```

[Senate Hearing 108-845]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 108-845

   AVIATION SECURITY AND IMPACTS ASSOCIATED WITH THE REGULATORY AND 
                               STATUTORY 
                   REQUIREMENTS OF THE AVIATION AND 
                   TRANSPORTATION SECURITY ACT (ATSA)

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

                                HEARING

                               before the

                        SUBCOMMITTEE ON AVIATION

                                 OF THE

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                            FEBRUARY 5, 2003

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation

                     U.S. GOVERNMENT PRINTING OFFICE
                             WASHINGTON: 2006        

95-389 PDF

For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512-1800  
Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001

       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                     JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska                  ERNEST F. HOLLINGS, South Carolina
CONRAD BURNS, Montana                DANIEL K. INOUYE, Hawaii
TRENT LOTT, Mississippi              JOHN D. ROCKEFELLER IV, West 
KAY BAILEY HUTCHISON, Texas              Virginia
OLYMPIA J. SNOWE, Maine              JOHN F. KERRY, Massachusetts
SAM BROWNBACK, Kansas                JOHN B. BREAUX, Louisiana
GORDON SMITH, Oregon                 BYRON L. DORGAN, North Dakota
PETER G. FITZGERALD, Illinois        RON WYDEN, Oregon
JOHN ENSIGN, Nevada                  BARBARA BOXER, California
GEORGE ALLEN, Virginia               BILL NELSON, Florida
JOHN E. SUNUNU, New Hampshire        MARIA CANTWELL, Washington
                                     FRANK LAUTENBERG, New Jersey

      Jeanne Bumpus, Republican Staff Director and General Counsel
             Robert W. Chamberlin, Republican Chief Counsel
      Kevin D. Kayes, Democratic Staff Director and Chief Counsel
                Gregg Elias, Democratic General Counsel

                                 ------                                

                        Subcommittee on Aviation

                   TRENT LOTT, Mississippi, Chairman
TED STEVENS, Alaska                  ERNEST F. HOLLINGS, South Carolina
CONRAD BURNS, Montana                JOHN D. ROCKEFELLER IV, West 
KAY BAILEY HUTCHISON, Texas              Virginia
OLYMPIA J. SNOWE, Maine              DANIEL K. INOUYE, Hawaii
SAM BROWNBACK, Kansas                JOHN B. BREAUX, Louisiana
GORDON SMITH, Oregon                 BYRON L. DORGAN, North Dakota
PETER G. FITZGERALD, Illinois        RON WYDEN, Oregon
JOHN ENSIGN, Nevada                  BILL NELSON, Florida
GEORGE ALLEN, Virginia               BARBARA BOXER, California
JOHN E. SUNUNU, New Hampshire        MARIA CANTWELL, Washington
                                     FRANK LAUTENBERG, New Jersey

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on February 5, 2003.................................     1
Statement of Senator Hollings....................................    26
Statement of Senator Hutchison...................................    34
Statement of Senator Lott........................................     1
Statement of Senator McCain......................................     2
Statement of Senator Smith.......................................     3
Statement of Senator Wyden.......................................     3

                               Witnesses

Barclay, Charles, President, American Association of Airport 
  Executives.....................................................    50
    Prepared statement...........................................    52
Bolen, Edward M., President, General Aviation Manufacturers 
  Association....................................................    41
    Prepared statement...........................................    43
Loy, Admiral James M., Under Secretary of Transportation for 
  Security, Transportation Security Administration...............     4
    Prepared statement...........................................     8
May, James C., President and CEO, Air Transport Association of 
  America, Inc...................................................    45
    Prepared statement...........................................    47
Mead, Hon. Kenneth M., Inspector General, Department of 
  Transportation.................................................    12
    Prepared statement...........................................    14

                                Appendix

Boxer, Hon. Barbara, U.S. Senator from California, prepared 
  statement......................................................    63
Response to Written Questions Submitted by Hon. John McCain to:
    Charles Barclay..............................................    70
    Edward M. Bolen..............................................    67
    Admiral James M. Loy.........................................    64
    James C. May.................................................    68
    Hon. Kenneth M. Mead.........................................    65

 
                     AVIATION SECURITY AND IMPACTS 
   ASSOCIATED WITH THE REGULATORY AND STATUTORY REQUIREMENTS OF THE 
                      AVIATION AND TRANSPORTATION 
                          SECURITY ACT (ATSA)

                              ----------                              

                      WEDNESDAY, FEBRUARY 5, 2003

                                       U.S. Senate,
                          Subcommittee on Aviation,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:35 p.m. in 
room SR-253, Russell Senate Office Building, Hon. Trent Lott, 
Chairman of the Subcommittee, presiding.

             OPENING STATEMENT OF HON. TRENT LOTT, 
                 U.S. SENATOR FROM MISSISSIPPI

    Senator Lott. The Subcommittee will come to order.
    We are still having a vote in the full Senate now, a 
resolution with regard to the Columbia disaster and in memory 
of the astronauts that were lost. So we will--I expect that we 
will have some other Senators that will join us momentarily. 
But since we do need to go ahead and get started, I thought we 
could start with the opening statements and then go to the 
second panel and then have comments from other Senators as they 
come in, and questions.
    And, of course, this is the first Aviation Subcommittee 
hearing of the year. It is on aviation security and the impacts 
associated with the regulatory and statutory requirements of 
the Aviation and Transportation Security Act. This is 
legislation that was passed relatively quickly after the events 
of 9/11. It was one of those occasions when the Congress moved 
quickly and, I think, made some good decisions in this area. 
And they're being carried out and, I think, are being 
implemented quite well. But it's important we take a look at 
how it's going and make sure we understand if the law is what 
it needs to be and how it's being financed.
    So we will have two panels of witnesses today, Admiral 
James Loy, Under Secretary of Transportation Security, 
Transportation Security Administration, and Ken Mead, Inspector 
General of the Department of Transportation. The second panel 
is Jim May, president and CEO of the Air Transport Association, 
Chip Barclay, president, American Association of Airport 
Executives, and Ed Bolen, president of the General Aviation 
Manufacturers Association.
    I would like to dispense with an opening statement on my 
own part so that we can get right into the testimony and then 
get to the very important part, which is the questions.
    But I'm pleased that the Chairman is here. He has already 
had one hearing this year in the aviation area, looking at, I 
believe, the Federal Aviation Administration legislation.
    Senator McCain, do you have a statement that you'd like to 
make before we get started?

                STATEMENT OF HON. JOHN McCAIN, 
                   U.S. SENATOR FROM ARIZONA

    Senator McCain. No, Mr. Chairman. I want to thank you for 
holding these hearings. And this one, I just want to say, Mr. 
Chairman, is a very important hearing. It's our first chance to 
look at what the TSA has done.
    I'd like to publicly say that Admiral Loy, I think, has 
done a fine job. Ken Mead has always given this Committee the 
unvarnished truth, whether we happen to like it or not. And I 
think that they will give us a great deal of information.
    I would just like to add, Mr. Chairman, something you know, 
and the reason why we're going to have more hearings. The first 
hearing we had was the state of the aviation industry, and it's 
in bad shape. There's no doubt that there are major airlines 
that are in serious difficulties. And as we look at the 
security measures that have been taken, I think we need to look 
at also its impact on the aviation industry, as well. I hope 
Admiral Loy will illuminate us a little bit about that, as well 
as the next panel.
    But I just want to--Mr. Chairman, you and I were just told 
when we came in that there's now legislation dropped that every 
airliner in America would have a surface-to-air missile 
prevention capability. And I think all of us want to do 
whatever is necessary to preserve the security of every 
airliner in America, but I think we need to rely on the 
expertise of Admiral Loy and others to tell us cost-risk ratios 
on all these issues of security.
    And, finally, Mr. Chairman, and I know we want to get 
started with the hearing, but you and I go through airports 
just about every weekend, and sometimes more often. It is still 
a very difficult process. Now I have to stand in line in one--
to get to one counter to get my boarding pass, and then I have 
to stand in line again to get through security, and it--
Americans are not finding it, in any way, a pleasant 
experience.
    They're being remarkably patient, I think. I never see any 
American who voices frustration or anger, at least I've never 
seen it. But I also would urge Admiral Loy to tell us about how 
we develop technology to make this process easier and more 
efficient.
    And I want to finally say there's a great deal of 
controversy about the privatization or making federal employees 
out of TSA employees. It's been my experience, Mr. Chairman, 
that they are doing an outstanding job. From everything I can 
see, the morale is high, they are very disciplined and very 
efficient and professional.
    I thank you, Mr. Chairman, for allowing me to say a few 
words, because I know you had intended to pass on opening 
statements. I thank you, Mr. Chairman.
    Senator Lott. Senator Wyden and Senator Smith are here. I 
had hoped to dispense with opening statements and go right to 
the witnesses, but if you would like to be recognized briefly, 
since we've both been recognized briefly already, I'd be glad 
to call on you, Senator Wyden.

                 STATEMENT OF HON. RON WYDEN, 
                    U.S. SENATOR FROM OREGON

    Senator Wyden. Well, Chairman Lott, thank you, and I will 
be very brief.
    Just two points. One, I'm particularly interested in 
hearing from Admiral Loy about how threat information is 
shared. It seems to me that one of the major lessons of 9/11 is 
the importance of sharing this information. Small bits of 
information can be like pieces to a puzzle, and if different 
agencies don't share and communicate, then you can't put the 
pieces together to see the whole picture. The fact of the 
matter is, that has happened again and again in the past, and 
I'm anxious to hear Admiral Loy explain to us how TSA can stay 
plugged into security information gathered and held by other 
agencies.
    The other point that I want to make deals with transition 
questions as the TSA moves from the Department of 
Transportation to the new Department of Homeland Security. I'm 
concerned that there may be an interruption in oversight in a 
key area, specifically that the transition may cut short the 
very valuable investigative work of Mr. Mead, who is with us 
here today, before the Department of Homeland Security has 
anyone with the expertise and resources to step into his big 
shoes. We cannot have a vacuum of oversight. I may offer an 
amendment before long to ensure that that oversight presence is 
in place.
    Certainly Chairman McCain has seen over the years, as we've 
looked at aviation issues, the value of Ken Mead's work. I want 
to make sure it is not lost in the transition.
    And I thank you for letting me make that statement, 
Chairman Lott.
    Senator Lott. Senator Smith?

                STATEMENT OF HON. GORDON SMITH, 
                    U.S. SENATOR FROM OREGON

    Senator Smith. Thank you, Mr. Chairman. I will be brief, as 
well.
    I appreciate the chance to be here. Like many of us, we're 
supposed to be in several different hearings right now, and--
but this is a very important hearing.
    And, Admiral Loy, I want to tell you that when we in the 
Senate voted to make public the TSA and the screeners, some of 
us had some concern as to whether or not that would turn out 
well. I rarely go through an airport now but that I don't seek 
out some of the employees of the Federal Government who do this 
job now to thank them for what I think is a real step up in 
quality and service and security, and I want to state that 
publicly for the record.
    Also, I'm here to ask a couple of questions I hope in the 
course of this hearing you can answer. Specifically, I am 
hearing, from rural airports in Oregon, they are concerned 
about what effort is going to be made to foster continued 
involvement and input from them. Some of them are feeling like 
they're being left out of the equation. And, additionally, what 
public or private initiatives or partnerships have been formed 
to promote security in the advent of a war on terrorism within 
our Nation's borders. Those are concerns specific to Oregon, 
but I think not unique to Oregon, that I hope we'll be able to 
answer.
    Thank you, Mr. Chairman.
    Senator Lott. Senator Hollings has joined us, and he's 
agreed we can go ahead with the testimony. And then--but if 
Senators need additional time to make statements or ask 
questions after their testimony, we would certainly be very 
lenient with that.
    Admiral Loy?

     STATEMENT OF ADMIRAL JAMES M. LOY, UNDER SECRETARY OF 
     TRANSPORTATION FOR SECURITY, TRANSPORTATION SECURITY 
                         ADMINISTRATION

    Admiral Loy. Thank you, Mr. Chairman. Good afternoon, 
Members of the Subcommittee. I'm pleased to testify concerning 
TSA's accomplishments this past year, and then, with a look 
forward, provide a very special look at the financing end of 
what we're up to.
