billion in the reconciliation package, another $10
billion in regular appropriations, comes out to $170 billion.
Transit programs have had ridership down 75, 95 percent.
Why are we putting so much money into transit when there are
not folks riding it? Yet even in the infrastructure package
that is being debated, you only have $110 billion in new money
for roads and bridges?
Mr. Regan. If I may, sir, I would argue that all the money
we spent on the relief money was to maintain services so it was
there for the people that need it, and that will be there when
we come out of the pandemic.
I would argue that we have been dramatically underinvesting
in transit for decades now. All you have to look at is, you
know, the report cards across all of our transportation
networks are averaging, what, a D-plus these days?
So we really need to do the big investments to make sure
that we are able to be competitive as a country, make sure that
we have transportation options for everybody. Whether it be in
transit and rail or roads and bridges--we support that as
well--these are necessary investments that are decades overdue.
Mr. Graves of Louisiana. But why should we put money
towards transit and not towards roads and bridges?
Mr. Regan. We are putting money towards both, and that has
been the way the Highway Transit Fund has been set up, has a
split to make sure that both are being supplied based on----
Mr. Graves of Louisiana. My time is expired, but I will
follow up in writing, and I have a few more questions on this
topic.
Thank you, Mr. Chairman, I yield back.
Ms. Williams of Georgia [presiding]. Ms. Johnson of Texas
is now recognized for 5 minutes.
Ms. Johnson of Texas. Thank you very much.
Let me thank of our witnesses for being present, and let me
engage Mr. Ortiz.
I understand that you had some concerns about supply chain
issues in terms of gathering equipment. Can you elaborate on
that?
Mr. Ortiz. Yes. There has been--had there been a
prioritization on the supply chain and had we been able to seek
out one specific source for our necessary supplies to provide
PPE to the frontline workers would have been more effective and
efficient. I think also very quickly we realized there was a
need for a national strategy for supply chain management in
order to ensure that we were not competing with other States
and other cities to seek out the limited supply of personal
protective equipment, because if not, then we can experience
both limited supplies to increase the price, and unequal
distribution patterns.
And if I am permitted, there is a natural example that I
can give you. After Austin was told by multiple of the Nation's
largest suppliers that our order for PPE was not large enough,
we partnered with the city of Houston and the Texas Medical
Center in Houston, and we identified supplies that were located
in a port in Florida, and as we were in the process of the
procurement, we were notified by the source that the Texas
Division of Emergency Management took possession of supplies
before we could close the deal. In this situation, we find
ourselves competing not only against other cities attempting to
mitigate a disaster, but even our own State.
So supply chain is something that I think becomes very
crucial when you have a nationwide pandemic like we have
experienced so far.
Ms. Johnson of Texas. Thank you very much.
Are there other entities across the United States with
similar noncongregate sheltering programs who have had their
project applications approved?
Mr. Ortiz. Yes. It is our understanding that State and
local governments in FEMA region 4, which is around Florida,
and FEMA region 2 in New York and FEMA region 3 in Washington,
DC, have had similar noncongregate shelter projects obligated
with a few having funding already disbursed.
Ms. Johnson of Texas. And one last question on that. Can
you expand a little on the local emergency management
perspective on why FEMA selected so few Texas applications?
Mr. Ortiz. Yes. Within Texas, $468 million in total project
funding applications were submitted, but no competitive
projects were selected. We believe the issue, in large part, to
be that Texas does not facilitate the adoption of the
enforcement of 2015 and 2018 International Building Code and
the International Residential Code.
However, the city of Austin does follow these codes, and
Texas building codes adoptions take place at the local level.
Given that the BRIC program assesses the IRC and the IBC at the
State level and allocates technical points on an all-or-nothing
basis, valid and much-needed mitigation projects go unfunded.
For Austin, that meant that mitigation projects for an area
that had been impacted by flooding multiple times was not able
to compete and was not funded under the BRIC program.
To bring this to a larger perspective, all of the nine
States, the District of Columbia that received competitive
funding had an IBC and IRC in 2015 and 2018. There were no
States or districts funded without these codes.
Ms. Johnson of Texas. Thank you very much.
My time has expired. I yield back.
Ms. Williams of Georgia. Mr. Weber is now recognized for 5
minutes.
Mr. Weber. Thank you. I appreciate that.
And actually, I am going to discuss some of the points--
where is my bio on Mr. Boskin over here, Doug? Did you give it
back?
Mr. Boskin makes a lot of great points in his discussion,
and I want to just run through them real quickly and see if
there is time for questions.
He said ``I support policies to mitigate short-run economic
pain caused by a crisis like the COVID-19 pandemic and help
spur recovery, as long as the long-run cost is reasonable.''
Good point.
He says it is early days in the detailed evaluations of the
economic effects of the several responses to COVID, and their
many components, by independent scholars, and that he is going
to address his comments to the desirability of additional
spending, which is what we are discussing here today, and its
methods of finance, its methods of finance under
consideration--I want to highlight--for traditional
infrastructure.
When I read that sentence that he wrote, I thought
traditional infrastructure financing. So does that include
terms like ``social justice''? Does that include terms like
``climate justice''? Also, does that include terms like ``you
can get more money or a subsidy for a Tesla if the car is built
in a union shop''? Is that traditional finance for
infrastructure projects? I kind of doubt it.
He says he cites much of the research below as evaluations
based on the 2009 ARRA, the American Recovery and Reinvestment
Act, but some focus on other data periods as well.
He says that some claim that there is a multitrillion-
dollar infrastructure deficit, and others have long blamed
inadequate public investment for holding back the U.S. economy.
Others argue that a closer analysis shows the infrastructure is
in much better shape and advocate for improving the allocation
of funding--don't miss that; the allocation of funding--over
massive new expenditures.
And if these expenditures aren't massive, I don't know what
is, especially when you have got union jobs in there that are
getting paid for, you have got social justice and climate
justice. We don't even know what that means. How does that
money get allocated? How do we figure out whether it is
appropriate or not?
He says U.S. infrastructure forums rate our infrastructure
as 13th out of 141, behind Singapore and Hong Kong, but ahead
of countries like Sweden and Denmark. And that, in my opinion,
we are not that bad. But he says only some of that is
appropriately a governmental, and only a part of that is
appropriately a Federal responsibility.
So I repeat--pardon me--the way it is being spent and the
amount that is being spent is unconscionable and incredibly
shortsighted.
He talks about the Highway Trust Fund following the
expiration on the 2015 FAST Act in his writing. He says the
Highway Trust Fund will depend not just on the level of
spending, but also the ex-ante quality of the projects funded
and their post-execution and their financing methods.
Well, I looked up ex-ante, and it says it is based on
forecasts rather than actual results. Well, who could have
forecasted that we would be spending this much money
inappropriately, and irreverently, I would state?
He goes on to say that, If done well, the program can
produce substantial societal benefits, but done to excess or
with poor design incentives, a plethora of poor-return
projects, even boondoggles, would likely result.
You know, it makes me think about here we have, what is it,
500,000 electric vehicle charging stations in the bill, and it
makes me think about going back when the gasoline engine was
invented in the 1900s. And I wasn't alive then. I know I just
look that old, but I read the history books, and the term for
the automobile was ``horseless carriage.'' Some of you all
remember that.
Well, I remember, reading also in those history books that
when the gasoline engine was invented in cars, the Government
went out and they put gasoline stations everywhere. Oh, wait.
They didn't. And now, we are going to put in electric vehicle
charging stations. How about entrepreneurs get out there and do
that like they did with gas stations.
He goes on to say that it should be noted that the economy
is now back to its pre-pandemic levels and is growing solidly.
While risks remain, we should keep a close eye on job growth to
make sure unemployment continues its downward movement to full
employment. It does not appear likely to need more considerable
input, short-run stimulus on top of that is already provided in
this process. No more is needed, especially not at these
spending levels.
He makes great arguments. He said, in fact, existing
research suggests that it is a misguided conclusion, page 4.
Colleagues, read his testimony. He makes perfect sense what he
is laying out.
With that, I yield back.
Ms. Williams of Georgia. Mr. Larsen is now recognized for 5
minutes.
Mr. Larsen. Thank you, Chair.
I would also note that economists have predicted nine of
the last five recessions, so it really depends on which
economist you read, and there are others who are saying
different things. But I certainly agree that the economy
continues to emerge but has not yet emerged. Our unemployment
rate continues to surpass the rate before the pandemic, and we
are defeating the pandemic, but it is not yet defeated.
In my State, we have a very high vaccination rate, but we
are also seeing local hospitals being crammed by COVID cases in
their ICUs, Delta cases, 93 percent of which are unvaccinated
folks. So the pandemic being defeated but not yet defeated, the
economy is emerging but not yet emerged, and I believe,
therefore, we still need to stand up and stand in and help.
So my first question is for Mr. Skoutelas. And if you could
comment on the impact that COVID-19 has had on paratransit and
paratransit riders and what transit has done to alleviate the
impact on paratransit specifically.
Mr. Skoutelas. Well, as we know, paratransit is essential,
an essential service that is offered by most of our transit
agencies across the country, and that is door-to-door service
for those who are either elderly or in need of specific medical
assistance. And this is critical services. What the COVID
relief has allowed agencies to do is to maintain that service
for this very fragile, very vulnerable segment of our
population.