    This has been probably the most challenging 8 months, 
leadership-wise or management-wise, of my life, and I thought I 
might never say that after 42 years in uniform. There's simply 
not enough time to share the roller coaster ride that we've all 
been on: long days, long nights, high highs, and very 
challenging lows, deadlines to meet deemed impossible by a 
constant stream of skeptics, all met on time by an amazingly 
committed team.
    A hundred FSDs are now in place around the country 
representing all of our airports. 1.6 million applicants were 
processed for screener positions and 360,000 of those 1.6 
million were actually assessed from bottom to top in many 
different dimensions to make sure we were picking the right 
people. The term ``zero-to-sixty'' will never mean the same 
thing to me, because we went from zero to 60,000 employees in a 
brand new federal agency within this year. We went from 33 to 
thousands of Federal Air Marshals now with tens of thousands of 
flights on a monthly basis, adding another security dimension 
to what we're doing. Almost a million background checks of 
airport and airline employees have gone through the wringer to 
make sure that there are good folks with proper clearances 
working at our airports. And then, of course, there were two 
very specific deadlines that we were charged by the Congress to 
meet, and both were met. November 19, 2002, when we federalized 
the work force in place at over 429 airports and December 31, 
2002, when a 100 percent of the bags were being checked by 
congressionally-approved methods.
    More importantly, sir, I believe this is about a return of 
public confidence to flying, for business or for pleasure. We 
continue to watch emplanements go back toward where they were 
prior to 9/11. It's been a thoughtful game plan that was put 
together long before I got here.
    By the way, Mr. Chairman, I would offer that the first 6 
months were actually taken to think very carefully through what 
we were going to do, and then we went to the execution mode. I 
think some of the skepticism was associated with, ``Why aren't 
they doing something?'' And the ``something'' was all about 
planning so that when we did something, it would be done well.
    So, from perimeter fences to airport bomb incident 
prevention plans to robust checkpoints to screened bags to air 
marshals to hardened cockpit doors to random secondary 
screening, cameras at checkpoints, and, finally, to the 
federalized screening force, there are enormous numbers of 
layers in our system. No one of those keys could ever do the 
whole job, and so we designed the idea that the sum of them is 
the quantum security jump that we needed at our airports.
    A final exam, sir, was the holidays for 2002, from 
Thanksgiving through the Christmas and New Year's holidays. If 
you were waiting in line at an airport, it was at the rest room 
or a Starbucks kiosk; it was not in front of the TSA 
checkpoint.
    We've had a visionary President and a Transportation 
Secretary who never wavered from the vision and the drive to do 
the job as had been outlined for them by the Congress in ATSA, 
to provide world class security balanced with world class 
customer service. Congress was intent on providing resources 
when necessary, and there was a stakeholder outreach to 
airports, airlines, pilots, and all concerned segments of the 
industry.
    I would hope the panel that follows will tell you that I've 
been bugging them ever since I took this job; I've spent more 
time in Chip Barclay's office than I have in my own. I have 
met, probably in 30 or 40 airports around the country, to gain 
a sense for what the real issues were, with both airline 
station managers and airport directors to discuss resource 
contributions from a beleaguered industry, ideas from all 
directions, and solid rebuilding steps to restore the financial 
viability of the aviation industry. All of these are our 
partners, Mr. Chairman, without whose help we would never have 
gotten off first base over the course of this past year.
    Team members were, literally, Deputy Secretary Jackson and 
the IG, Ken Mead, and his shop, and many other members of the 
Office of the Secretary of Transportation's staff who 
represented for us a source of constructive criticism, good 
ideas, challenges when we might have been going in the wrong 
direction, and opportunities to change our ways and get into 
the line of productivity.
    We were helped by loaned executives from the private 
sector. We realized early on that there were skill sets and 
competencies that could be brought to bear on this issue. If we 
wanted to find out for example, how you make people feel good 
standing in lines, maybe Disney knew something about that, so 
we brought Disney executives in to help us figure things like 
that out.
    Contractors. Again, without them we certainly would not 
have gotten the job done. Key contractors were Lockheed Martin, 
NCS Pearson, Boeing, and VF Solutions, the providers of our 
uniforms.
    The TSA team was assembled across the course of the year. 
There was nobody there to begin with, but now a very strong, 
committed workforce is in place.
    Congress approved direction and deadlines and resources. A 
sum of $738 million was appropriated for the physical 
modification and installation of checked-baggage explosives-
detection systems.
    I have a chart, Mr. Chairman, just to illustrate this. 
Because there have been some--I'll call them rumors, for lack 
of a better phrase--afoot recently as to whether or not the 
$738 million went to the purpose intended on the part of the 
Congress. In fact, they have. From Fiscal Year 2002 to the 
carryover that represented into 2003, the total obligation of 
$738 million. We obligated $184 million in FY02, another $200 
million to date in FY03, with $354 million more to go to deal 
with the rest of the installation challenge that we still have 
at a small number of very large and challenging airports.
    These charts show the obligations to date. And this latest 
popular rumor circulating in airport circles, that a portion of 
these dollars was somehow siphoned off as a Boeing profit, is 
simply unfounded. Boeing's costs are in a separate line item in 
the budget, and I'll be glad to provide any additional 
documentation, sir, that you might want or need about that. All 
$738 million will end up as enhanced security at airports, 
albeit many of those dollars actually were passing through 
Boeing as the facilitator, the contractor to make that work.
    The available balance for FY03 will enable us to complete 
the EDS-ETD installation work at the small number of airports 
still using alternative methods to reach 100 percent bag 
checks. Other FY03 work will be required to provided added 
coverage as seasonal peaks arrive in late spring and on into 
the summer, and any equipment moves or additions as we optimize 
the flow among airports. We are learning with every day that 
goes by. All those congressional mandates will be met.
    This work caused us to crisscross America twice, once for 
checkpoints by 11-19, and again for explosive detection by 12-
31. We pushed very, very hard, Mr. Chairman, as you know, to 
meet those deadlines.
    We did leave a wake behind us at many airports. Airports' 
aesthetics suffered. There is much work yet to be done at those 
impacted airports. We are just now finishing the data call 
necessary to see the total bill associated with the work that 
needs to be done.
    Looking ahead, an important item on our agenda is building 
the model workplace I've promised to our work force. We will 
engage supervisors and screeners in its design, and TSA will be 
recognized as the preferred work environment when we're done. 
We have hired the most diverse work force in government. We are 
following the President's management agenda and using, 
constructively, every authority offered us by the Congress in 
ATSA.
    Another addition that is enormously important for us to get 
at is the management infrastructure necessary to be a good 
steward of the dollars that Congress entrusts to us to get the 
job done. Contracting out traditional functions like management 
services and H.R. are just a couple of examples of following 
the President's management agenda. You get to do that when you 
start with a blank sheet of paper and you can build the 
organization you want.
    This hearing is about aviation security costs. I will offer 
a few thoughts. America has an absolute jewel in its economic 
foundation known as the aviation industry. We must do all we 
can to support its solvency. America also has a fundamental 
obligation to provide security to its transportation system. 
The challenge is always about who pays.
    In Fiscal Year 2002-2003, the Federal Government will have 
paid in excess of tens of billions of dollars to provide 
aviation security. The Government, Congress and Administration 
together, provides war-risk insurance when no competition was 
evident in the marketplace, billions of dollars in value. The 
Government provided $5 billion to help the industry recover 
immediately in the days after 9/11. The Government is buying 
equipment, hiring, training, and paying for a replacement work 
force, and contemplating other important investments, such as 
the Federal Flight-deck Officer Program, ``guns in the 
cockpit.'' The airlines have been asked to harden cockpit 
doors, to train flight crews in self defense, and provide 
secure catering services.
    There are two fees that we have found to offset the 
mandates that were created in ATSA. This second chart, sir, 
offers some insights to those two fees and how we are doing in 
terms of their collection.
    The 9/11 passenger fee, as you recall, at $2.50 a leg, has 
produced an annual yield of about $1.7 billion. That's what we 
expect to gain in 2003, and that's, again, what is presumed in 
the President's budget for 2004.
    The aviation security infrastructure fee was designed to 
seek airline reimbursement to TSA at a rate previously paid in 
2000. Based on information in ATA public statements and 
correspondence, that annual expense was between $750 million 
and $1 billion. The Administration has requested that Congress 
set the fee at $750 million. Annualized collections have been 
about $300 million. These are all crucial elements of the 
financial realities in aviation today, and they are happening 
now in an even more difficult revenue environment.
    Looking forward, I see several dimensions of aviation and 
numerous areas of other transportation modes that deserve our 
attention--cargo, charters, general aviation--all areas this 
Committee has already identified for study. I concur and look 
forward to working with you on all three.
    And though this Committee's emphasis is aviation, I would 
be remiss if I didn't acknowledge our efforts in other modes. 
As the National Transportation System security manager, TSA 
will be the key agency in the new department to determine 
transportation system needs. We are already working with other 
DHS agencies and DOT operating administrations to develop 
security standards, to incorporate industry best practices, to 
find new technologies and innovations, and to create a more 
uniform level of security across all modes.
    As TSA moves to DHS, my responsibility is to represent 
transportation interests and vulnerabilities across all 
dimensions of the National Transportation System in the 
discussions and the decisions that DHS will make. I offer that 
I will be aggressive in that work, Mr. Chairman, and look 
forward to working with the Committee on these issues, as well.
    Mr. Chairman, security is a filter; it is not a guarantee. 
Our challenge is to get it right at 429 airports every day, 361 
ports every day, and on our highway systems, our pipeline 
protection systems, our transit systems, and our rail systems. 
The terrorist only has to succeed once. Complacency is no 
longer an option. Every day at TSA begins with a sobering 
intelligence brief. Our task together is an enormous one, and I 
look forward to working on these issues with you.
    Thank you for your attention, and I look forward to your 
questions.
    [The prepared statement of Admiral Loy follows:]

    Prepared Statement of Admiral James M. Loy, Under Secretary of 
  Transportation for Security, Transportation Security Administration
    Good afternoon, Mr. Chairman, Senator Rockefeller, and Members of 
the Subcommittee. I am pleased to testify before the Subcommittee today 
on behalf of the Transportation Security Administration (TSA), the 
Nation's transportation security manager, concerning our progress in 
meeting the ambitious goals Congress set out for us only 14 months ago.
    I can report to you that TSA has met all deadlines established by 
the Aviation and Transportation Security Act (ATSA). On February 17, 
2002, TSA assumed responsibility for civil aviation security and by 
summer had stationed Federal Security Directors in major airports 
across the country. We deployed federal passenger screeners at all 429 
commercial airports by November 19, 2002. By December 31, 2002, TSA 
screened 100 percent of checked baggage for explosives through the use 
of Congressionally approved methods. We dramatically expanded the 
Federal Air Marshal program so that many more flights are covered each 
day than ever before. With the help of state and local agencies, law 
enforcement officers were positioned at all screening checkpoints. The 
initial phase of reinforcing commercial aircraft cockpit doors was 
completed through the Federal Aviation Administration (FAA). Background 
checks were ordered for an estimated 750,000 airport and air carrier 
employees who could enter secured areas of airports.
    The uniformed TSA screeners are becoming a comforting presence to 
the traveling public as we establish world-class security and world-
class customer service.
    Air carriers and airports are major partners in the effort to 
improve security, and they worked shoulder-to-shoulder with TSA to 
reach these goals. We appreciate the significant resources they have 
contributed, as well as the flexibility and cooperation they have 
shown. The dramatic improvement in security that we have achieved is an 
essential building block in improving the financial viability of the 
aviation industry. A sound, strong aviation security system is 
fundamental to ensuring the confidence of the public in the safety of 
air travel. You have my assurance that TSA will work closely and 
cooperatively with all our transportation partners in our quest for 
continuous progress in the months ahead.
    In just four weeks, TSA will become part of the Department of 
Homeland Security, and this may be the last time I appear before this 
Subcommittee while TSA is part of the Department of Transportation. I 
would like to personally thank Secretary Norman Y. Mineta and Deputy 
Secretary Michael Jackson for their unwavering support for our mission 
and their tireless efforts to make sure TSA had the support it needed 
to meet its deadlines. I would also like to acknowledge Inspector 
General Ken Mead, my co-panelist today. He has helped us focus on our 
weaknesses so that they become our strengths.
    TSA would never have met its goals without the extraordinary 
efforts of its contractors. For example, Lockheed Martin helped TSA in 
its unprecedented challenge of training the federal security screeners 
needed to staff passenger checkpoints across the nation, as well as to 
assess and modernize the layout and equipment at all security 
checkpoints. Boeing Service Corporation along with Siemens installed 
thousands of explosives detection systems (EDS) and explosives trace 
detection (ETD) systems in the nations airports. InVision Technologies 
and L3 Communications worked extremely hard to make sure TSA had the 
screening equipment needed to meet its deadline. NCS Pearson was hired 
to recruit and assess applicants for over 50,000 screener jobs. The 
company reviewed almost 2 million initial applications to find 
candidates able to meet the rigorous requirements of these important 
positions. Virtually overnight, VF Solutions developed and supplied 
over 50,000 uniforms for passenger and baggage screeners, deploying 
field teams to measure and outfit new recruits as they came on board. 
These, and other subcontractor companies were an extension of TSA, its 
arms and legs laboring to get the job done, airport-by-airport.
    Though the deadlines of ATSA have been met, TSA is far from the 
finish line. In fact, for TSA, there will be no finish line. Our 
security mission demands boldness, constant reassessment, and continual 
change to meet new challenges. The security measures we have put in 
place are only a filter; they are by no means a guarantee. Our enemies 
are alert and resourceful, perpetually looking for any weakness. To 
confront this challenge, we are putting in place a ``system of 
systems,'' a multi-layered security strategy stretching from curb to 
cockpit. What TSA has achieved in the course of the last 14 months is 
only the springboard for the next phase of our work. We have to ``get 
it right'' every day, at every airport.
    We are working closely with airports to complete the installation 
of explosives detection systems in a small number of airports. Congress 
supplemented DOT's original request of $507 million in funding, 
appropriating $738 million to TSA for the physical modification of 
commercial airports for installation of checked baggage explosives 
detection systems, including explosives trace detection systems. This 
funding has been used to meet the ATSA requirement for electronic 
screening of checked baggage for explosives. Specifically, the funding 
covered site assessments, detailed site surveys, development of 
architectural and engineering plans, electrical work, reinforcement of 
existing structures, temporary structures, and new conveyor belts. 
These funds were not used for the purchase of explosives detection 
equipment. As a result of the hard work of the entire TSA team and 
extended family we are now screening all checked baggage for explosives 
at all airports, using electronic screening and Congressionally 
approved alternatives. However, we are continuing at several airports 
to install electronic screening systems.
    In our steady push to meet the deadlines established by ATSA, TSA 
swept rapidly across airports throughout the country, first to deploy 
federal passenger security screeners, and again to ensure that all 
checked baggage was screened. Having crossed the country twice, I must 
acknowledge that our efforts have left a wake that should be addressed. 
We worked quickly, and in some cases airport aesthetics have suffered 
for it. Indeed, we do have more work to do, even with the equipment now 
in place. There are opportunities to improve the efficiency of the 
screening systems.
    We must also recognize the human dimension to our work. We have a 
family of over 50,000 security screeners in every state in the nation, 
Puerto Rico, and other U.S. territories and possessions that work 
incredibly hard, under great pressure, and in difficult circumstances. 
Many have worked long hours of overtime in order to serve their 
country. Although I exercised my statutory authority to prohibit 
mandatory collective bargaining, I am absolutely committed to 
establishing a Model Workplace environment. I have just appointed a 
director for this project. She has my full support in making this a top 
priority for TSA, engaging management and our labor force to make our 
working environment one that we can all be even more proud of.
    There is no debate that addressing our human resource issues and 
the installation and maintenance of our equipment is an effort of great 
magnitude and importance. It is also resource intensive. Talking with 
airport directors on a regular basis, we know the airports are 
concerned about the costs and the impact on their airports. Airport 
tenants are concerned as well. Meeting the statutory deadlines we faced 
was only part one of our work together. We hope our partners will stay 
with us as we press on.
    TSA has assumed responsibility for substantial security costs once 
borne by the air carriers, including the costs of the screener 
workforce, screening equipment, and property claims. However, air 
carriers are still responsible for security costs in several areas, 
including flight deck modifications and catering security. Congress 
gave FAA $100 million to distribute to air carriers for security 
modifications to their aircraft. Of this amount, $73 million has been 
disbursed to carriers and we expect remaining funding to be disbursed 
before the end of this fiscal year, including $3 million for ten air 
carriers participating in a pilot program for video surveillance.
    The ATSA required TSA to ``establish procedures to ensure the 
safety and integrity of catering and passenger amenities, placed aboard 
such aircraft . . . and all persons providing such supplies.'' TSA has 
established guidelines and believes security for catering services and 
other amenities that are not property items transported for hire, but 
rather are part of the service voluntarily provided by the air 
carriers, should properly be paid for by carriers, rather than TSA. Air 
carriers have sought federal reimbursement for catering security.
    ATSA authorized TSA to implement two distinct fees to assist the 
agency in recovering some of its costs from civil aviation passengers 
and carriers. The September 11th Fee is charged to airline passengers 
and is capped by ATSA at $2.50 per enplanement or $5 per one-way trip. 
TSA has issued a regulation and has been collecting this fee on tickets 
sold since February 1, 2002. TSA believes that there has been a high 
level of air carrier compliance with collecting and remitting this fee 
from passengers. TSA has collected $977 million in FY 2002 from 
passengers through this fee.
    Under ATSA, Congress also authorized the Aviation Security 
Infrastructure Fee. This fee was established to reimburse TSA for the 
passenger and baggage screening costs that were previously incurred by 
the airlines themselves prior to the establishment of TSA. Air carriers 
no longer incur the cost of screening passengers and property. Instead, 
each air carrier annually remits the Aviation Security Infrastructure 
Fee to TSA equal to its calendar year 2000 costs for security 
screening.
    To assist TSA in determining fee levels, each air carrier was 
required by regulation to submit security screening cost information 
for the calendar year 2000. The air carriers are paying a monthly fee 
based on that cost information. Based on industry information and 
testimony to Congress in 2001, TSA had projected collections of 
approximately $750 million annually for the Aviation Security 
Infrastructure Fee, with approximately $400 million prorated for the 
period of FY 2002 during which the fee was in effect. Carriers are now 
certifying that their screening costs in 2000 were only about $300 
million, about $450 million less than previously estimated by the 
industry and TSA. Airlines paid $160.7 million for the prorated portion 
of FY 2002, about $240 million less than projected.
    TSA still believes that the costs reported by the carriers are not 
complete as is evidenced by the air carriers' own external auditors 
being unable to certify the costs that the carriers have provided to 
TSA. To avoid a lengthy and resource intensive effort to determine 
actual airline calendar year 2000 screening costs, TSA has asked 
Congress to set the annual fee at $750 million and requested 
legislative changes to allow these fees to be assessed and collected in 
a more equitable fashion amongst the carriers. TSA is sensitive to the 
economic challenges facing the aviation industry, and we will continue 
to seek ways to provide appropriate support and assistance for air 
carriers. TSA is also aware of the concerns of airlines that stronger 
security measures might create delays in flights and increase 
frustration for passengers. To reduce the ``hassle factor'' for 
passengers, we have eliminated unnecessary questions at the check-in 
counter, dropped unnecessary rules, and put in place measures to 
substantially improve our system of gate screening. Today over 90 
percent of passengers pass through security screening in 10 minutes or 
less.
    TSA is moving forward on implementation of the Arming Pilots 
Against Terrorism Act (APATA). Immediately after enactment of APATA in 
November of last year, as part of the landmark Homeland Security Act of 
2002, I chartered a cross-organization task force of experts in law 
enforcement, security training, aviation, and other disciplines to 
design the Federal Flight Deck Officer (FFDO) program. The task force 
is looking at all viable options for the program, such as the best 
firearms and ammunition to use and the safest methods of transport and 
storage. The input of a wide range of stakeholders, including pilots, 
flight attendants, air carriers, and law enforcement agencies, has been 
invaluable to us in developing the program. The APATA authorizes TSA to 
fund the necessary training, supervision, and equipment for the FFDO 
program. I have recently announced the creation of a pilot program that 
will allow us to quickly screen, train, and deputize approximately 50 
pilots. Concurrent with our efforts to stand up the program on a larger 
scale, the President has requested $25 million in the 2004 budget.
    There will only be minimal costs to air carriers for the arming 
pilot program, but there could be substantial costs for training flight 
crews on security and self-defense. The APATA requires airlines to 
provide training by November 24, 2004. TSA has begun the groundwork for 
a rulemaking with opportunity for public comment on the training 
requirement. There are erroneous reports that TSA has decided on a 
regimen of flight crew training that would be burdensome to the 
carriers and contrary to the intent expressed by Congress in the final 
enacted legislation. Similarly, there are erroneous reports that TSA is 
ignoring a clear mandate in the Act that allows a flight crew member to 
opt out of hands-on-training if the individual believes that such 
training would have an adverse impact on his or her health or safety. I 
want to state clearly that I have not made any such decisions, nor has 
our staff made any recommendations to me on this score. We are only at 
the initial stages of this process.
    TSA is now confronting the next major dimensions in aviation 
security. With the critical deadlines for passenger security behind us, 
TSA will turn more of its energy to addressing cargo security. In 
accordance with ATSA, TSA began securing the nation's airports through 
passenger and baggage screening. TSA recognized the threat of air cargo 
and expanded baggage screening to include cargo placed on a passenger 
plane. There are an estimated 12.5 million tons of air cargo 
transported per year, 2.8 million tons on passenger planes. The 
remaining 9.7 million tons of freight is being shipped in cargo planes. 
This air freight remains a unique threat to the homeland.
    The recently released GAO report on the status of aviation cargo 
highlights many of the concerns and challenges that face both the 
industry and the TSA. GAO recommended that TSA create a strategic plan 
that identifies priority actions on the basis of risk, costs, and 
performance targets, and establishes deadlines for completing those 
actions. We have begun this process through the establishment of a 
working group to look at requirements of a mandatory cargo security 
program--using a threat-based and riskmanaged approach. An important 
part of this effort is our outreach to the cargo industry. To the 
extent possible, we will build on many of the security measures they 
have already been adopted. We intend to move forward as expeditiously 
as possible in the development and implementation of a comprehensive 
security program.
    In light of this threat, the President is requesting a total of $30 
million for an air cargo security pilot program in FY 2004. Of this, 
$20 million is requested for the design and development of a random, 
risk-weighted freight screening process and the development of a pre-
screened ``known'' shipper program. An additional $10 million is 
requested for further research and development to explore new air cargo 
technologies.
    TSA will employ technology and information management solutions to 
further strengthen cargo security. Our challenge is to find a 
``workable'' nexus between technology and information management that 
provides a higher degree of security while protecting the economic 
viability of the air cargo industry.
    TSA is working with stakeholders to address the issue of carrying 
certain classes of currently prohibited mail, an issue we know has 
economic consequences on passenger air carriers. TSA has implemented a 
canine detection pilot program at four major airport hubs to test this 
type of screening as a possible alternative to prohibiting the 
transport of certain weight mail on passenger carriers.
    We are also focusing our efforts on the security of charter 
aircraft. Aircraft operators are required to ensure that passengers and 
their accessible baggage are screened prior to passenger boarding. 
Aircraft operators using schedule and charter, passenger and cargo 
operations in aircraft with a maximum certificated takeoff weight of 
12,500 pounds or more, are required to implement security measures 
including criminal history record checks on all flight crew members and 
restricted access to the flight deck. TSA also requires training for 
ground security coordinators and contingency plan measures for threats 
against aircraft and ground facilities. TSA's security requirements 
vary with the size and intended use of aircraft. Larger aircraft 
chartered for public use, such as those used by tour operators, are 
generally subject to the same security requirements in sterile areas 
that we enforce for commercial aircraft.
    Security improvements in General Aviation are another high priority 
for TSA. General Aviation accounts for more than 75 percent of all 
flights in the U.S. and it encompasses more than 200,000 aircraft, 
650,000 pilots, and over 19,000 public and private airports and landing 
strips. All of the GA associations have taken a proactive approach to 
educating their members.