Without those resources, those services would have been in
jeopardy. And by the surveys that we have done, we would have
seen the complete closure and stoppage of those operations. But
what the relief was able to do was to continue, provide the
resource, agencies maintain that service level. And as a
result, those needy populations were attended to. And that is
the biggest result, I think, that--again, we have to think
about this in the context of serving people, and this is what
the emergency relief did for public transit, allowed the
agencies to serve people and the brave workers that delivered
those services on a daily basis.
Mr. Larsen. Thank you. That is fine.
Mr. Regan, can you discuss your thoughts why the
unemployment rate in March of this year for transportation
workers was still nearly 3 percent above the overall U.S.
unemployment rate? Is it specific to certain jobs or
professions? And what additional measures can be taken to
support those jobs or professions?
Mr. Regan. Sure. In transportation, you have to look at
individual sectors. I think broadly, there are different
causes, depending on the sector you are in. I think in some
cases, it is whether the demand has returned to get full
service back in Amtrak or in aviation. I know that in March
this year, Amtrak had begun to bring back all of its furloughed
employees but had not brought everybody back. So I would be
interested to see what they look like in a month or two once we
have sort of the full impact of all of the relief effort is
there.
Mr. Larsen. Any other thoughts, though, on additional
measures that can be taken?
Mr. Regan. Certainly, I think investing more in our
infrastructure system right now. I think the infrastructure
bill that has been placed before the House here is a really
good one. It would put into place a lot of the big investments
that we have been calling for for decades. We have been
underinvesting, and if we are able to do this now and put
historic levels of investment into Amtrak, into transit, into
roads and bridges, all of those things will help bring more
people back to work.
Mr. Larsen. All right. And, Chair, I just want to make a
final point, a bipartisan point, that as part of the American
Rescue Plan, although there was a partisan vote on it, there
was bipartisan legislation incorporated into it. The Aviation
Manufacturing Jobs Protection Act, cosponsored by me and by Mr.
Estes from Kansas, that program utilized $750 million that went
to 488 aviation companies, mainly smaller companies, to bring
back workers, to protect those workers' jobs, to ensure
continuation of the aviation supply chain in an industry that
was especially hit hard by the pandemic. And I just want to
note that, because there was a bipartisan effort to get that
bill incorporated into the American Rescue Plan. It is being
implemented right now. It is working. And I do want to end my
comments on that bipartisan note, because it does happen around
here, despite what we read.
With that, I yield back.
Ms. Williams of Georgia. Mr. LaMalfa is now recognized for
5 minutes.
Mr. LaMalfa. Thank you, Madam Chair. I appreciate the
opportunity in this hearing here.
Dr. Boskin, I am interested in some of your earlier
comments and answers to questions here on the whole broad
picture we are looking at with Federal Government spending. Of
course, we had three previous big COVID packages, part
defensible, part maybe not so defensible, more recently a
smaller package passed by Democrats without really any
significant Republican input, pushed through the process, but
it had a lot of additional spending in it, hundreds of billions
in additional spending that were really above what was needed.
So we look at this in context with inflation, and I am glad we
are having that conversation as well.
We--this stimulus bill--let's step back in time, too. You
talked about in your comments the 2009 ARRA bill that was
supposed to be a stimulus at the time, I think somewhere around
$800 billion. That was back when we weren't quite as
comfortable with throwing the word ``trillion'' in spending
around as we seem to be these days. Shovel-ready projects, can
you comment on the efficacy, the performance when Federal
Government stimulus dollars just fill up the trough like that,
going back to ARRA or more recently?
Would you comment on how well that performs and, basically,
bang for the buck for the taxpayer and what kind of inflation
is involved just when there is that much money in the trough
and everybody is trying to get their piece.
Mr. Boskin. Of course, the 2009, February 2009 ARRA passed
at a time when there was substantial unemployment. Unemployment
was rising rapidly. There was great uncertainty about how the
economy would recover from that.
So when these sorts of things happen, as you indicated in
your opening comments, sometimes you need to get something
started. It may not be perfect, but I think we can learn from
that a variety of things. Number one, that the ex-post
estimates by independent scholars suggests that it costs
several hundred thousand dollars per job saved or created.
Eventually President Obama came out and said, I guess to say,
their words, there is no such thing as a shovel-ready project.
So there may be a few here and there, but in general it
takes time to get infrastructure done. It takes--there is only
about 5 percent of infrastructure, a lot of those [inaudible].
Mr. LaMalfa. So, Doctor, you might say an immediate jolt on
jobs isn't really there because shovel-ready really doesn't
exist to any great extent.
Mr. Boskin. I think it cushioned the fall some. I think it
is fair to say that, but I think it had much less impact than
was being projected at the time the economic advisors were
predicting a so-called multiplier of 1.7 ex-post estimate
[inaudible] and seems to have been about one-third of that.
That is not----
Mr. LaMalfa. In California, sir--I am sorry. In California,
right in your backyard, the high-speed rail project was going
to blow right through Palo Alto there, and at the time in
California they were touting it as being 1 million jobs, and
soon finally we got out of it, it was 1 million job-years. A
comment on, is that kind of a poster child for the big promises
made by this type of--what do you want to call it--
infrastructure or in general, stimulus spending?
Mr. Boskin. Well, I think, as a general matter, spending
the money 6 years after the recession isn't going to cushion
job loss very much, so that was poor. I think the funds wound
up being spent hurriedly to do something that was unnecessary
and unwise given subsequent information, but they were spent
because otherwise the money would have had to have been
returned to the Federal Government under the terms.
So I think that is a particularly poor example. There are
many other projects that are certainly better than that.
I think it is worth pointing out that when you take a look
at this kind of thing, all the academic literature, from Ed
Gramlich, a Clinton Federal Reserve appointee, the CBO's
analysis of this, suggests that the highest return projects
tend to be repair and maintenance, and there is certainly that
that should be done. It is not a sexy--you don't have a ribbon
cutting----
Mr. LaMalfa. No, they aren't. They are very needed. How
about Cash for Clunkers? That was supposed to be a stimulus as
well for the auto industry and new cars. Do you remember that
one?
Mr. Boskin. Yes, I do. We evaluated that. It moved car
sales forward a few months and then they collapsed, so didn't
do very much, and the cost per ton of CO2 reduction was about
20 times what the European Union treaty was [inaudible].
Mr. LaMalfa. That is being discussed around here again. So
thank you, Dr. Boskin.
Ms. Williams of Georgia. Mrs. Napolitano is now recognized
for 5 minutes.
Mrs. Napolitano. Thank you, Madam Chair.
Mr. Regan, in Congress, I have introduced the Transit
Worker and Pedestrian Protection Act included in the INVEST in
America Act, and a version of which was included in the
infrastructure bill on the floor this week, which will require
the implementation of protective shields in buses and transit
vehicles to ensure the safety of drivers. If this bill had been
implemented prior to COVID, it could have protected public
health and spread of COVID by having barriers in place.
What are your thoughts on the Transit Worker and Pedestrian
Protection Act? How necessary and important is the bill for
protection of you and your colleagues? And also during the
outbreaks of violence against other transportation workers, how
does it work? What should Federal Government be doing to
protect all transportation workers?
Mr. Regan. Thank you so much for your question and for the
consistent support you have had for transportation workers on
safety.
Yes. I think passing the Transit Worker and Pedestrian
Protection Act would have had a significant impact on reducing
some of the assaults and some of the problems we have seen
since the pandemic started. One example here is that we aren't
collecting data adequately on the extent of the problem. This
bill would help us collect data on all the assaults, not just
the most violent ones, which is the case right now, which would
really allow us to better examine what the scope of the problem
is and where the improvements need to be made.
The other thing that it would do is basically look to
transform the workspace inside a bus to make sure that the
workers were better protected, they reduce--you know, to
improve the line-of-sight visibility, decrease the blind spots
and generally make it a safer system for people both inside and
outside the buses.
Mrs. Napolitano. Very good. But what about the shields? How
do they protect the workers? What has it done--like Los Angeles
has done it for our metropolitan workers, and they seem to have
a very good record of not having COVID transmitted.
Mr. Regan. Yes, I think shields are an important part of
that. There are various shields being used at transit agencies
across the country. Some of them have less of a benefit than
others. But if you have a reimagined workspace that actually
protects workers, I think that would be a really important part
for moving forward. And I know there has been a lot of people
out there designing these, and the Federal leadership is needed
here to make sure that they are implemented across the country.
Mrs. Napolitano. Would it be better to go to the
manufacturers and suggest that they implement them in the bus
sales?
Mr. Regan. I think a lot of it will be done it with the
manufacturers, but the agencies who are procuring buses are
also going to have to require certain specifications that are
there to protect workers. So, ultimately, the manufacturers are
going to be responding to the RFPs and responding to the asks
from the agencies, from their customers on these issues.
Mrs. Napolitano. Thank you very much, sir.
Mr. Ortiz, you state that FEMA all too often recaptures
disaster assistance funds on the pretext of small violations of
arcane procedural rules and regulations, the complexity of
which are exacerbated by policy inconsistencies across regions
and from year to year.
Would you explain a little more about that? And how can we
help resolve some of those issues?
Mr. Ortiz. Yes. I believe the main issue is, especially in
this pandemic, we have a national disaster that is impacting
everybody, and the effort is trying to allow the FEMA regions
to use all resources available to respond to the emergency. The
problem exists when we start having disparities from different
regions, and the application of the rules and laws that makes
it difficult for the whole country as a whole to be able to
recover in an effective and equitable manner.
Mrs. Napolitano. I see. Well, thank you very much, Madam
Chair, and I yield back.