    On December 2, 2002, TSA implemented a centralized system for 
General Aviation pilots to report information about suspicious 
activities. The National Response Center collects information from the 
General Aviation community through use of a toll-free number, 1-866-
GASECURE, and provides notifications to appropriate state and federal 
agencies. TSA met with major General Aviation associations, such as the 
General Aviation Manufacturers Association, the Aircraft Owners and 
Pilots Association (AOPA), and the National Business Aviation 
Association (NBAA) to formulate an aggressive, integrated program to 
market the centralized reporting system to all segments of the General 
Aviation community.
    The AOPA has established an Airport Watch program extending the 
Neighborhood Watch concept to airports. TSA is working with the Civil 
Air Patrol, the U.S. Air Force, and the AOPA to develop and implement a 
pilot project that will complement AOPA's Airport Watch Program.
    Our overall general aviation strategy for 2003 focuses on three 
areas--communication and relationship building, activities related to 
the National Capital Region, and partnership projects that will lead to 
national policies. Our goal is a framework of appropriate federal 
security standards for general aviation consistent with the threat. 
General Aviation is a very diverse community, and ``one-size'' security 
certainly does not fit all. We are trying to leverage the resources and 
knowledge of general aviation stakeholder organizations to develop 
procedures that are tailored to each segment of general aviation. As 
you are aware, Reagan National Airport remains closed to General 
Aviation. I have previously provided the full Committee with a closed 
briefing on this situation. I will of course keep the Committee 
informed of any changes to this policy.
    In all these areas, TSA is taking interim measures to immediately 
boost security. Our future steps in these areas will be based on 
assessments of threat and risk. We will be constantly reviewing and 
reevaluating our strategies to eliminate potential vulnerabilities and 
keep pace with changes in technology, transportation, and security 
threats.
    Though your Subcommittee's principal focus is aviation, I know that 
you are concerned about security in all aspects of our transportation 
system. As the security manager for the National Transportation System, 
TSA looks at the range of transportation needs beyond aviation. The 
Department of Homeland Security will be assessing vulnerabilities 
across all sectors, and TSA is working with other DHS agencies and 
Department of Transportation operating administrations to develop 
security standards that incorporate industry best practices, new 
technologies, and innovations to create a more uniform level of 
security across modes, while ensuring minimal disruption to our 
transportation system. As TSA prepares to leave our home in the 
Department of Transportation, we remain committed to working closely 
with DOT and its Operating Administrations on all matters that affect 
transportation security.
    Thank you for the opportunity to appear before your Subcommittee. I 
will be pleased to answer any questions that you may have.

    Senator Lott. Mr. Mead?

     STATEMENT OF HON. KENNETH M. MEAD, INSPECTOR GENERAL, 
                  DEPARTMENT OF TRANSPORTATION

    Mr. Mead. Thank you, Mr. Chairman. I'd like to express my 
appreciation to the panel for their kind words.
    I'd like to begin my testimony in a strange way for an 
inspector general. I'd like to turn to my colleagues here and 
I'd like to salute them--TSA, the Department, Secretary Mineta, 
Deputy Secretary Jackson, and Admiral Loy (now Under Secretary 
Loy)--for the achievements of this past year. I think they have 
been significant, particularly if you look back to the 
situation before 9/11.
    What I'd like to speak about today, though, sir, are the 
costs associated with meeting these requirements, what we see 
ahead, and controlling those costs.
    I think it's very important to recognize that what's 
happened this past year has occurred in an environment where 
there was virtually no preexisting or established 
infrastructure for overseeing costs, administration of 
contracts, or managing human resources. So everything I say 
should be understood in that context.
    We testified in early 2002 that the cost of good security 
was going to be a lot more than most people, including this 
body, thought. Before 9/11, there were about 28,000 screeners. 
They worked for private screening companies who were hired by 
the airlines. And the cost that the airlines estimated in 
August of 2001, a month before 9/11, was about a billion 
dollars annually.
    Of course, the security then, and I think we know, was 
woefully inadequate. The 28,000 number didn't even count 
screeners that would be needed for the explosive detection 
machines--in other words, to screen all checked luggage. And 
today, as Admiral Loy pointed out, TSA is employing about 
62,000 screeners at the Nation's airports, and the annual 
operating capital budget is in the neighborhood of $5.8 
billion.
    Offsetting revenue, as the Admiral's chart explained, is 
about $1.7 billion plus $300 million--that's $2 billion. By my 
math, that means you're about $3 billion or so short. That 
money is going to have to be made up from the General Fund. 
Those requirements also don't take into account at all the 
hundreds of millions of dollars that air carriers and airports 
will pay for aviation security. I'm not going to dwell on that, 
because I'm certain that my colleagues from ATA and the 
airports will give you a further exposition on that. But those 
costs are hitting at the very time the industry is in extreme 
financial distress.
    I believe, Mr. Chairman, that it's in this context that the 
overriding goal of TSA must be to provide tight security in a 
way that avoids waste and ensures cost-effective use of 
taxpayer dollars. There are two areas I want to speak to here: 
getting much stronger control over the contracting, and 
capitalizing on the economies of scale as TSA moves to the 
Department of Homeland Security.
    Because TSA literally had to build from the ground this 
past year, they relied very heavily on contractors. To give you 
a perspective on that, TSA contracts have a total value of 
about $8.5 billion. And we have an agency here that's just 
given birth--we have $8.5 billion of contracts and a limited 
infrastructure in place for overseeing them.
    When the lack of infrastructure contributed to gaps in 
contract oversight, that, in turn, led to tremendous growth in 
some contract costs. For example, one contract with an initial 
cost estimate of $104 million has grown to about $700 million. 
We've also identified some weaknesses in controls over 
contracts of screener companies.
    Now, to its credit and as we recommended, this past summer 
TSA hired the Defense Contract Audit Agency to audit those 
contracts. So far, DCAA has questioned $124 million, or 20 
percent, of the $620 million in costs that it audited.
    Let me move to capitalizing on the economies of scale. With 
the transition to DHS of TSA, Customs, and INS, I think there 
are some special opportunities here to get some economies of 
scale that will save money.
    First, centralizing administration. The key question is 
whether TSA is going to have its own separate staff for the 
lawyers, the budget people, contracting, human resources, and 
internal affairs, or whether the creation of DHS is going to 
offer centralized services and control costs in those area. I 
see that as a fairly early decision point for the new 
department.
    Second, utilizing airport space. At airports, we think TSA 
ought to consolidate its airport space requirements for things 
like office space, break rooms, training facilities, and 
holding cells, with Customs and INS. Customs and INS already 
have space at many international airports, and we think some 
opportunities are there.
    Third area, TSA ought to avoid mission creep. We've 
testified on this before, and I think TSA has done a good job 
of keeping that under control. But recently we heard that 
they're considering extending the Federal Air Marshals' duties 
to conducting surveillance and patrolling on the ground at 
airports. Air marshals were set up to guard airplane flights. 
And before extending their mission, I hope TSA carefully 
considers the budgetary and staffing implications of this and 
discusses them with the FBI and local and State police as well 
as the airport authority.
    We're not at an end state with aviation security. Even 
though the law had these deadlines of November 19th and 
December 31st, the heavy lifting and costs lie ahead. Thus far, 
nearly all of the explosive-detection system equipment has been 
lobby-installed. But, at your larger airports, you can't keep 
them in the lobbies. Over the next two years, you're going to 
have to install them in the baggage system. And that's going to 
require facility modifications. The price tag is estimated in 
the neighborhood of $3 billion. Some people will put it even 
higher. I've seen estimates go as high as $5 billion. And it 
has not been settled who's going to pay for that yet.
    Another area that needs attention is cargo. The law 
requires screening of cargo, but doesn't specify a date by 
which that should be done. And I noticed in Admiral Loy's 
statement, that's an area that TSA plans to pay attention and 
emphasize, and that's good.
    And let me come to the final area, which is who will pay 
and how. TSA expenses can't be covered by the current security 
fees and ticket taxes. So you have to decide how to bridge that 
gap.
    I would urge the Committee to exercise great caution before 
adding additional fees or taxes for air travel, by whatever 
name. Consumers already pay a significant amount in aviation 
taxes and fees. I'm sure you've seen the charts. An example 
that I have here in my testimony is that a $100 nonstop 
roundtrip ticket includes approximately $26 in taxes and fees. 
That means the airline gets $74, and somebody--the Government 
or the airport--gets the remainder.
    With regard to the Airport Improvement Grant Program that 
has provided some funding in the past for aviation security, we 
would urge caution before tapping that to any great degree, as 
well. As a frame of reference here, in 2002, the airports used 
$561 million of AIP funds for security-related projects. The 
year before, $56 million.
    Now, I testified before this Committee, I can't remember 
how many times, in the aftermath of the summer of 2000, and I 
don't think any of us want to relive the summer of 2000 and the 
delays, the cancellations, the near gridlock in our Nation's 
aviation system. We need to make sure the capacity issues in 
our system are addressed now while there's still time to avoid 
a repeat of the summer of 2000.
    I don't see much of a dispute, Mr. Chairman, that aviation 
security is a matter of national security. You all will have to 
make the policy decisions of who pays and how much, and I 
recognize that, but I just wanted to leave you with that word. 
I would also like to say that whatever we lay down here today 
with respect to who pays for aviation security, you will face 
the same questions next year or perhaps the year after, 
regarding other modes of transportation, like transit, 
trucking, and maritime.
    Thank you, sir.
    [The prepared statement of Mr. Mead follows:]

    Prepared Statement of Hon. Kenneth M. Mead, Inspector General, 
                      Department of Transportation
    Mr. Chairman and Members of the Subcommittee:
    I appreciate the opportunity to testify on the Transportation 
Security Administration's (TSA) efforts to meet the legislative 
deadlines set forth in the Aviation and Transportation Security Act 
(Act), the costs associated with meeting those requirements, and 
controlling TSA costs, especially of contracts. Most of TSA's 
expenditures to date are attributed to securing the Nation's aviation 
system, and this will be the focus of our testimony today.
    Deadlines in the Act--for federalizing the screener workforce and 
the screening of all checked baggage--were the key cost drivers over 
the past year, and will be for some time to come. Over the past 14 
months, TSA and the Department of Transportation (DOT) moved forward in 
standing-up an entirely new organization. Most noteworthy, TSA met the 
challenge to hire and train a federalized workforce to screen all 
passengers and their carry-on baggage by November 19, 2002; and, for 
the most part, to deploy the necessary equipment and federalized 
workforce to meet the December 31, 2002 deadline to screen all checked 
baggage. At the same time, TSA significantly expanded the Federal Air 
Marshals program with more flights being guarded now than any time in 
history. It is important to note that these accomplishments were 
occurring in an environment where there was no preexisting 
infrastructure for overseeing contracts or managing human resources.
Security Costs Are Much Greater Than Anticipated
    We testified in April 2002 that the cost of good security would be 
substantially greater than most had anticipated. Before September 11, 
2001, there were approximately 28,000 screeners at the Nation's 
airports, and the Air Transport Association estimated in August 2001 
that the annual security cost for the airline industry totaled about $1 
billion. These costs covered activities such as screening, training, 
and acquisition of security equipment. Today, TSA employs nearly 62,000 
screeners at the Nation's airports, (of whom 28,000 are ``temporary''), 
and capital and operating costs for Fiscal Year (FY) 2002 alone 
exceeded $5.8 billion.
    TSA requested $5.3 billion for FY 2003, and the Department of 
Homeland Security (DHS) requested $4.8 billion just for aviation 
security in FY 2004. This is projected against FYs 2003 and 2004 
revenues from the passenger security fee \1\ of about $1.7 billion 
annually, along with yearly contributions of $300 million from the 
airlines. Resolving the gap of about $3 billion each year will require 
a large infusion of cash from the General Fund. This comes at a time 
when the General Fund is already strained to pay for vastly increased 
fiscal needs throughout the Federal Government. Also, these 
requirements do not account for the additional hundreds of millions of 
dollars that air carriers and airports will pay for aviation security, 
such as securing cockpit doors, ensuring the security of catering 
operations, conducting employee background investigations and criminal 
history checks, and strengthening access controls to secure areas of 
the airport. These costs are hitting at the very time much of the 
industry is in extreme financial distress.
---------------------------------------------------------------------------
    \1\ The passenger security fee is calculated by multiplying the 
number of enplanements on a ticket by $2.50. A passenger would pay 
$5.00 on a non-stop roundtrip ticket and $10.00 if there was a 
connection on the outbound and return trips.