Ms. Williams of Georgia. Mr. Fitzpatrick is now recognized
for 5 minutes.
Mr. Fitzpatrick. Thank you, Madam Chair. And thanks to
everyone on the panel for joining us here today.
My question is for Mr. Regan of TTD. Good morning, sir.
Please send my regards to President Samuelsen. We will be
keeping him in our thoughts today.
My question for you, sir, relates to the benefits of
transit relief that Congress provided. Transit agencies
received a significant amount of Federal aid. What would public
transit and all those that depend on it look like today if
Congress had not provided the amount of aid that we did?
Mr. Regan. Oh, and thank you and thank you for your kind
words about Mr. Samuelsen.
To be frank, transit would have been completely decimated.
There wouldn't be the workforce in place to support rising
demand. We would not have been able to--the rise in demand we
are seeing now, we would not have been able to sustain
operations during the pandemic, especially for those who relied
on it to make sure that they were getting to their jobs,
whether it be in healthcare or in food service or in grocery
stores. So, we would have been in a very, very difficult spot.
And, frankly, if we hadn't had the support in place from the
Federal Government, I think we would have been digging this out
for years to try to make sure that we would--to bring our
transit systems back to where they were before the pandemic.
Mr. Fitzpatrick. Second question. SEPTA, as you know in my
district, and other agencies have continued to invest in
electric buses and other types of new capital projects
throughout the pandemic. Are there any additional actions that
are needed to ensure that our transit workforce is ready for
the next generation of technology? This is certainly an area
that we know our society is moving to microchips and everything
pretty much, certainly in the area of transportation. So as we
proceed into this next generation of technology, like electric
buses, are there any additional actions that are needed by us
to ensure that our workforce, our transit workforce is ready
for the next gen?
Mr. Regan. Yes, there are. Frankly, we have been working--
and I say ``we''--TTD and our unions have been working with
leadership at T&I, as well as that of the Senate Banking
Committee to make sure that all of the funds that are attached
to, you know, the low-emission or EV vehicles will support
workforce development, the development for the next generation
of transit vehicles.
Historically we have invested next to nothing in the
transit workforce and in transit workforce training. So this
investment will upend that trend and make a huge impact so that
not only are we funding the physical infrastructure, but we are
making sure that the workforce is ready to operate it safely,
and make sure that our maintenance is up to speed as well.
Mr. Fitzpatrick. Thank you, Mr. Regan.
Madam Chair, I yield back.
Ms. Williams of Georgia. Mr. Johnson of Georgia is now
recognized for 5 minutes.
Mr. Johnson of Georgia. Thank you, Madam Chair, for holding
this hearing, and thank you to the witnesses for your time and
your testimony.
Since the start of this once-in-a-century pandemic,
Congress has acted decisively and passed legislative relief
totaling $5.9 trillion; but our work is far from done, and we
are obligated to ensure that relief aid arrived to the folks
who needed it most, especially Black Americans, communities of
color, and low-income groups who have, too often, been
dismissed by the Federal Government.
Mr. Skoutelas, public transit plays a uniquely important
role for communities of color. In 2017, APTA reported that more
than 60 percent of riders are minorities, such as Black
Americans and Hispanics, and during the pandemic, transit
provided a lifeline for essential workers, many of whom are
minorities, to get to and from their jobs, while also providing
critical assistance to minority-owned small businesses.
Can you discuss specific examples of how Federal assistance
enabled your member transit agencies to continue to serve
minority populations during the pandemic?
Mr. Skoutelas. Thank you, Congressman, for that question.
You are absolutely correct, the transit services through
the pandemic period were absolutely critical in two regards,
not only for transporting many of the minority population to
hold their essential jobs, as we talked earlier, jobs at
hospitals, at medical centers, those critical jobs at grocery
stores. These are the individuals that I often remark--and I
think it is so true--that are out there performing their jobs
as they had and continued to do through the pandemic so that
the rest of us who have the great fortune of being able to, at
least for a time period, work remotely, be able to conduct our
lives.
So those minority populations in every city and community
across the country have done just that in terms of supporting
the services that are delivered, and in terms of operating
those services, really bearing the risks of being on the front
lines and providing the services on behalf of the greater
population.
So transit services are absolutely essential, not only in
terms of the minority population who comprise a large
percentage of ridership, but also those who also deliver the
services to these needy areas throughout the country and in
many communities. So your comments are right on target, and
very much what we experience and what we know day to day in
talking to our member agencies across the country.
Mr. Johnson of Georgia. Thank you, Mr. Skoutelas.
This past summer, I introduced the Stronger Communities
Through Better Transit Act, which would create a new program to
provide high-quality, frequent public transit. How will Federal
funding help transit operators recover from the challenges
posed by the COVID-19 pandemic, such as decreased ridership and
revenues?
Mr. Skoutelas. Here again, the emergency relief that you
all, that Congress passed, was so fundamental to providing
continuity of services. The surveys that we have done very
recently of our membership suggests that almost half, if not
above half, of all agencies would have shut down their services
entirely, not only lost jobs for workers, but lost
opportunities to service their communities and to service the
people that rely on it. So it helped us through this period,
and it has been a period of survival for the agencies.
Going forward, what is being proposed in terms of the
Infrastructure Investment and Jobs Act is all about modernizing
our systems, investing capital dollars, not operating dollars,
capital dollars, to be able to improve these systems to allow
agencies to better serve communities of color, and communities
all across the country that really rely on public transit.
Mr. Johnson of Georgia. Thank you.
And, sir, what impact would parity in funding for transit
and highways have on our ability to mitigate climate change and
elevate historically marginalized communities?
Mr. Skoutelas. You know, we have had a pattern of robust
investment in highways over at least a half a century, perhaps
longer. On the public transit side, quite frankly, we have been
underinvested, as you heard from others, including my
colleague, Greg Regan, for many decades, and so we are trying
to make up the difference here. It won't be made up in one bill
or one act but needs to be followed over a course of a number
of years, and I would even say decades, to get the public
transit systems with the kind of resources that they can have
to provide true alternatives and true options to serve our
communities and people all across the country.
So we are in a deficit position relative to the investment
that is needed, and that is not coming just from the transit
association, that is coming from independent sources that have
confirmed that, and we need to make stronger, larger
investments in public transit in the long term to get even
close to what the investments we have made in the highway
system for well over a half a century.
Mr. Johnson of Georgia. Thank you.
And I yield back.
Ms. Williams of Georgia. Mr. Nehls his now recognized for 5
minutes.
Mr. Nehls. Madam Chairwoman, thank you.
And my first question is for Dr. Boskin. In your testimony,
you spoke of the diminishing benefit of additional stimulus at
this point in time of the pandemic, and across our entire
Government, we know that there are hundreds of billions of
pandemic relief money that is yet to be spent. At the U.S.
Department of Transportation, for example, the outlay rate for
relief money appropriated in the CARES Act, in supplemental,
the American Rescue Plan, it remains at 37 percent.
And as this body considers another $3.5 trillion in
economic stimulus, should the exorbitant amount of existing
unspent--unspent--stimulus raise any macroeconomic concerns?
Mr. Boskin. Well, I think the least risky thing would be to
spend that first or simultaneously with any additional funds
that are passed. I believe that they are at great risk in a
large additional short-run stimulus, risk of inflation,
substantial budgetary costs, risks of poor allocation of the
funds.
It is also worth pointing out, to pick up a point that
Wendy Edelberg mentioned in her opening statement that the
disposable personal income was $1.5 trillion proposed
[inaudible] vastly the amount of savings where they would have
[inaudible]--and appropriated to spend as it becomes available
by supply chain issues are resolved as safety is resolved, the
pandemic [inaudible]----
Mr. Nehls. Thank you. Thank you, Dr. Boskin.
The next question, Mr. Ortiz, in your written testimony it
says the city of Austin Homeland Security and Emergency
Management Office is one of several public agencies charged
with keeping our city and metropolitan area safe. And you work
with public and partner organizations to protect our whole
community when it needs us the most.
And I understand the Austin police force is down 150
officers since making the decision to defund the police. In my
graphic here, you will see there is a quote from an Austin City
Council member, quote, ``Our primary response to problems as a
local government is policing. Our community has come together
like never before and demanded that change and set a goalpost
of $100 million [reduction in the police budget] as a signal to
that change.''
Well, the city of Austin did it. They made that cut. But it
is actually more than $100 million. The Austin Police
Department lost one-third of its budget, $142 million. They
failed to fill 150 open jobs, and on top of that, they have
lost another 150 sworn officers.
The result has been catastrophic. We all know it. We see
it. Crime is spiking. Murders are up 71 percent over the last
year, and, sadly, it is the citizens that will suffer the most
because of this irresponsible policy.
So, Mr. Ortiz, has the dwindling police force in Austin
changed your role, or increased emergency management duties?
Mr. Ortiz. Thank you for this question.
We have a really good relationship working with all our
public safety agencies and departments in the city of Austin,
and my understanding is that a majority, if not all, of that
funding has already been restored to the Austin Police
Department. And we have a commitment to work with all agencies,
not only within the city, but within the county and our
surrounding regions, to make sure our response to future
disasters is the most effective and efficient as they can be.
Thank you.
Mr. Nehls. So as the director--let me get this right. So as
the director for homeland security for the city of Austin, you
would like to continue to see the size of your police force
reduced? Or would you like to see it go back to where it was
before this irresponsible council member and city council made
such an irresponsible decision?
Mr. Ortiz. Like I stated, my understanding is the majority
of that funding, if not all, has already been restored to the
police department through the budget process that they have
gone through. We are committed, and we work and we have an
excellent relationship with all our public safety agencies, and
they know that our commitment to the community and to our
region is there, and we will be there to ensure that all future
emergencies and disasters are coordinated and are as effective
and efficient as they can be.
Thank you.
Mr. Nehls. Well, thank you.
And you seem to be a very reasonable man, and I am sure
that you will do everything you can to make sure that you can
provide that safety and security to your residents.
And thank you for your time.
Ms. Williams of Georgia. Ms. Brownley is now recognized for
5 minutes.
Ms. Brownley. Thank you, Madam Chair.
Dr. Edelberg, thank you for your very comprehensive written
testimony. I appreciate it very, very much.
And on page 3 of that testimony, you have a graph that
really demonstrated sort of the vast regional differences in
COVID inpatient hospitalization rates that are going on now in
the United States, particularly in States like Florida and
Texas, and those States where the politicians are actively
working to prevent implementation of commonsense public health
measures.
So my question is, can you discuss the impact these
inpatient hospitalization rates are having on the economic
recovery of these areas?
Ms. Edelberg. Sure. We have strong evidence that the surge
in the pandemic from the Delta variant has depressed the
recovery across the board. One really obvious example is what
we recently saw in employment. After months of increases in
employment in the leisure and hospitality industry, in the last
employment report, we saw no net change. That sector added no
jobs, so it is still in significant deficit. People are, I
think, facing the surge in the pandemic, have pulled back on
face-to-face services, and that is exactly where we need to see
a strong recovery. So getting a robust recovery goes hand in
hand with getting the pandemic under control.
Ms. Brownley. Thank you for that.
And also in your testimony, you noted the rapid upswing in
demand for new automobiles. Is there any evidence to suggest
that the new automobile buyers are individuals who are leaving
transit due to concerns about COVID, or are these buyers
generally individuals wanting to replace older vehicles?
Ms. Edelberg. That is an excellent question, and I don't
know the answer, but I can say that the increase in spending on
automobiles has been part of a very strong spending on durables
overall. So I wouldn't want to separate it out. The households
in the midst of the pandemic significantly, and quite
unusually, pulled back on spending on services in a way that we
have never seen in a recession before, and part of what they
used--the savings that resulted, is to finance a surge in
durables across the board, and the spending on automobiles was
part of that.
Ms. Brownley. Thank you so much.
And, Mr. Skoutelas, the first thing that I just wanted to
say to you is to really thank you and your members for all the
work you have done for all of us to keep our Nation moving.
Your frontline transit workers put themselves and their
families at risk to help other frontline workers, like nurses
and grocery store workers, get to their jobs throughout the
pandemic, again, to help us. And I know it has been devastating
to have, you know, 500-plus of your members having died from
COVID.
You mentioned in your opening remarks that transit workers
are heroes, and I concur wholeheartedly and just really want to
thank you and all of your members, and please pass that along,
how grateful we are for their service during this pandemic. We
are extremely grateful, so thank you.
The question I wanted to really ask you too is, just
generally, if we were writing a bill tomorrow, what are the top
things that Congress needs to do to keep our Nation's transit
system functioning as the economy now is slowly recovering and
ridership is slowly rebounding?
Mr. Skoutelas. Well, thank you, Representative Brownley.
Let me say that I will pass that along for the excellent words
that you have shared with me, and let me tell you that the
industry really appreciates you and the House of
Representatives and Congress for the great support through this
emergency funding that has allowed the industry to stay afloat,
to keep operating.
First, let me just say that what is necessary is really
contained in the bill that is in front of you, the
Infrastructure Investment and Jobs Act, as was the case with
the INVEST in America Act, provides some larger funding for
public transit that is long overdue. Every accounting of
investment we have made as a country in public transit comes
down on the side to say that, that it has been underinvested.
The report that I often like to cite because it includes all
modes of transportation----
Ms. Williams of Georgia. The Member's time has expired.
Ms. Brownley. I apologize, sir. I asked a question with
little time left, so I apologize. And I yield back. And we can
speak offline.
Ms. Williams of Georgia. Mrs. Steel is now recognized for 5
minutes.
[Pause.]
Mr. Burchett is now recognized for 5 minutes.
Mr. Burchett. Thank you, Chairlady.
Mr. Skoutelas--did I say that name right?
Mr. Skoutelas. Yes, you did. Thank you.
Mr. Burchett. All right. Good. ``Burchett'' gets
slaughtered all the time, so I just want to make sure I get it
done right.
Do you believe that it is the role of the Federal
Government to fund local or regional transit programs?
Mr. Skoutelas. I do, sir.
Mr. Burchett. OK. What percentage should the Federal
Government be responsible for, and what percent should be paid
for by the State and locality or the rider fees? Because I know
when I was--younger years, I was in the State legislature, and
we had a study committee that basically said that about 40
percent was the funding level--I mean, excuse me, that they ran
at about 40 percent efficiency, which meant 60 percent was
either paid by State, Federal, local fees or funds and the
ridership. I am curious, is there a blanket--a magic number
that you all would be acceptable to?
Mr. Skoutelas. There isn't a magic number. It varies really
by size of agency and the financial structure of the agencies.
I would say that, on average, across the country, we are at
about a 35-percent level of rider fees, rider fares for transit
and the rest, some combination of other revenues, whether it be
State or local, and it really depends upon the financial
structure of the organization.
Let's keep in mind that the bulk of overriding dollars at
the Federal level go for capital investment for public transit,
and that is really what we are seeking in terms of the
Infrastructure Investment and Jobs Act is the capital
investment that is necessary to modernize our systems. And I
think that that is a very appropriate role for the Federal
Government. It has been a part of a 50-year partnership that
has allowed these systems to maintain and to grow,
notwithstanding the fact that we have talked here, and it is so
true, that it has been an underinvestment as well over that
period of time. But we are seeking and believe the industry
needs robust investment on the capital side, and that is where
we believe the emphasis should be.
Mr. Burchett. OK. Dr. Boskin--and I hope I got that name
right as well. Is that correct?
Mr. Boskin. Yes. Thank you.
Mr. Burchett. OK. Great.
The reconciliation package includes roughly $60 billion in
Federal infrastructure spending, most of which is duplicative.
Do you think the spending in this bill will result in even more
useless or lower term projects like California's high-speed
rail project?
Mr. Boskin. I think there is a substantial risk, getting
back to your previous question, if the matching ratio, let's
say, is 80:20 Federal, then local elected officials have an
incentive to push any projects, say, that has 30 percent--that
costs local people only 30 percent of the total cost. And so we
have people in Florida and Georgia and Texas and Colorado and
New York subsidizing people in California, and vice versa, when
there are projects in other places.
So getting good projects is very important, getting the
incentives right; 80:20 has been the historical--90:10 actually
for interstate highway--has been historical, but that doesn't
mean that that is carved in stone or it is sufficient in every
project would make sense for the [inaudible] to be funding it
in the future as opposed to [inaudible] local and State funds
for a larger percentage.
I think reexamining that is probably long overdue, and I am
sure there are plenty of good projects out there if this is
done carefully.
Mr. Burchett. Dr. Boskin, you talked about the importance
of national cost-benefit tests for infrastructure projects, and
I was wondering, could you speak a little more on that? And, as
well, what Congress should be doing--what we should be doing to
make sure that the Federal dollars are spent wisely on high-
return projects that provide maybe some long-term benefits to
society?
Mr. Boskin. Yes, sir. I think the important thing to focus
on are things that have prospectively, we are investing funds
with the hope that they will pay off, things that prospectively
have good returns, heavily repairs and maintenance, but in some
case, new capital spending that have interstate or national
significance, not projects, not voting a lot of projects to
purely local things where the overwhelming bulk of the benefits
are received by local riders without much national effect.
Now, that doesn't mean there is no local project that is
not a national or a multistate. For example, we have, at the
moment, massive congestion at the ports in California. You
know, investments that decongest those ports will get goods
[inaudible]----
Mr. Burchett. Thank you. And, Chairlady, I yield none of my
time because it has all run out. Thank you so much.
Ms. Williams of Georgia. Mr. Payne is now recognized for 5
minutes.
Mr. Payne. Thank you, Madam Chair.
This question is for Dr. Edelberg. You know, we are in a
pandemic right now of the unvaccinated. The only way to end the
pandemic is for more Americans to become fully vaccinated.
Beyond the health impacts of people not being vaccinated,
prolonging this pandemic continues to affect all sectors of the
economy. Amtrak, United Airlines, have already announced that
employees must be vaccinated or undergo regular testing. These
and other employer vaccination mandates have proven largely
successful. However, these requirements only apply to their
employees, not to passengers. Meanwhile, Canada recently
announced that all air travelers will have to show proof of a
COVID vaccine to board an airline, train, or cruise ship.
If more transit operators, such as railroads or airlines,
were to adopt vaccine requirements for passengers, would this
result in more Americans choosing to get the COVID vaccine?
Ms. Edelberg. Surely requirements to get vaccinated would
result in more Americans indeed becoming vaccinated. One way in
which we know that this is mattering is that if the people who
you are serving--whether it is in a retail store or as a
transit operator--if the people you are serving are not
vaccinated, it means you, regardless of your own vaccination
status, are at a greater risk by working around those people.