---------------------------------------------------------------------------
Cost Controls Must Be a Priority for TSA
    We all recognize that the mission of ensuring that our 
transportation systems are secure is a tremendous task. Nevertheless, 
the overriding goal for TSA must be to provide tight and effective 
security in a manner that avoids waste and ensures cost-effective use 
of taxpayer dollars. A key cost control issue for TSA is effective 
contract oversight and managing human resources, and in our work we 
have highlighted this as a high priority item for TSA as it transitions 
to DHS.
    Because the agency was built from the ground this past year, there 
was little existing infrastructure in place and TSA had to rely 
extensively on contractors to support its mission. This lack of 
infrastructure resulted in a lack of management oversight contributing 
to tremendous growth in contract costs. For example, one contract with 
initial cost estimates of $104 million grew to an estimated $700 
million. TSA must have the infrastructure to monitor and control its 
operating costs, especially given the large number and dollar volume of 
contracts it is managing, about $8.5 billion at the end of calendar 
year 2002 and continuing to grow.
    As we tracked TSA's progress in meeting the deadlines for the 
deployment of screeners and explosives detection equipment, we 
identified weaknesses in the controls over the interim contracts with 
screener companies, the contract for hiring the screener workforce, and 
the contract for deployment of explosives detection equipment. As we 
recommended, TSA hired the Defense Contract Audit Agency (DCAA) to 
audit its major contracts. The DCAA audited costs on the screener 
contracts and questioned over $124 million of almost $620 million 
audited. A TSA review of an NCS Pearson subcontractor with $18 million 
in expenses, determined that between $6 million and $9 million of these 
expenses appear to be attributed to wasteful and abusive spending 
practices. We know there are questions regarding the funding of the 
Boeing contract. We have been asked to look into this, and the use of 
$500 million from the supplemental appropriation, and we are currently 
working to answer these questions.
TSA Needs to Capitalize on Economies of Scale
    TSA, Customs Service (Customs) and Immigration and Naturalization 
Service (INS) will be together in one DHS Directorate providing a 
unique opportunity to capitalize on economies of scale. There are at 
least three different levels where savings can be realized through 
economies of scale: (1) centralized administrative services, (2) use of 
airport space, and (3) use of law enforcement personnel.

   A key cost savings is whether TSA will have its own separate 
        staff and bureaucracy for general counsel, contracting, 
        budgeting, human resources, and internal affairs or whether the 
        creation of DHS will offer centralized services and control 
        costs in these areas. We feel an early decision by DHS as to 
        what central services will be provided to TSA could reduce 
        staff requirements and establish effective cost controls for 
        TSA.

   At individual airports, TSA should explore ways to 
        consolidate its airport space requirements for functions like 
        office space, break rooms, training facilities, and holding 
        cells with other organizations that are merging into DHS. Some 
        of these organizations, such as Customs and INS, already have 
        space at airports, and consolidating these facilities will save 
        resources.

   With the tremendous tasks facing TSA, it is important that 
        the agency avoid extending itself beyond the basic tenets of 
        the Act's requirements. For example, we previously testified 
        that TSA needed to avoid mission creep. While the law is only 
        explicit about a federal law enforcement presence at 
        checkpoints, TSA was considering expanding its law enforcement 
        presence at the airports. TSA later abandoned these plans. 
        However, TSA is now considering extending Federal Air Marshals' 
        duties to conducting surveillance and patrolling at airports. 
        The Federal Air Marshals were set up to guard flights. Before 
        extending their mission, we hope TSA carefully considers the 
        budgetary and staffing implications, and thoroughly vets this 
        issue with airport authorities and federal and local law 
        enforcement agencies.

Aviation Security Is by No Means at an End-State--Most Heavy Lifting 
        and Costs Lie Ahead
    TSA made significant progress in meeting the Act's deadlines, but 
TSA's work is not done and it is far from an ``end state'' for securing 
the Nation's aviation system. The requirement that all checked bags 
undergo explosives detection equipment screening by December 31, 2002, 
carried a large price tag, estimated at $1.6 billion to date. However, 
the heavy lifting and costs still lie ahead. This year, TSA will need 
to complete its ``interim solution'' for deploying explosives detection 
equipment to the remaining airports where alternate screening methods 
are being employed today.
    At the same time, TSA needs to move forward with integrating 
explosives detection systems (EDS) into baggage handling systems at the 
largest airports. Some estimates put the cost of integrating the 
equipment upwards of $3 billion. For example, we have seen 
comprehensive plans for Boston Logan and Dallas/Fort Worth 
International Airports with estimates for integrating EDS into their 
baggage handling systems at $146 million and $193 million, 
respectively. How much it will ultimately cost depends on the type of 
structural changes required in the baggage make-up area, and the 
efficiency and reliability of the equipment. At this point, it is 
unclear how long this integration will take, how much this will cost, 
and who will have to pay for it.
    What is clear is that integrating EDS into the baggage systems at 
the largest airports will not be the end state. The need to deploy 
better, more effective equipment to meet current and future threats 
will be an ongoing need for years to come. We must continue to invest 
in research and development for cheaper, faster, and more effective 
equipment for screening passengers, their carry-on and checked baggage, 
and air cargo. However, we must be responsible in how we spend our 
research and development funds.
    Congress should look for synergy in the new DHS research and 
development programs. A shotgun approach for funding deployment of a 
technology before its time will not be efficient. The pressures from 
vendors to purchase and deploy their products will be significant, and 
TSA will require the support of Congress to make prudent spending 
decisions on new and proposed security technologies. Efforts should be 
focused on the development of technology that can improve security in 
multiple areas of homeland security, such as technology to screen 
containers at ports or borders and air cargo.
Decisions Need to Be Made on How to Pay For Security
    A major issue on the horizon is funding the next phase of EDS 
integration. Thus far, nearly all EDS equipment has been lobby-
installed. TSA's planned next step (integrating the EDS equipment into 
airport baggage systems) is by far the most costly aspect of full 
implementation. The task will not be to simply move the machines from 
lobbies to baggage handling facilities but will require major facility 
modifications.
    A key question is who will pay for those costs and how. The 
difference between TSA expenses and current aviation security revenues 
from taxes and airline fees cannot be covered by cost savings alone. 
The means for bridging this gap needs to be decided--to what extent it 
will be accomplished through the General Fund of the Treasury or 
aviation system users, which ultimately means passengers, airlines, and 
airports.
    We urge great caution before adding additional fees or taxes for 
air travel. Consumers already pay a significant amount in aviation 
taxes and fees. For example, a $100 non-stop round trip ticket includes 
approximately $26 (26 percent) in taxes and fees. Put differently, the 
airlines receive approximately $74 and the government \2\ gets $26. A 
$200 single-connection round trip ticket includes approximately $51 (26 
percent) in taxes and fees. Here the airline gets approximately $149 
and the government gets $51. The current financial state of the airline 
industry will make it difficult for air carriers or their passengers to 
pay the billions of dollars required each year to cover TSA's expenses.
---------------------------------------------------------------------------
    \2\ In this case, government includes both the Federal Government 
and airport authorities.
---------------------------------------------------------------------------
    While the current Airport Improvement Program (AIP) has provided 
some funding in the past for aviation security, we urge caution in 
tapping this program until we have a firm handle on airport safety and 
capacity requirements. In FY 2002, airports used over $561 million of 
AIP funds for security-related projects. In contrast only about $56 
million in AIP funds were used for security in FY 2001. Continuing to 
use a significant portion of AIP funds on security projects will have 
an impact on airports' abilities to fund capacity projects.
    We also need to remember the conditions of the summer of 2000--with 
its delays, cancellations, and near system gridlock. We need to make 
sure capacity issues are addressed now, while there is still time to 
avoid a repeat of the summer of 2000.
    The most likely options for meeting TSA's financial requirements 
over and above the existing revenues are for the General Fund to 
continue to pay a large portion of security costs, along with strong 
contract oversight and cost controls. While we do not see much of a 
dispute that aviation security is a matter of national security, 
Congress will ultimately have to make a decision about how these costs 
will be paid for and the proper mix between airlines, airports, 
passengers, and the General Fund. I should also underscore, Mr. 
Chairman, that while the debate today is on aviation security, you will 
also face these same questions regarding other modes of 
transportation--rail, transit, trucking, pipelines, and maritime.
Capital Costs: TSA Needs to Build Efficiencies Into Existing Deployment 
        Efforts and Improve Performance of Existing and Future 
        Technologies
    Everyone recognizes that the challenge TSA faced in meeting the 
statutory December 31st deadline to screen 100 percent of checked 
baggage was both unprecedented and monumental. An effort of this 
magnitude--an estimated 1,100 explosives detection systems (EDS) and 
5,000 explosives trace detection (trace) machines deployed--was one 
that had never been undertaken on a scale of this magnitude, with very 
little experience to draw on, and even less time to make judgments on 
what might be more cost-effective.
    TSA now faces significant challenges in controlling its capital 
costs, particularly in terms of moving from the system that now exists 
to screen all checked baggage toward a solution that moves the 
screening operations from airport lobbies into the baggage handling 
systems at the Nation's largest airports. TSA needs to ensure that 
equipment is properly integrated into airport baggage systems, and that 
it can be relied on to perform as expected. At the same time, TSA needs 
to begin fulfilling its additional equipment needs, completing the 
integration of EDS into airport baggage handling systems, upgrading 
equipment at passenger screening checkpoints, prototyping new systems 
for screening checked baggage, and developing its future equipment 
needs for screening cargo and mail.
    Moving Toward an In-Line Solution: Checked Baggage Screening. 
Although TSA made every effort to meet the December 31st deadline to 
screen all checked baggage using explosives detection equipment, 
deployment of the equipment was not completed at all the Nation's 
commercial airports. At airports where deployment was not completed, 
TSA exercises its authority to implement alternate screening methods. 
These alternate methods are short-term, temporary solutions for 
screening checked baggage as TSA continues with its deployment efforts.
    To meet the deadline, TSA executed a two-phase deployment approach. 
In the initial phase for screening all checked baggage, some airports 
use EDS, with trace machines used only for resolving alarms; others use 
trace machines exclusively; and some use a mix of EDS and trace 
machines.
    In phase two, at a future date that is not yet firm, TSA will move 
the EDS machines into baggage systems at the largest airports. It is 
unclear how much this will cost and who will have to pay for it. While 
integrating EDS machines into airport baggage handling systems takes 
substantially more up-front capital, future cost savings could be 
realized with a reduction in annual labor costs. Lobby-installed EDS 
machines and trace detection machines require twice the number of 
screeners compared to integrated EDS machines.
    The ultimate funding needs of TSA will be most affected by who 
assumes the costs of integrating the equipment--airports or TSA--and 
how it will be paid for. Some estimates put the costs of integrating 
the equipment upwards of $3 billion, depending on whose estimates are 
the most reliable with respect to the nature and type of structural 
changes required to install EDS machines. Most estimates we have seen 
are based on a ``rough order of magnitude'' and are more than likely 
subject to change. However, we have seen comprehensive plans for both 
Boston Logan and Dallas/Fort Worth International Airports with 
estimates for integrating EDS into their baggage handling systems at 
$146 million and $193 million, respectively.
    In an effort to provide some relief to the airport community for 
costs associated with EDS and trace machine installations, Congress, in 
TSA's FY 2002 supplemental appropriation, provided a $738 million set-
aside for ``physical modification of commercial service airports for 
the purpose of installing EDS and trace machines.'' There now appears 
to be some question as to whether the set-aside was spent for its 
intended purpose. In a joint letter to Secretary Mineta, dated January 
30, 2003, the American Association of Airport Executives and the 
Airports Council International reported they had learned that $500 
million of the $738 million was shifted to fund the Boeing contract.
    Boeing was tasked to (1) complete airport site assessments at over 
400 airports; (2) submit to TSA a proposal on the right mix of 
equipment for each airport and where the equipment will be installed; 
(3) modify facilities to accommodate the equipment; (4) install and 
make the equipment operational; (5) maintain the equipment; and (6) 
train a screening workforce. Boeing's contract does not include the 
purchase of explosives detection equipment, which will be funded 
separately by TSA.
    TSA agrees that $500 million of the $738 million was used to fund 
the Boeing contract and views using the $500 million toward Boeing's 
efforts as appropriate. We have been requested to look into this, and 
the use of $500 million from the supplemental appropriation, and we are 
currently working to answer these questions.
    Fulfilling Near-Term and Future Equipment Needs. Over the next 2 to 
5 years, TSA can be expected to purchase additional equipment for 
completing the integration of EDS into airport baggage handling 
systems, upgraded equipment needs at passenger screening checkpoints, 
and prototyping new systems for screening checked baggage. Over this 
period, TSA has opportunities to refine its deployment and procurement 
strategies in order to better identify its equipment needs.
    The requirement that all checked bags undergo explosives detection 
equipment screening by December 31, 2002, carried a large price tag, 
estimated at a cost of $1.6 billion. This does not include the cost of 
additional EDS machines needed for integrated systems to replace 
explosives trace detection devices currently used for screening checked 
baggage. Also, some models of EDS currently deployed are not suited for 
in-line systems as their capacity rates make them better suited as 
lobby-installed or stand-alone machines. Modeling of airline passenger 
and baggage flows also needs to be as precise as possible--factoring in 
future capacity demands--so that machines purchased best meet capacity 
demands.
    Although equipment used in screening passengers and their carry-on 
bags has been in place at airports for over 2 decades, little has 
changed in the technology used. Existing x-ray machines for screening 
carry-on baggage do not automatically detect for explosives. Congress 
provided TSA with $23 million for the deployment of enhanced walk-
through metal detectors. TSA has spent about $12.6 million to purchase 
and install approximately 1,345 detectors.
    TSA also has an ongoing pilot program to field test explosives 
trace detection portals for screening passengers. In the immediate 
future (less than 1 year), this technology could prove to be the best 
technology available for screening passengers for both concealed 
metallic threat objects and bombs. We should know in less than a year 
whether this technology is best suited for screening passengers.
    An area that has received little attention, to date, is the actual 
screening of cargo using EDS. This will be an area that TSA needs to 
move forward on now that the Aviation and Transportation Security Act 
requires the screening of all cargo. This requirement was not tied to 
any specific deadline, unlike the requirement to screen all checked 
baggage using explosives detection systems by December 31, 2002.
    The capital costs to deploy a certified machine to screen cargo, if 
one becomes available, could far exceed the costs for deploying EDS to 
screen checked baggage. Machines that are available for screening 
cargo, albeit not certified by TSA, cost as much as $10 million, 
compared to less than $1 million for an EDS. Machines for screening 
cargo are also bulky and costly to install. For the time being, there 
are not many attractive emerging technology options available for 
screening cargo. Almost any credible scenario involves breaking 
palletized or other bulk shipped cargo into its smaller component parts 
for screening.
    Research and Development Efforts. Over the years, the Government 
has provided funding for developing prototypes; establishing pilot 
programs; furthering research, engineering, and development; and 
purchasing and deploying new aviation security technologies. As we move 
to improve homeland security, including aviation security, it is 
critical that security equipment also continue to be improved to face 
new and evolving threats.
    To the greatest extent practicable, TSA should test and evaluate 
promising products operationally, using pilot programs at a variety of 
different size airports in several geographic and demographic areas, 
before committing large sums of money to full-rate-of-production 
contracts. This is important because pilot programs offer an 
opportunity to demonstrate clearly how the product will perform in its 
intended environment when used by typical operators.
    As TSA moves to the Department of Homeland Security, it should also 
look at technology being developed for other homeland security areas as 
a potential area for new transportation security technology. Technology 
is another area where economies of scale could be realized, and 
Congress should look for synergy in the new Department's research and 
development programs. For example, technology developed to screen cargo 
containers on the border or shipping containers may one day be refined 
to a level where it could be used to screen air cargo.
Operating Costs: Tightening the Reins on TSA Recurring Costs
    While deadlines were without a doubt driving factors behind TSA's 
efforts thus far, TSA must now devote significant efforts towards 
building an effective infrastructure for controlling costs. The 
overriding goal for TSA must be to provide tight and effective security 
that ensures cost-effective use of taxpayer dollars. TSA faces 
significant challenges in controlling its operating costs, particularly 
in terms of overseeing contracts and controlling workforce costs.
    Contract Oversight. TSA initially (and understandably) focused its 
resources on hiring and training a screening workforce and deploying 
sufficient explosives detection equipment. This was an enormous 
undertaking requiring billions of dollars by an organization building 
from the ground up while facing tight statutory deadlines and the need 
to move out expeditiously. However, the lack of pre-existing 
infrastructure for controlling costs resulted in a lack of management 
oversight contributing to tremendous growth in contract costs.
    For example, one contract with initial cost estimates of $104 
million grew to an estimated $700 million. TSA must build the 
infrastructure needed to monitor and control its operating costs, 
especially given the large number and dollar volume of contracts it is 
managing (about $8.5 billion at the end of calendar year 2002 and 
continuing to grow).
    As we noted in the DOT Top Management Challenges report issued on 
January 21, 2003, TSA faces significant challenges in providing 
effective security in a way that avoids waste of taxpayer dollars. 
During the early months of TSA's formation, the agency relied on the 
expertise of other DOT contracting offices until it hired staff. As we 
tracked TSA's progress in meeting the deadlines for the deployment of 
screeners and explosives detection equipment, we identified weakness in 
the controls over the interim contracts with screener companies, the 
contract for hiring the screener workforce, and the contract for 
deployment of explosives detection equipment. Because of the lack of 
infrastructure, we recommended TSA hire DCAA to audit costs on the 
screener contracts. TSA adopted our recommendations, and DCAA has so 
far questioned over $124 million of almost $620 million in costs 
audited.

   Interim Contracts With Screener Companies. As required by 
        the Act, TSA assumed responsibility for passenger screening at 
        all U.S. commercial airports on February 17, 2002. TSA 
        contracted with 74 incumbent screener companies to continue the 
        day-to-day operations until a federal screener workforce was 
        hired, trained, and deployed. TSA obligated over $1 billion for 
        the interim screener contracts.

        We audited TSA's oversight of the screener contracts and found 
        that TSA still had not negotiated final rates for 61 of 74 
        contractors, including the 13 contractors that accounted for 93 
        percent of the $1 billion obligated for the contracts. We also 
        found that six contractors charged TSA substantially higher 
        hourly billing rates than they charged air carriers for similar 
        services. While we recognize some cost increases were 
        reasonable given the need to keep sufficient staff to run the 
        checkpoints, many costs appeared excessive. Comparing hourly 
        rates charged air carriers to the rates charged TSA, and using 
        the same work hours through November 19, 2002, we estimate that 
        the six contractors would charge TSA about $305 million more 
        than they would have charged air carriers.

        TSA identified several factors that contributed to the problems 
        experienced, including the number of agreements, the screening 
        companies' lack of familiarity with federal contracts, and lack 
        of operational staff at the airports. In August, TSA reached 
        agreements with the Defense Contract Management Agency (DCMA) 
        to administer, and DCAA to audit, the 74 screener contracts.

        Much has been done by TSA, through the assistance of DCMA and 
        DCAA, to obtain pricing and audit costs, to definitize the 
        letter contracts, and to ensure that final payments to the 
        contractors represented actual costs incurred. To date, cost 
        and pricing data have been obtained from 9 of the 13 larger 
        contractors and proposal audits have been completed for 8 of 
        the 9. For the eight completed proposal audits, the proposals 
        totaled $340 million, and DCAA questioned nearly $80 million of 
        that amount. Voucher audits have been completed for two of the 
        other four large contractors, and DCAA questioned more than $6 
        million of $127 million audited. This leaves three of the 
        larger contractors where the audits were not completed, and 
        DCAA has thus far questioned another $38 million.

        TSA has detailed the corrective action it has taken, including 
        directing DCMA to withhold contractor payments until the DCAA 
        audits are completed and the final hourly billing rates have 
        been negotiated. TSA indicated that it is currently holding 
        over $90 million in invoice payments to the largest 
        contractors. TSA expects all outstanding issues regarding the 
        screening company contracts to be closed by late April 2003.

   Contract for Hiring the Screener Workforce. On February 27, 
        2002, TSA contracted for NCS Pearson to recruit, assess, and 
        hire the nationwide screener workforce, and to provide human 
        resources support for all TSA employees. The contract was a 
        labor and materials cost contract that obligated TSA to 
        reimburse NCS Pearson for the actual costs of services provided 
        with no contractual requirements or incentives to control and 
        contain expenses. During the period of the contract, from 
        February to December 2002, the overall cost of the contract 
        grew from $104 million to an estimated cost of $700 million.

        During the contract period, TSA personnel focused on the hiring 
        and deployment of screeners, but provided limited oversight for 
        the management of the contract expenses. Although obligations 
        are normally made prior to expenses being incurred, NCS Pearson 
        incurred over $135 million of expenses during July and August 
        2002, but TSA did not obligate funds to cover these expenses 
        until September. In addition, it was not until November 4, 
        2002, that TSA obligated sufficient funds to cover all the 
        costs incurred in September and October, which exceeded $160 
        million in each of those 2 months.

        By September 2002, TSA was concerned by the rising cost of the 
        contract, and in October 2002, it initiated a preliminary 
        review of NCS Pearson's financial management of subcontractor 
        expenses. TSA reviewed one subcontractor with $18 million of 
        expenses charged to the contract. TSA determined that between 
        $6 million and $9 million of the expenses appeared to be 
        attributed to wasteful and abusive spending practices. TSA 
        attributes this problem to ``the complete breakdown of 
        management controls at NCS [Pearson]'' and failure of the 
        subcontractor to exercise reasonable care in expenditures for 
        equipment and warranty, and for employee travel. To its credit, 
        TSA hired DCAA to audit expenses claimed under the NCS Pearson 
        contract.

        TSA has contracted with two different companies, one for hiring 
        and one for human resources support, to provide these services 
        beginning in January 2003. Some personnel files from NCS 
        Pearson did not comply with Office of Personnel Management 
        requirements. Therefore, TSA directed the two new contractors 
        to review all personnel files and data records provided by NCS 
        Pearson and to separately track costs for correcting any 
        identified errors or deficiencies in the files. TSA intends to 
        charge NCS Pearson back for the costs needed to correct the 
        identified deficiencies. However, TSA also needs to capitalize 
        on the lessons learned from the NCS Pearson contract and 
        closely monitor the new contractors' performance and costs.

   Contract for Deploying, Improving and Maintaining Explosives 
        Detection Equipment. On June 7, 2002, TSA entered into a $508 
        million cost plus award fee type contract with Boeing Service 
        Company to deploy EDS and ETD machines to the Nation's airports 
        and to train the checked baggage screener workforce needed to 
        operate the equipment. The period of performance for this 
        contract was to expire on December 31, 2002. However, upon 
        realizing that not all airports would be completed by the 
        deadline, TSA issued a contract modification on December 23, 
        2002, to extend the period of performance to December 31, 2003.

        To date, TSA has funded $542 million on the contract exclusive 
        of change orders. This amount is likely to increase 
        substantially as Boeing submits change orders to TSA for 
        negotiation. Multiple change orders for an individual airport 
        can be submitted and may be substantial. For example, TSA has 
        approved seven of the eight change orders submitted by Boeing 
        for Portland International Airport. These seven change orders 
        total approximately $402,000. To date, systemwide change orders 
        totaling $13.1 million have been submitted to TSA.

        TSA must provide continuous oversight and tight controls over 
        the Boeing contract and closely monitor individual change 
        orders and their cumulative effect on total contract costs. The 
        agency has proposed engaging DCAA to audit the Boeing contract, 
        but has yet to act on this. By doing so, this will serve as a 
        means of ensuring that Boeing's cost and pricing data are 
        accurate and allowable under the terms of the contract.

        Another area of concern is that of continuous improvement for 
        the EDS machines. Both EDS manufacturers are contractually 
        obligated to continue developing a product improvement program 
        that decreases the false alarm rates experienced by their 
        already deployed machines. At the same time, Boeing is also 
        contractually obligated to work with TSA and the EDS 
        manufacturers to develop a solution to improve the false alarm 
        rates. It is unclear to us how Boeing's work regarding 
        continuous improvement differs from that of the EDS 
        manufacturers. In our opinion, there is a great potential for 
        duplication of effort. To date, Boeing has been paid $7.6 
        million for continuous improvement efforts.

        TSA needs to bring clarity to the scope of this contract. 