And I think that this is one of the reasons why we have seen a
frustrating slowness in matching workers with all of these job
openings. Our vaccine hesitancy is making it unsafe for people
to work in a lot of these in-person jobs.
Mr. Payne. Yes. Thank you.
Mr. Skoutelas, like my previous question, can you explain
the practical benefits of increased vaccination rates in
transportation operations across the country?
Mr. Skoutelas. Yes. Thank you, Congressman.
Well, first of all, I know that our transit organizations,
by and large, have really stressed to the workforce the need to
become vaccinated and have set up onsite vaccination sites,
transported people to those sites to greatly encourage that,
and it has been with mixed results. I think, overall, if you
look at the industry, it is probably a vaccination rate across
the board that hovers somewhere above 50 percent, but not
terribly higher than that, so there is a long way still to go
there.
Relative to users of the system, for transit, given that
these are open systems, subway systems, buses, it is very, very
difficult to be able to enforce that among riders. Certainly,
to the degree that people protect themselves through a
vaccination, through a mask, these are all positives in trying
to keep everybody safe, not only the rider, but also the
workforce.
But I would say we have got a long way yet to do in terms
of educating and encouraging people that this is really an
imperative for everyone's safety.
Mr. Payne. Thank you.
Mr. Regan, frontline workers, especially those working on
trains, planes, and other transit systems, put themselves in
harm's way every single day. During the pandemic, it has been
ongoing. How would a higher vaccination rate among the American
public better protect frontline workers?
Mr. Regan. Thank you for your question.
Certainly, a higher vaccination rate would reduce the risk
for everybody, whether you are working in the trains, planes,
or on the buses, or whether you are a passenger. I think
vaccination is a really important part of getting us through
this, and I hope that more and more people understand that as
we continue to bring back our economy, and as more people get
vaccinated, more of the world is going to open back up to all
of us.
Mr. Payne. Thank you.
And Madam Chair, I yield back 30 seconds.
Ms. Williams of Georgia. Mr. Perry is now recognized for 5
minutes.
Mr. Perry. Thank you much, Madam Chair.
Dr. Boskin, you stated that funding from the 2009 American
Recovery and Reinvestment Act increased local construction
payrolls by 30 cents on the dollar, but had no real effect on
employment, just higher procurement prices. As a result, the
Government paid 6.2 percent more on stimulus projects and left
about $335 million on the table. That is real money where I
come from.
How do you think we ensure that future infrastructure
investments are actually spent on more projects rather than
wasting taxpayer dollars on higher priced work?
Mr. Boskin. Well, from the studies I quoted, which are the
most detailed academic studies of these things by respected
nonpartisan academics, the basic story is if you throw a lot of
money in a very short period of time in an area that doesn't
have a substantial ability to expand production, with new
firms, or with a big expansion of workers--you can't make many
of the unemployed today into tower crane or giant excavator
operators overnight--then that is just going to bid up prices
and cost. So the thing is to space it out through this cost-
benefit analysis, make sure the sequence of projects
[inaudible]--of local market [inaudible] enough employees to
actually get the thing done quickly and on time. And, of
course, there are all the traditional issues in construction,
the potential cost overruns. That doesn't just plague the
public sector. It is probably worse there. And anybody who is
remodeling their house knows this goes up relative [inaudible].
So I think that careful [inaudible] a serious analysis by the
DOT, or whoever is overseeing this, to make sure that these are
individual projects that make sense and they are not all
[inaudible] at one period of time in one or a few places, that
they respect the fact that [inaudible] supply of workers and
firms [inaudible].
Mr. Perry. Hey, Dr. Boskin, if you can stay closer to your
mic, you kind of cut in and out and it truncates.
Mr. Boskin. Better?
Mr. Perry. Yes. I want to move on because you talked about,
I think with Mr. Burchett, inherently parochial projects
regarding modes of transportation that are politically popular
with some of my colleagues, but really have been largely
rejected by the American people in the marketplace. And
specifically, I am referring to the massive proposed increase
in spending on transit and Amtrak, despite the minuscule amount
of total passenger trips those modes represent and the
uncertainty surrounding future ridership levels.
In that vein, what is the long-term economic consequence of
misallocating significant amounts of Federal resources to said
parochial projects based on political calculations rather than
on actual demonstrated demand?
Mr. Boskin. Well, that could be serious misallocation of
resources, funds would be wasted, costs could be driven up. You
miss the opportunity to do other projects that are higher
return or spend the money on other high-priority public and
private needs.
Mr. Perry. And if I might ask, what do you think the risks
are for providing a one-time infusion of stimulus, as we are
kind of staring down the barrel of right now in many places,
funding for capital projects and system expansion, especially
regarding transit to places like Amtrak or transit agencies
that really can't even maintain their current systems?
Mr. Boskin. I think there is a balancing act between
dealing with agencies and the sectors of the economy that were
particularly hard hit, that were heavily disrupted, where we
had to provide a safety net to keep them from total collapse
and potentially wasting money or assuming that they are all
going to come back to exactly where they were before and then
grow happily thereafter. I think you have to do a detailed
analysis. And certainly, patterns will shift. For example, in
California, work from home has become a hybrid situation, so
people going to the office 1 or 2 days a week have become much
more common, and many of the technology firms are making that
permanent, not just temporary.
So I think when you look at what the demand is going to be,
you have to do that seriously and not just based on fanciful
numbers.
Mr. Perry. Hey, just one last question in the remaining
time. Do you think that the bipartisan infrastructure bill that
we are potentially voting on today or the proposed
reconciliation package make the reforms necessary to ensure
Federal infrastructure investments actually produce a return to
the taxpayer? I mean, based on what you read about it or heard
about it?
Mr. Boskin. Well, from what I have been able to tell, there
aren't many reforms in them, and there are some requirements
that are in there that might drive [inaudible] costs. We can
argue [inaudible] that substantially more will remain to be
done if this is passed as currently.
Mr. Perry. Thank you.
Ms. Williams of Georgia. Mr. Lowenthal is now recognized
for 5 minutes.
Mr. Lowenthal. Thank you, Madam Chair.
I live in the city of Long Beach, and I represent the Port
of Long Beach, which is the second largest container port in
terms of volume in the United States. It is immediately
adjacent to the Port of L.A., which is the largest container
port in terms of volume in the United States. And these two
ports, taken together, are among the largest in the world.
I would like to preface my statement by saying, the Ports
of L.A. and Long Beach are highly efficient. Both the
workforce, the ILWU, the terminals, and the terminal operators
strive to increase their proficiency and their productivity.
Not saying that there is not more to be done, there is.
Yet, as I walk down from my house down to the port, or just
down to the ocean and look out, as far as I can see, I see
containerships sitting out, waiting to come into the port,
carrying goods for the rest of the Nation.
So Dr. Edelberg, in your testimony, your written testimony,
you mentioned how destruction of the supply chain and
bottlenecks--and what I am talking about is a major
bottleneck--as one of the key drivers of temporary increases in
the price of many consumer goods. This point is a very critical
point, so I want to spend a little time focusing on it.
I am sure that many of these disruptions in the supply
chain, going from the Port of Long Beach to wherever the goods
will ultimately end up, are simply due to the pandemic, which
you have pointed out, shifted consumption patterns.
But it seems to me that a more resilient freight
infrastructure system could have responded far more effectively
to these bottlenecks.
We can make infrastructure investments to strengthen these
supply chains, and I think that the President, in both the
reconciliation package and in the infrastructure bill, can help
accomplish this goal.
I also believe that the appointment of John Porcari as the
Port Envoy to the Biden administration Supply Chain Disruptions
Task Force shows that the administration is taking this
question seriously.
I would like you, Dr. Edelberg, to elaborate on how the
Federal Government can more effectively coordinate and
strengthen these supply chains.
Ms. Edelberg. You are absolutely right that we have seen
massive disruptions in supply chains, and particularly
disruptions in the movement of containerships around the globe.
And the underinvestment in ports in the United States has
exacerbated that, but this is actually a circumstance where we
can see disruptions in the movement of containerships globally
having an effect on boosting inflation globally.
And this is one--if I may, this is one place where we just
have very clear evidence that the inflationary pressures that
we are seeing are temporary COVID-related, and it is misguided
to think that the inflation effects that we are seeing now, the
inflation pressures that we are seeing now, are largely the
result of too much fiscal support.
We are seeing these sorts of supply disruptions around the
globe, partly from these disruptions in the movement of
containerships, boosting food and food inflation in particular,
around the globe, suggesting that when this resolves, inflation
will come down.
Mr. Lowenthal. Thank you. I want to add--and I agree with
you in terms of that global disruption. I want to add one more
point for you to address. We are also seeing a lack of actual
empty containers to fill. It is not just the ports themselves,
it is the containers that are not available.
We are seeing that the distribution centers, where the
goods go, they cannot accept any more goods. They are piling
up. We can see the lack of trains that are coming in. We can
see problems with demurrage and detention and trucks. So we see
this as a systemic problem. Can you comment on that?
Ms. Edelberg. The developments that our economy and the
global economy has had to absorb over the past 18 months are
completely unprecedented. So you mentioned the huge spike in
demand of durable goods and how that has affected supply chains
all over the globe.
We did not have nearly a resilient enough supply chain to
absorb the crazy movements in demand that we have seen over the
last 18 months.
Mr. Lowenthal. Thank you. And I yield back and thank you
for explaining this kind of global problem that is going on.
Ms. Williams of Georgia. Mr. Westerman is now recognized
for 5 minutes.