        Originally, the EDS manufacturers were responsible for 
        performing maintenance on the equipment during the warranty 
        period; however, maintenance responsibility was also included 
        in the Boeing contract. Although TSA has recently exercised its 
        option for Boeing to provide maintenance service, the EDS 
        manufacturers and Boeing have yet to resolve the scope of the 
        services to be provided. This becomes extremely important as 
        the warranty period for the equipment expires.

    Controlling Workforce Costs and Capitalizing on Economies of Scale. 
In previous testimonies, we have reported areas where TSA can improve 
its cost controls. For example, in June 2002, we expressed concerns 
regarding the number of positions being created with salaries in excess 
of $100,000. While we have seen improvements in this area, there are 
other opportunities that need to be further addressed by TSA such as 
better utilizing part-time positions and capitalizing on economies of 
scale in the organization of the Department of Homeland Security.

   Controlling Workforce Costs. As part of TSA's FY 2002 
        supplemental appropriation, Congress capped TSA's hiring at 
        45,000 full-time permanent positions. However, as of December 
        31, 2002, TSA had a total workforce of about 66,000 employees. 
        Of these 66,000 employees, approximately 28,000 were hired 
        under temporary appointments and, according to TSA, are not 
        subject to the congressionally mandated staffing cap.

        We have previously testified on the need for TSA to control its 
        workforce costs by making full use of part-time positions to 
        better match screener staffing to passenger flows at many 
        airports. In June 2002, TSA announced that 20 percent of its 
        total screener workforce would be part-time and seasonal 
        positions. However, as of December 31, 2002, only 1,225 
        (approximately 2 percent) of TSA's total screener workforce 
        were part-time employees.

   Capitalizing on Economies of Scale. The new Department of 
        Homeland Security has significant implications for TSA in terms 
        of activities TSA anticipated performing and staffing up for. 
        These include intelligence gathering and analysis, criminal 
        investigations, administrative support, and space requirements 
        at airports. The new Department offers economies of scale in 
        many areas including general counsel, budget, contracting, 
        internal affairs, and human resources.

        We previously testified on the need for TSA to capitalize on 
        the economics of scale. Specifically, in April 2002, we 
        testified on TSA's plans to assume numerous law enforcement 
        responsibilities that seemed to us to be beyond the basic 
        tenets of the Act. Although TSA subsequently abandoned that 
        plan, we have been advised by TSA that duties of Federal Air 
        Marshals may be extended to include surveillance and patrolling 
        at airports. With the tremendous tasks facing TSA, it is 
        important that the agency avoid extending itself beyond the 
        basic tenets of the Act's requirements.

        There are also opportunities for economies of scale in terms of 
        airport space. The deployment of 62,000 screeners, 
        reconfiguration of screening checkpoints, and installation of 
        explosives detection equipment, require considerable use of the 
        limited space available at airports. Now that this workforce is 
        in place, additional needs for administrative and support space 
        are being identified. For example, the Federal Security 
        Directors must ensure an adequate sized training room is 
        established at each airport to support continuing, computer-
        based training for screeners.

        TSA should explore the consolidation of its administrative, 
        training, and support space with the administrative space now 
        used by other agencies that will be part of DHS, such as the 
        Customs and the INS, at the major international airports. The 
        impending reorganization of these agencies under the same 
        Directorate within DHS provides a unique opportunity for the 
        consolidation of administrative space and possible 
        administrative support activities.

   Leasing Vehicles. The Federal Air Marshals program, as with 
        any law enforcement function, has a need to lease government 
        owned vehicles (GOV). However, the decision on how many and 
        what type of vehicles to lease was not well thought out. The 
        decision that each field office would get 12 GOVs and the 
        majority of the GOVs would be Sport Utility Vehicles and 
        Passenger Vans was costly. Annual leasing rates for the current 
        FAM fleet are about $1 million. TSA could save about $200,000 a 
        year if the FAM program leased all midsized sedans instead of a 
        mix of Sport Utility Vehicles and Passenger Vans.

        This savings does not include the cost for the mileage rate 
        charged per vehicle. Mileage rates for SUVs are 39 percent 
        higher than the mileage rates charged for midsized sedans. If 
        an SUV is driven 12,000 miles per year compared to the same 
        mileage for a midsized sedan, the annual mileage expense for 
        the SUV would be about $1,000 higher than the mileage expense 
        for a midsized sedan. Additional annual cost savings could be 
        realized if TSA reduced the number of vehicles leased by 
        determining the actual need for GOVs by field office location.

Funding: Decisions Need to be Made Over Who Will Pay for What and in 
        What Amounts.
    It is now very clear that the cost of good security is significant. 
In November 2001, when the Aviation and Transportation Security Act 
passed, the only financial data available were ``best guesses''--that 
security costs for airlines were somewhere around $1 billion annually, 
and that there were between 28,000 and 30,000 screeners. Today, TSA 
employs nearly 62,000 screeners (of whom 28,000 are ``temporary'') and 
capital and operating costs for FY 2002 alone exceeded $5.8 billion.
    It is also now very clear that the revenues established by the Act 
will pay for only a fraction of TSA's costs. The means for bridging 
this gap need to be defined--whether it is accomplished through revenue 
from fees, airline contributions, airport funds, and/or direct 
appropriations from the General Fund. Clearly, there are difficult 
decisions to be made over who will pay for what, in what amount, and 
from what funding source.
    Revenues Created by the Aviation and Transportation Security Act 
Cover Only a Fraction of TSA's Costs. Although the Act created several 
new revenue sources to pay for the costs of additional security, it is 
now evident that the passenger security fee will pay for only a 
fraction of TSA's costs. For example, current estimates are that the 
passenger security fee will generate only about $1.66 billion in FY 
2003 and $1.74 billion in FY 2004. To meet TSA's FY 2003 budget of $5.3 
billion using only proceeds from the security fee, we estimate the fee 
would have to be raised from the current $2.50 per flight segment to 
almost $8 per flight segment. This means that, on a round trip flight 
with one connection each way, a passenger would pay over $32 in 
security fees alone.
    Consumers already pay a significant amount in aviation taxes and 
fees. For example, according to the Air Transport Association, a $100 
non-stop round trip ticket includes approximately $26 (26 percent) in 
taxes and fees. A $200 single-connection round trip ticket includes 
approximately $51 (26 percent) in taxes and fees.
    The Act also allowed TSA to impose an aviation security fee on air 
carriers based on the amount each air carrier paid for screening 
passengers and property in calendar year (CY) 2000. In August 2001, 
prior to the passage of the Act, the Air Transport Association 
estimated that the annual security requirements for the airline 
industry totaled about $1 billion for activities such as screening, 
training, and acquisition of security equipment. Based on further 
industry data on security costs, TSA projected collections of about 
$750 million annually from air carriers. However, based on the 
certified submissions by air carriers for CY 2000, TSA now expects to 
only collect about $300 million annually for this fee. This leaves a 
difference of $450 million annually that will not be paid by air 
carriers and will have a significant impact on TSA's funding 
requirements.
    TSA had proposed that Congress legislatively establish the fee at a 
flat rate of $750 million per year, which TSA proposed apportioning 
among air carriers based on their share of market or other appropriate 
means. However, the 107th Congress did not act on that proposal, and 
this remains an open issue.
    A Key Question Is the Amount of Airport Funds That Should Be Used 
for Security. In FY 2002, airports used an unprecedented amount of AIP 
funds for security-related projects. In the past 10 years, only about 
1.5 percent of AIP funds were used for security, while 17 percent of 
AIP funds (or over $561 million) were spent on security-related 
projects in FY 2002. Despite this increase, FAA was able to fund 
safety, security, and capacity-related projects in FY 2002 largely 
because of a record carryover in AIP funds from previous years. 
However, it is evident that if the level of AIP funds committed to 
security continues, there will be trade-offs in other airport programs.
    A major issue on the horizon for airports is funding the next phase 
of EDS integration. Thus far, nearly all EDS equipment has been lobby-
installed or stand-alone. TSA's planned next step (integrating the EDS 
equipment into airport baggage systems) is by far the most costly 
aspect of full implementation. The task will not be to simply move the 
machines from lobbies to baggage handling facilities but will require 
major facility modifications. For example, modifications needed to 
place EDS equipment in-line at Boston's Logan International Airport are 
estimated at $146 million. Dallas/Fort Worth International estimates 
that placing EDS in-line will cost nearly $193 million.
    A key question is who will pay for those costs. AIP funds as well 
as passenger facility charges are eligible sources for funding this 
work. However, using those funds for security could have implications 
on long-term capacity projects (such as building new runways). While 
the current AIP has provided some funding in the past for aviation 
security, we urge caution in tapping this program until we have a firm 
handle on airport safety and capacity requirements.
    We will also remember the conditions of the summer of 2000--with 
its delays, cancellations, and near system gridlock. We need to make 
sure capacity issues are addressed now, while there is still time to 
avoid a repeat of the summer of 2000.
    The most likely option for meeting TSA's financial requirements 
over and above the existing revenues are for the General Fund to 
continue to pay a large portion of security costs, along with strong 
contract oversight and cost controls. While we do not see much of a 
dispute that aviation security is a matter of national security, 
Congress will ultimately have to make a decision about how these costs 
will be paid for and the proper mix between airlines, airports, 
passengers, and the General Fund. I should also underscore, Mr. 
Chairman, that while the debate today is on aviation security, you will 
also face these same questions regarding other modes of 
transportation--rail, transit, trucking, pipelines, and maritime.
    That concludes my statement Mr. Chairman. I would be pleased to 
address any questions you or other Members of the Subcommittee might 
have.

    Senator Lott. Well, thank you, Mr. Mead. That was a very 
interesting presentation, and you touched on a number of 
subjects that we wanted to have addressed here.
    But let me go back to Admiral Loy and join in the 
expressions of appreciation and commendation for the job that 
you have done that we have heard from Mr. Mead and Senator 
McCain and Wyden. I think you really have been--you've 
undertaken a major task, and I think you've done a great job 
with it.
    Admiral Loy. Thank you, sir.
    Senator Lott. But there is, obviously, a lot more to do. 
We--you did have to do it with a specified amount of money in a 
specified period of time, and you did have to start from zero 
and go to sixty, and when you have to do that sort of thing, 
you know, maybe you do make some mistakes normally or you 
overbuild in certain respects and you don't quite do enough in 
others, and we know we've got other issues we have to address. 
And so we need to get your input about how to handle that.
    I, personally, feel that TSA has been doing a good job. The 
workers, you're right, the diversity is very impressive. I 
think that they--the esprit de corps, their attitude seems to 
be good, and I hope we can maintain that and not lose it, you 
know, a couple of years from now. You do--it does seem like 
there are a lot of them in some of these airports. Maybe that's 
critical. But they're very visible, and maybe that's a part of 
why I do also feel that we are safer as a result of what has 
been done--being done by TSA.
    But there are a number of questions that we need to 
address, and let me try to wrap the cost questions, sort of--
maybe three parts, into one question. For instance, the point 
was made, I believe by Mr. Mead, that AIP funds have been used 
for security costs. I don't--we can't allow that to continue, 
because, while security is important, if we don't address the 
improvement needs which gets to safety and capacity and 
everything else, we're going to have a problem of a different 
kind. I guess maybe some of these costs were one-time costs, 
and, therefore, it won't be necessary to have that continue.
    But, you know, I'd like for you to speak to the AIP 
problem. We're going to have the costs--we're going to have to 
design the system of having armed pilots. We're going to have 
to assess the cost of that. Their cockpit doors, as I 
understand it from talking to the airlines and to you and to 
others, basically we authorized 500 million for reimbursement 
for these cockpit kits that were installed on the doors, and 
the costs, probably somewhere between two- and three-hundred 
million, I guess. And we have provided a hundred million, I 
think is what we expect to get, I guess, in the Omnibus bill, 
is that correct? Or have we provided that----
    Admiral Loy. No, sir. The FAA is in the process of----
    Senator Lott. They've got a hundred----
    Admiral Loy.--of providing up to a hundred million over the 
course of the last two fiscal years.
    Senator Lott. Well, there's a specific area where I think 
we ordered this, and we indicated we were authorizing payment 
if we were going to pay for it, and we haven't done it. So--and 
then there's also the problem with, you know, what the airports 
operators have had to deal with.
    So just deal, if you will, on that combination of cost 
questions. What is it going to be in the future? And who should 
be bearing these costs? Because I think the airlines and 
airports have been having to bear costs that really the 
Government should be paying for.