Mr. Westerman. Thank you, Madam Chair, and thank you to the
witnesses today. I had another meeting that I was leading that
started at the same time as this one, so I missed out on the
early discussion today.
But you know, I found it ironic that we are having a
meeting, the title of it, ``Assessing the Federal Government's
COVID-19 Relief and Response Efforts and Its Impact--Part 2,''
very long title, impressive-sounding title, but I would have to
ask the question, does it even matter what we do in this
committee, as today we are considering what I believe to be--or
we are supposed to consider--we were supposed to consider
earlier this week, the largest infrastructure package, from
what I can tell, in the history of mankind, a $1.2 trillion
infrastructure package. And never in a million years would I
have guessed that there would be the largest infrastructure
package in history on the House floor for a vote that did not
come through this committee, that this committee has not had
one chance to weigh in on that infrastructure bill.
You know, even if you look at the New Deal, that was a $42
billion program, which in 2009, that inflation-adjusted amount
was still less than $700 billion, which was less than the big
infrastructure program back then.
But I find it rich that we are having a hearing on
infrastructure when we actually apparently don't have any say
in infrastructure in the House Transportation and
Infrastructure Committee.
I would just like to ask the panelists if they think it is
more beneficial or less beneficial if on a massive
infrastructure package, if we actually go through the committee
process and pass a House bill, and then go to conference.
Do you think that is a wiser use of American taxpayer
dollars, or should we just allow the Senate to write every
infrastructure bill, and maybe even disband this committee,
since it apparently has no impact or influence in the process?
I will open that up to anybody that wants to answer it.
Mr. Boskin. Well, I will go first. When I was chairman of
the Council of Economic Advisers for President George H.W.
Bush, I worked closely with this committee, its analog in the
Senate, particularly Senator Moynihan, how it eventually became
ISTEA. Was it perfect? No. But we made some improvements, and I
think relying on the expertise that people accumulate in the
committees is potentially very valuable input.
And for my own viewpoint as a citizen, I would love to see
the Congress return to more regular order [inaudible] rather
than these giant omnibus things being negotiated by the
leadership with little input [inaudible]. I think it would be,
on balance, despite all the problems and eventual delays that
might occur, I think on balance that would be an improvement
most of the time.
Mr. Westerman. I thank you, Dr. Boskin. I would agree with
that as well.
Would any of the other witnesses like to talk about the
importance of the congressional process in approving massive
infrastructure packages and how the American taxpayer dollars
can be used most wisely and effectively?
Mr. Regan. Sure. I don't think I am in a position to be
able to speak about congressional process. I think those are
decisions that are made by the elected leaders and those in the
various House and the Senate.
Certainly, as someone who worked in the House of
Representatives, I believe in the institution, I believe in the
committee process as well.
However, what I can comment on fully is that we support
this bipartisan infrastructure bill, we think it needs to be
passed. You have the types of investments that we have been
calling for for decades, in transit, in Amtrak, in roads and
bridges, that need to be done that are long overdue, and I
think this is a good product that needs to be seriously
considered by everyone on both sides of the aisle.
Mr. Westerman. So if it is a good product, do you think it
is good enough that it would withstand the rigors of going
through the committee process in the House?
Mr. Regan. I believe the entire House has an opportunity to
make that decision on their own right now.
Mr. Westerman. We have no opportunity to offer amendments
or to debate it. It sounds like we are going to have an
opportunity to possibly vote on it, which personally, I think,
is a bad move for our country. I think it is a bad process.
And what I would call on is all Members of the House to
finally stand up to the Senate and say, we are not going to
pass this bill just like you sent it over, to reject it when it
comes to the floor, and bring it to the committee, because we
are all interested in infrastructure.
And let's show that this committee actually does matter,
and the House actually does matter, and that we do care about
infrastructure, and that we have something to offer.
And with that, I yield back, Madam Chair.
Ms. Williams of Georgia. Mr. Carbajal is now recognized for
5 minutes.
Mr. Carbajal. Thank you, Madam Chair.
Dr. Edelberg, recently we have been hearing a lot about our
national debt, but surprisingly, to me, it seems that it wasn't
much of an issue of concern during the past 4 years during the
previous administration's spending. There seems to be selective
concern and situational about when we are concerned about the
growing national debt.
To his credit, Dr. Boskin has acknowledged that, quote,
``under President Donald Trump, Federal deficits and debt
remained massive by prosperous peacetime standards,'' unquote.
As we know, before the COVID-19 pandemic, President Trump
signed tax cuts into law that grew the national debt by
trillions, while largely benefiting the wealthiest in our
country.
From an economic perspective, can you discuss how good a
return on investment we got on those tax cuts? Would we be
better off and get a better return on that investment if we
repealed some of those massive tax cuts to the wealthy to pay
for the needed investments in infrastructure, lift children out
of poverty, and help most working middle-class families get
their fair share?
Ms. Edelberg. So there is a lot there. Let me take it in a
few different points. So, first let me say, with regards to the
current state of Federal debt and the trajectory of Federal
debt, one of the places where we had the clearest signal of
whether or not we have an urgent problem to solve is financial
markets.
Financial markets appear to be entirely unperturbed by the
level of Federal debt. Interest rates are at remarkable lows,
and expectations for interest rates going forward look like
they are going to rise to more normal levels but not to levels
that should create concern.
So, we should think of our Federal debt problem as a very
long-term problem that we need to address. These are long-term
factors that will eventually create unsustainable upward
pressure on our Federal debt, but this is not a problem that we
need to urgently face today. And for that, we need to look no
further than financial markets.
When it comes to the economic effects of the 2017 Tax Act,
so CBO estimated at the time that it would have a modestly
positive effect on the economy. That was largely because of
stimulative effects because it sent money back to households
that CBO estimated would, in turn, spend the money.
The actual positive effects on incentives to invest were
only a portion of that positive estimated effect that CBO wrote
about. And indeed, it looks like that is basically what we have
seen for the last few years, a muted but positive effect on
investment as a result of the 2017 Tax Act.
So undoing a portion of the changes made in the 2017 Tax
Act would have just the opposite effect. It would have a muted
but negative effect on the incentives to invest.
But of course, the big question is, what do we do with that
money? And if, in turn, we choose to take that money and invest
it in children, invest it in infrastructure, invest it in the
long-term resiliency of our economy, that is a choice that we
can make as a society, and I think it makes us stronger.
Mr. Carbajal. Thank you so much.
Mr. Ortiz, FEMA has played an important role in making
COVID-19 vaccines widely available. It provided more than $4.75
billion in support of vaccination efforts in communities across
the country and worked with State and local partners to
establish more than 1,700 vaccination centers.
Can you discuss briefly, from your perspective, what went
right, and what are some of the lessons learned to ensure we
respond better and quicker and more effectively in the future?
Mr. Ortiz. Thank you. That is a really good question. I
think what we can say, that this was something that was a very
large, major effort, brought our country to engagement in this
past year.
Probably the biggest thing that was very helpful was how it
was easier for our communities to get an expedited application
process to establish vaccinations that facilitated funding
upfront.
Our communities across the country are spending money in
response to this pandemic, and it creates a situation that is
difficult to be able to sustain these disasters.
So I think that would probably be the best thing is the
expedited application process that FEMA put in place.
Mr. Carbajal. Thank you.
Madam Chair, I yield back. I am out of time.
Ms. Williams of Georgia. Mr. Balderson is now recognized
for 5 minutes.
Mr. Balderson. Thank you, Madam Chair.
My first question--I want to thank all of you for being
here--my first question is for Professor Boskin. Professor, in
your testimony you note the long-term economic effects of a new
Federal infrastructure program will not just depend on the
level of spending, but also on the quality of the projects
funded and their financing methods.
Can you expand on this thought and provide any ideas on how
we can assure that projects are fairly financed, will have
positive, long-term returns, and benefit our constituents?
Mr. Boskin. Well, as I said in my testimony, sir, I think
the most important thing is to apply rigorous--as CBO has also
said the same thing--rigorous national cost-benefit tests so
there is a legitimate national purpose where benefits are
accruing to citizens and the population broadly, not just in
the local area where you wind up getting a bunch of projects,
that if the rest of the country pays for it, we are glad to do.
And then we wind up with massive fiscal cross-hauling where
people in California are subsidizing other States, and systems
in other States are subsidizing California, and it creates the
incentive to have some low national return projects because
they look good locally because other people are paying a large
part of the costs. So that would be point number 1.
Point number 2 is, we traditionally have funded a larger
and larger share of these with user fees and gasoline taxes and
more recently, the idea of a vehicle-miles traveled tax to
account for the fact that we are growing the electric fleet--
which obviously doesn't pay gasoline taxes--would line up the
benefits received and the payments made so there would be very
little distortion to the economy.
And people--the local officials and you in general, this
committee, and your colleagues in the House and Senate, would
have to respond to people feeling like they weren't getting
their money's worth for what was going on. So I think those are
some of the most important things.
I think whatever the amount spent is going to be
[inaudible] probably be the single most important overarching
thing to do. It is not easy. [inaudible] examples of things
going wrong. But [inaudible] on balance U.S. rates about 5
percent [inaudible].
Mr. Balderson. OK. Unfortunately, we were having some
technical difficulties there, Professor. I will do a followup.
I didn't hear the last part of your answer.
But would you agree that the current Federal permitting and
environmental review process, which can delay projects by over
a decade, are a poor use of Federal and State resources?
Mr. Boskin. Absolutely. I think streamlining that process
would be one of the single best things we could do to reduce
costs, target efficiency, make sure we find what we actually
spend money on is actually relevant at the time, rather than
decades' old demand.
And we are much worse than most of the rest of the world in
this regard.
Mr. Balderson. Thank you. Professor Boskin, in your
testimony, you also mentioned your concerns that inflation
risks are rising, a trend that more deficit finance spending
will only accelerate.
Can you give us a general overview of what a $3.5 trillion
Federal spending bill, which would likely add trillions of
dollars to the debt, could mean to inflation and our economy?
Mr. Boskin. Well, of course it is going to depend on the
particulars and especially the timeframe at which it is
introduced and what else is done. But if we add this
substantial amount in the short run, when we have this
inflation, we risk [inaudible] more of an inflation expectation
which can become a self-fulfilling prophecy as we have seen in
our history.
I would add that while I generally agree with the comments
that Wendy made, I do want to emphasize that financial markets
have often been badly wrong. They never got to expect the
inflation of the 1970s, they badly misunderstood the
disinflation of the 1980s, and as recently as when the Federal
Reserve lowered its target interest rate to zero in response to
the Great Recession and financial crisis in December of 2008,
financial markets expected it to stay there at 9 months. It
stayed there for 7 years.
So while I think there is little indication in financial
markets that there is a big concern now, that could change
quickly, and we ought to keep that risk in mind. It is not the
only thing we should keep in mind. We should keep that risk in
mind as well.
Mr. Balderson. Thank you, Professor.
Madam Chairwoman, I yield back my remaining time.
Ms. Williams of Georgia. Mr. Stanton is now recognized for
5 minutes.
Mr. Stanton. Thank you, Madam Chair.
My first question is for Mr. Ortiz. Early on in the
pandemic, there were many reports of State and local emergency
managers alleging that their orders for emergency supplies were
getting redirected and not getting to the correct recipients.
GAO found this in their audit work as well.
They reported that States sometimes had trouble confirming
that the supplies provided by FEMA were shipped to the right
entities, like hospitals and nursing homes, and that the
supplies were the right ones and in usable condition.
I want to get your thoughts on that. Why do you think FEMA
initially responded in such a poor manner overall? What was
your own experience in getting supplies from FEMA? Any ideas
that you have for positive changes that could be made to
improve FEMA's response time to communities in need in the
future?
Mr. Ortiz. Yes, thank you. That is a really good question.
Let me start with what I think is the biggest thing we can do
as a country in order to improve our capabilities.
When we are dealing with the supply chain management, the
issue is, we can't wait. The need is here, is present at this
point in time. And we need to be able to access local resources
and supplies that are available to our local region. So the
support of the establishment of local stockpiles, local staging
areas, connecting more quickly and faster response to the
emergencies, especially in a pandemic, is critical.
That can allow us to create a bridge to allow for the
supply chain management to catch up, and to allow all these
other issues that we are discussing in this committee, to allow
for the additional supplies that may be sourced from different
locations to really catch up and be able to build that proper
response.
That was the biggest challenge that we had. It created a
situation where communities were having to basically compete
with each other. And as the example that I presented earlier,
you end up where you are not only competing with other
communities, you are competing with your own State or with
other States and, even to a certain point, with the Federal
Government.
And that ends up resulting in a more expensive response
because of price increases that at the end of the day is going
to be a higher cost to the taxpayers.
Mr. Stanton. Thank you very much.
This next question is for Mr. Skoutelas. We know that
public ridership fell during the height of the pandemic. Too
many people were unemployed or working from home, shelter-in-
place orders, et cetera. And so, I just want to get your take
on this balancing act now.
How are transit operators balancing fiscal constraints with
the need to ramp up service to match passenger demand, and how
does it vary from transit agency to transit agency?
Mr. Skoutelas. Yeah, thank you very much for that question.
It really is right on the mark relative to the challenge that
these agencies are facing.
On the one hand, the communities, by and large, are
expecting them to provide the level of service that they have
been accustomed to, so that there is the pressure to really
ramp up that service.
On the other hand, just matching the demand that is there
is the other part of the equation. And overlaid on top of that,
of course, is the national workforce shortage issue that
everyone is facing and every industry, and certainly it is in
the transit industry as well.
I mentioned earlier in my remarks that transit now has
recovered with ridership about 63 percent of what it was pre-
pandemic. So we have seen a steady, kind of gradual increase in
that.
We would expect that to continue, and our agencies now
really are looking to modify their services--many have already
done that--providing services where they know the demand is
greater, trying to be as efficient as they can be. And I would
expect that is going to continue over the next 18 months or
more as they get back to some degree of normality.
Our forecast is that we are going to see by the surveys
that we have done, that across the board, we will have achieved
as an industry, about an 80-percent recovery level in terms of
ridership by the end of next year.
Mr. Stanton. That is great. My next question was going to
be about changes in commuter patterns, but you addressed that
in your answer. I appreciate it very much.
Madam Chair, I yield back.
Ms. Williams of Georgia. Mrs. Steel is now recognized for 5
minutes.
Mrs. Steel. Thank you, Chairman DeFazio and Ranking Member
Graves, for hosting this hearing, and I want to thank the
witnesses for participating.
The COVID-19 pandemic has greatly impacted all of us and
our local communities. Transportation and infrastructure
projects faced sharp drops in economic growth and employment.
Supply chain disruptions have increased, leading to further
delays on important projects.
It is important we continue to support policies that help
economic recovery, while also ensuring that our national debt
does not continue to soar, leaving future generations to pay
high taxes and bankrupting many important Federal programs in
the next few years.
Inflation fueled by excess Government spending continues to
hit my constituents at the gas pump and at the grocery stores.
In Europe, for example, inflation has almost gone up 1 percent
in just a single month. I bring this up as Secretary Buttigieg
has previously claimed that the ``American dream'' is now in
Denmark.
Meanwhile, there is growing concerns on this committee
regarding the administration's spending proposals and the
effects they will have on our constituents.
Some have argued that deficits don't really matter and we
should continue to build up debt. Having said that, I have
questions for Dr. Boskin.
Dr. Boskin, as we try to adequately respond to the COVID-19
crisis, what will happen to the transportation and
infrastructure industry should we continue to go down a
continued path of accelerating deficit spending? Historically,
what has this strategy shown us?
Mr. Boskin. Historically, it often has led to problems down
the road. Sometimes these wind up in an abrupt financial
crisis. More generally, I think, the bigger risk is that it
will slow growth over time, particularly when you add not only
the high level of the debt anticipating adding to it now, but
the additional debt that is going to become--that is
represented by the unfunded liabilities of Social Security and
Medicare that are coming due.
So we are going to be--we are going to have a big fiscal
year challenge in dealing with those in the coming decade,
quite aside from adding this on. So I think it adds to the risk
considerably.
Mrs. Steel. Thank you, Dr. Boskin. I have another question.
I appreciate you using the California high-speed rail
boondoggle as an example of a project that lacks support and
has tripled in cost estimate. I introduced the Stop the High-
Speed Money Pit Act to prevent more Federal funding to this
waste of taxpayer dollars.
With proposals from the administration and numerous
transportation bills introduced on Capitol Hill to spend even
more taxpayer dollars, do you believe there is a lack of fiscal
responsibility on some of these initiatives, and if so, how
will this affect the taxpayers?
Mr. Boskin. Well, if there are poor returns, taxpayers will
be getting a very bad deal and our citizens will be getting a
very bad deal. With California high-speed rail, I fully
support--I don't know the details of your bill, ma'am, but I
think that you are on the right track, that perhaps the single
best thing with respect to this that this committee could
insist on is no additional funding for California high-speed
rail, and let it evaporate as it should.
That would be good for California, good for the rest of the
country, and actually probably the single best thing they could
do for the legacies of Governor Newsom and Governor Brown,
would be to kill the project.
Mrs. Steel. Thank you, Doctor. I have one last question.
The transportation bill is important for all of us that are in
infrastructure jobs and trade. In this important sector and to
rebound from the pandemic, what areas of transportation do you
think the committee should focus on in this Congress?
Mr. Boskin. Is that addressed to me?
Mrs. Steel. Yes.
Mr. Boskin. I think you should start with primary focus on
traditional infrastructure and doing that well. Build-outs of
these other areas that sound good, but have--we don't have
experience in pouring a lot of money in and getting good
returns.
Whether that is early this or education that, et cetera, I
think those are fairly risky, and I would suggest for those who
support these things, let's do some pilot projects first and
see how they pan out. If they work, [inaudible].
Mrs. Steel. Thank you very much, Dr. Boskin, and that is
what I wanted to hear, and I yield back.
Ms. Williams of Georgia. Mr. Garcia is now recognized for 5
minutes.
Mr. Garcia of Illinois. Thank you, Madam Chair, and thank
Chair DeFazio for holding this hearing.
As a former union member and someone who represents a
predominantly working-class district in Chicago, I have fought
throughout the pandemic for the workers impacted by COVID-19,
both from a health and economic perspective.
Millions of working Americans lost their jobs while many
frontline workers, like transit workers, had to go through the
pandemic, and some sadly died from COVID. The pandemic has had
a disproportionate effect on working men and women, especially
Black and Brown communities, and we must keep in mind as
Congress continues to respond to the pandemic. I thank the
witnesses for appearing today.
Mr. Regan, you highlight in your testimony the lack of
action by the Trump administration to protect workers from
COVID-19 unfortunately cost some workers their lives.
Thankfully, the Biden administration has implemented some
commonsense policies, like a Federal mask mandate and increased
access to vaccines.
While we continue to do everything to protect workers, what
additional policies should Congress consider or the Biden
administration should implement that can make sure that
transportation workers are protected from COVID-19?
Mr. Regan. Thank you, Congressman, for your question. One
thing we have discussed a little bit already today is the
Transit Worker and Pedestrian Protection Act. That one would
really help especially busdrivers inside their workspaces, to
help protect them from COVID-19, especially if they are
designed correctly.
I think continuing to have this mask mandate in place
throughout all modes of transportation would be a really
welcome development. I know the President does not seem to want
to lift that anytime soon, but that is proving to be well-
received, and, I think, protective for people.
But what we also need frankly is to make sure that there is
support of the employees so they are not being the mask police.
I think at airports you have a situation that is set up in
order to make sure that there is an existing law enforcement
present, so that it is not going to be entirely on gate agents
or flight attendants. But even there we are seeing problems.
So whether it has been the increased fines you see onboard
aircraft, whether that type of situation needs to be applied in
other areas of transportation, I think these are things that
the administration and Congress needs to look at.
Mr. Garcia of Illinois. Mr. Regan, so it took a while for
Congress to implement protections against Amtrak furloughing--
and you underscored it in your testimony--its workers in
assistance to Congress provided for Amtrak.
This follows many worker issues we have dealt with over the
years on Amtrak, including call center closures and the end of
dining car service.
As we look at the future, what additional protections does
Congress need to consider to make sure that workers at Amtrak
are protected?
Mr. Regan. Yes, thank you for that. The way that increasing
the aid that went to Amtrak--yeah, the labor protections got
better and better. Whether it be a commitment that they need to
bring back furloughed employees and then ultimately they
required them to return furloughed employees and retain
services.
Certainly, we should have limitations to the amount of
outsourcing that Amtrak can do for their existing services.
Right now, that seems to be the way they deal with a problem
they don't know how to solve, is to outsource that work to
somebody else, where it usually is nonunion labor, and the
wages and benefits are dramatically slashed when they do that.
So we should constantly be looking at ways to build up Amtrak
and its workforce at the same time.
Mr. Garcia of Illinois. Thank you.
And for Ms. Edelberg, you mentioned in your testimony that
you see no compelling reason for the cancellation of
unemployment insurance benefits. Can you expand on why ending
unemployment benefits early causes financial hardship for so
many people?
Ms. Edelberg. It always is an unforced error when Congress
puts calendar date cutoffs into legislation when providing
fiscal support. So whether it is--excuse me--households or
businesses, and even worse, abruptly canceling benefits, so it
would have been far better to tie those benefits, the expansion
and extension of unemployment insurance benefits, to the state
of the labor market, and in particular, the state of local
labor markets.
That is a concern now as we see the Delta variant can surge
through communities and put in peril the labor market recovery.
So yes, it gives me concern that now about 5\1/2\ million
unemployed people who are actively looking for work no longer
have any access to unemployment insurance benefits.
Mr. Garcia of Illinois. Thank you very much, Madam Chair. I
yield back.
Ms. Williams of Georgia. Miss Gonzalez-Colon is now
recognized for 5 minutes.
Miss Gonzalez-Colon. Thank you, Madam Chair.
My question will be, the first one, to Mr. Skoutelas, and
this is a question that actually I have related to because of
the situation with FEMA on the island and the money that has
been approved and the money that is unused yet.
You said in your testimony that $69.5 billion in funding
was provided by Congress for transit during the COVID pandemic.
However, at this time, only 56 percent has been spent, which
means almost $39 billion. Do you think the rest of the funding
is going to be needed or not?
Mr. Skoutelas. Yes, thank you, Congresswoman, for that
question. Based on the economic forecast that we had conducted,
that was conducted on our behalf for the industry, we had
forecast that those resources would be needed to carry the
industry through calendar year 2023, so taking us really to
January of 2024.
So a good percentage, as you mentioned, of these resources,
have already been obligated--almost all of the CARES Act, half
of the CRRSAA Act, and more than one-quarter of the most
recent, the American Rescue Plan.
And our agencies, the industry, is really parceling out
those dollars so that they can continue to operate services
while ridership comes back. And, again, our forecasts, while
they are subject certainly to change because of evolving
conditions, it does appear that they are going to need those
resources to carry them through being able to come back in some
kind of a normal fashion roughly at the end of 2023.
Miss Gonzalez-Colon. Given that money that has already been
obligated, do you think that the transit agencies may need the
additional $10 billion from the Build Back Better, given that
there is still a lot of funding that is unspent from the
supplementals of COVID?
Mr. Skoutelas. Yeah, thank you for that question, because
really those dollars are intended for different purposes. The
three tranches of emergency funding were for operations--to
sustain and stabilize operations.
The $10 billion in the Build Back Better Act really is the
shortfall that we saw in the bipartisan agreement for
infrastructure, originally proposing a $49 billion increase for
transit, which was reduced to $39 billion. So we see that $10
billion as really making up for that shortfall, which would all
go to capital dollars, as we understand it, to support transit
access to affordable housing.
Miss Gonzalez-Colon. Thank you. I would love to make a
question to Mr. Ortiz, and this is something regarding the
emergency management about FEMA. You said in your testimony
that FEMA recaptures disaster funds based on some violations of
procedural rules, or even other principles.
Do you mind providing exact examples of what you are
talking about? Because we are facing some of--kind of this down
in Puerto Rico as well. Although FEMA has been engaging with
the stakeholders to manage it. So I would love to know, what
specific situations are you referring to?
Mr. Ortiz. Yes. And I can give you a little bit more
specific situations, but as a whole, we agree that FEMA has
that ability that was passed to them under the 2018 act, the
ability for them to recoup those funds. But the way they are
doing it in certain situations, it creates a confrontational
relationship, where instead of focusing on the adequate
response to ensure that the programs necessary to ensure that
the need resulting from the disaster gets addressed, creates a
confrontational relationship where it may hinder or slow down
the response efforts by a local community, because they are
afraid to engage because of fear of overextending themselves
and not be able to be reimbursed because FEMA may ask for those
funds in return.
I think what we want to be able to do is create an
environment where it is a team effort, both at the Federal,
State, and local level, in order to ensure that decisions are
made early and upfront, and make sure that we are transparent
in the process to prevent situations where there may be
misunderstandings or abuse of funds that are being utilized in
response. And also, at the same time, expedite the response as
fast as we possibly can.
We are all working together. We all are working towards the
same common goal. But in certain situations, FEMA, they put
themselves in a situation where they are more of an enforcement
side versus from a partnership side.
Miss Gonzalez-Colon. Thank you.
I yield back, Madam Chair.
Ms. Williams of Georgia. Mr. Carter is now recognized for 5
minutes.
Mr. Carter of Louisiana. Madam Chair, thank you for the
opportunity. My question is for Dr. Edelberg.
The New York Times reported this summer that States were
working to cut off Federal pandemic unemployment benefits for
their residents, saying that the unemployment benefits are
discouraging people from looking for work at a time when small
businesses are having difficulty hiring workers.
In my estimation, Dr. Edelberg, that has been quite the
contrary, that people--the notion that unemployment benefits
are so high that people don't want to work, I think is a
ridiculous thought, particularly when juxtaposed with the
option that a person has to work for $7.25 an hour, a meager,
meager minimum wage.
Instead of looking at questioning if unemployment is too
high, perhaps we should really focus on the fact that minimum
wage is way too low. Thoughts?
Ms. Edelberg. Let me say a couple of things. So first we
now have a lot of preliminary evidence that economists have
gathered about what the effect on employment gains has been
from abruptly cutting off these benefits across the country,
and the evidence is even more compelling because we have this
natural experiment of the benefits being cut off in different
States in different times.
The punch line is that so far we have no compelling
evidence that cutting off the benefits changed aggregate
trajectories of what we are seeing in employment gains in any
of these localities. And so, that is the first fact.
The other is that we obviously know that the increases in
labor supply have fallen short of the increases in labor
demand. Job openings are at record high rates, but at the same
time, we are seeing quits with record high rates, and we are
still seeing that firms are laying off workers.
This is all to say, there is a massive amount of churn in
the labor market right now, and The Hamilton Project just had
an event yesterday where Betsey Stevenson made an excellent
point, from the University of Michigan. People are going back
to work, but they are demanding that work be done on different
terms than before the pandemic.
They want more flexibility. They want higher wages. They
want to be compensated for the risks they are taking if their
face-to-face service sector jobs are now dangerous because of
the pandemic. And they want more flexibility, to be able to
work from home.
So, we are seeing big changes in the labor market, but--and
I know I am going on too long, but these have also been made
possible by the fiscal support that the Government provided.
People are no longer financially utterly desperate, and that is
a good thing. That is not a bad thing. That is a good thing.
Mr. Carter of Louisiana. And it speaks to the fact that we
still have people that are women with children, families with
children, caring for the aged or people that need additional
care. And we know that eldercare is terribly expensive. We know
that childcare is terribly expensive.
Let me ask you: Is there any empirical data as an expert,
as an economist, any research that has been done on this topic,
that is: an impact of expanded unemployment benefits to the
labor force and its participation?
Ms. Edelberg. So we do have a fair amount of evidence that
suggests that more generous unemployment insurance benefits do
slow down the rate of job matching. They make workers choosier
about taking which job to get, but that is not altogether a bad
thing.