    Admiral Loy. Yes, sir. Let me just, if I may, run down your 
list as I jotted it down. The ``lots of them'' comment is a--I 
think, a valid comment, sir. If we were going to err, I 
consciously wanted to err on the side of surging capability 
there to meet the congressionally mandated deadline. And if you 
look at the intended slope of where we want to go across the 
next two fiscal years, we will go from about 60,000 at the 
moment, a combination, by the way, of full-time, permanent, and 
part-time employees, down to 51,000 by the end of fiscal 2003, 
and on down to about 48,000 screeners by the end of fiscal 
2004.
    Now, there's a variety of things that enable us to be doing 
that, sir, as you know. One of them is just efficiencies. And, 
as you described, I want that mix at the other end of the 
fiscal year to be a mix of full-time, permanent, and part-
timers, where we have learned the lessons of peak and valley 
management across the days and the weeks at any given airport, 
and allowing FSDs--I'd love nothing more, sir, than by the time 
the FY05 cycle rolls around, that if I'm an FSD at a major 
airport, I get a budget that I have to live within; and it's 
not a matter of dictating how many screeners or how much of 
this or how much of that, but within the framework of a good 
management game plan, the FSD is empowered and delegated and 
entrusted to do the very best security job he can at that 
airport within a given budget.
    As to AIP funds, I think, in the--in the aftermath of the 
tragedy, there simply were no mechanisms around to be used 
artfully in the process of grappling with the costs that we 
were facing. AIP, as Ken mentioned, offered a mechanism in 
place that, through the FAA and through its process of 
providing AIP grants, could actually get dollars to the 
airports quickly when they needed them. And so the $561 million 
level was where we were in 2002. I would like to think that 
there may be one last bite at the apple, in terms of a high-
priority security set of programs in FY03. But I acknowledge, 
sir, absolutely, that the intention of operating expenses and 
capacity improvements, in terms of what AIP is originally 
designed for, is where we should be ending up in that regard.
    As far as the--a flight deck--I'm sorry, the Federal Flight 
Deck Officer program is concerned, arming pilots against 
terrorism, regardless of what my personal feelings might have 
been, was an enormously popular thing here--87 to 6 in the 
Senate, a three-to-one vote in the House--and we are designing 
exactly to the date that was required--that is, by February the 
25th, just a couple of weeks from now--a program that will be 
paid for largely by--not by the airlines; it'll be paid for by 
the Federal Government. That's what the law intends.
    We have, within our enormously foreshortened budget in the 
CR and which we've been laboring under for months now, set 
aside enough money to do a prototype of the FFDO program 
wherein we can learn the lessons we need to learn to go to a 
more enhanced program if and when the Congress so funds that in 
the FY03 Omnibus bill for 2003, and the President has asked for 
$25 million in the 2004 budget to continue the program on into 
that. But that's, that, in my mind, should be, as you say, sir, 
a Government-funded program. We'll buy the equipment, we'll do 
the training, we'll do whatever is the various dimensions of 
the program.
    One of the--one of the elements of that, as you and I 
discussed in your office, sir, is the training capabilities and 
whether we use the federal facilities that FLTC offers. I 
believe that's the right place, especially to do the prototype. 
Because at the other end of the day, I'm the guy that's going 
to have to deputize these guys to put a gun in their hands and 
do the right thing in the middle of an airplane at 30,000 feet. 
So I am very concerned that we do that right.
    And is there an opportunity down the road for a private-
sector training opportunity? Absolutely. We've gotten in touch 
with Mr. Shaw. We have--we're making arrangements to hear him 
out, in terms of his particular opportunity that he would 
offer. But, across the board, there very well may be a private-
sector opportunity to do that right.
    Cockpit doors? What was authorized and what was 
appropriated and what turned into $100 million going to the 
airlines to do the job is exactly as you have described it, 
sir. On the other hand, the certification process that FAA was 
responsible for to get the cockpit door packages available to 
the airlines is going very well. We're at about 92 percent of 
the 6,000 airplanes right now that have certified packages 
available to them to do the job. Another 7 percent is 
forthcoming, so we're just about there by the April 9, 2003, 
deadline for that program.
    In terms of installation, we're at about 40 percent as I 
last checked with the FAA administrator, so the program is 
marching along the path it's designed to march along.
    In terms of who pays? As Ken says, the bottom line is 
always ``who pays.'' We have provided--not we--the FAA, who is 
responsible for the program, has provided that $100 million on 
the way to what appears to be about a $300 million bill.
    Last, the general notion of airport operators and the--you 
know, the challenge they have as part of this. One of the 
things that I would like to point out is the--is the deep reach 
that I tried, personally, to engage, with Chip at AAAE, with 
his counterpart, Mr. Plavin, at ACINA, and with hosts of 
airport directors, who--to whom I gave my personal number to 
make sure that in the engagement process, we heard from them 
and listened very carefully as--to allow them to be part of 
what was going on at the table.
    Senator Lott. We've got senators that push the hardest for 
this legislation all here this afternoon. And certainly one of 
those that led the way in creating TSA and getting this 
legislation through is Senator Hollings, from South Carolina.
    So, Senator Hollings, since you didn't get to make an 
opening statement and since you're one of the fathers of this--
--

             STATEMENT OF HON. ERNEST F. HOLLINGS, 
                U.S. SENATOR FROM SOUTH CAROLINA

    Senator Hollings. I've got to yield to my chairman.
    Senator McCain. No, no. Please.
    Senator Hollings. OK. Let me ask consent to place in the 
record a statement by Senator Boxer in which she calls for 
counter measures to be placed on commercial aircraft to defend 
against shoulder-fired missiles.
    Senator Lott. Without objection.
    Senator Hollings. I appreciate it very much. *
---------------------------------------------------------------------------
    * The information referred to is in the Appendix.
---------------------------------------------------------------------------
    And, right to the point, you've brought order out of chaos, 
Admiral Loy. And it was discombobulated. They were more worried 
about furniture, office furniture and all that nonsense, really 
bureaucratic, and you've cleaned it up, and you've got our 
gratitude, I can tell you that. We feel a lot better about the 
entire program.
    When you talk about the training--I'm getting to the 
hardening of the doors now, and I'm getting to that pistol and 
so forth--let's continue to study. You're not training anybody 
to commit suicide. The challenge is, five fellows that are 
ready to commit suicide. So how do you defend against that? You 
secure the cockpit door. You can send all these people down to 
FLETC all they want, and how they're going to shoot accurate 
and all of that--bah, humbug. You're not going to do it. So 
let's live in the real world and get on with the hardening of 
the doors, and then come back to the Israeli approach of--if 
there's any disturbance, go down to the ground, and law 
enforcement meets you. And they've never had a hijacking.
    How about the hardening of the doors? You say 300 million? 
They are only 40 percent installed. That's what I want to know 
about.
    Admiral Loy. They're about 40 percent installed, sir. All 
of the packages have now been certified, so that the processes 
of getting on with the installation is available through the 
FAA to the airlines. But, at this particular point, as of--
January 24th, I think was the last data I saw--they're at about 
40 percent in the installed fleet. So of the 6,000 airframes 
that we're talking about, somewhere in the--in the 2500 ball 
game have actually got the doors aboard.
    Senator Hollings. And is there money there to do it?
    Admiral Loy. The money is the question, sir. And the FAA 
is----
    Senator Hollings. Well, what's the answer, then? How much 
money do we need? And is it in the budget?
    Admiral Loy. Oh, I think it's a--it's a pretty--well, I 
don't know what's in the budget, sir, you know, given we don't 
have a budget yet for 2003. But it's about a $300 million 
program to which the FAA is already processing about $100 
million.
    Senator Hollings. But, I mean, in 2004--we just had a 
hearing this morning with the director of the budget on the 
2004 budget, and that's what we're trying to determine, that 
you get enough money. That's really one of the big interests we 
have here at the committee level.
    Admiral Loy. Yes, sir. Well, the deadline for this program 
is April 9th this year, 2003----
    Senator Hollings. Right.
    Admiral Loy.--a couple of months from now.
    Senator Hollings. Right.
    Admiral Loy. So I would like to think that we would be done 
with this program and have the need for no money as it relates 
to hardened doors, other than new manufacturers, which will 
make a--that'll be the easy part to do it then.
    Senator Hollings. How about the--not just the hardening of 
the doors, but the EDS systems and everything else? Do you have 
enough money--what money--I'm back to what we had early this 
money and what we had before this Committee.
    Mr. Chairman, we're part of that disaster down there at--
the Columbia disaster. There's no question in my mind. You see, 
we sit up here, as politicians, and we follow the needs of the 
country. I'm for defense, I'm for homeland security, I'm for 
the airports, I'm for the healthcare, I'm for this, I'm for 
that, and then we get around to the needs of the campaign, I'm 
for tax cuts.
    And so what happens for 15 years around here--you could see 
it, and I told Sean O'Keefe, when he first came onboard, I 
said, ``You can't afford both that there space station''--
started off at 8 billion, went up to 100 billion--``and you 
can't afford them to keep that going and keep your shuttle 
program going.'' And I favor the shuttle program. I told him 
that. I said, ``We've been neglecting that.'' That vehicle was 
supposed to last, at best, 10 years. They're talking about 
safety upgrades now of 500 million or 600 million. They're not 
safety upgrades. You need a new-designed vehicle, because those 
particular tiles, they flew off the very first flight, Mr. 
Chairman, and they continue to fly off. And so what you need is 
a new research and design and a new shuttle and those kind of 
things, and we're not giving them the money.
    And I know we struggle with seaport security, and we 
haven't given you the money for that. We know we're 
shortchanged on Amtrak.
    And the question is, before Admiral Loy, what about this 
particular program. How much are you shortchanged? What money 
do you need in the 2003 budget and the 2004? That's all I want 
to know.
    Admiral Loy. Yes, sir. In the 2003 budget, the earlier 
chart that I had up, sir, perhaps before you came in, reflected 
that we have about $354 million as carryover from the total of 
738 that was appropriated by the Congress to do the EDS and ETD 
installation at the airports across the country.
    So what we're going to be able to do with those dollars, 
sir, by the time this calendar year rolls out, I--we will have 
met the 100-percent electronic-screening requirement that the 
Congress mandated us to meet, with those dollars that have 
already been appropriated.
    Senator Hollings. Good.
    Admiral Loy. Now, it will also allow us to deal with 
seasonal adjustments as they come at us in the spring and 
summer, and it will also enable us to deal with the moves and 
adds and subtracts from airport to airport as we learn the 
peaks and valleys of the system over time.
    What it won't enable us to do is get on with the total 
cleanup process and the total installation of a ``final end 
game,'' if you will, with inline installations that so many of 
the airports across the country want.
    As I mentioned before, sir, in my opening statement, we've 
left a bit of a wake across the country as we went from airport 
to airport. That cleanup process, as the IG testified, is 
probably estimated at somewhere between two- and I've heard as 
high as five-billion dollars in terms of the total bill 
forthcoming from airport directors who would like to have, you 
know, the cat's-meow installation at all the airports across 
the country.
    Senator Hollings. But what's being done now about Mr. Mead 
talking about the staff and the proper space and you have the 
cost of relocating the EDS to the baggage area and all? Have 
you coordinated with him and given that amount of money, or do 
you have it where you're still in the same space?
    Admiral Loy. As far as the two points that I thought that 
Ken made, sir, on the space piece, he's absolutely right, and 
we are already talking with our Customs counterparts, INS 
counterparts, to see whether or not there is an opportunity for 
consolidation of space requirements at the airports, those 
airports that have the international tone to them that have 
Customs and INS there. Dulles is a great example. Our federal 
security director there, Scott McHugh, has presented to us a 
game plan to approach how to optimize--I'll say minimize the 
federal footprint at an airport by working well with our--with 
the rest of our federal colleagues.
    The other notion that Ken offered is going on as we speak. 
And that is as we go to the new department, there is an 
opportunity for consolidation of administrative things. Whether 
it's the counsel's office, the H.R. office, the IG's office, 
and everybody else's office, the notion of centralized 
provision of those services to the agencies is very much under 
consideration in DHS.
    I would offer, your Committee gave this organization, TSA, 
very good authorities to do it ever better, and that is to 
contract it into the private sector. So we have a management-
services contract that will have very few federal employees 
associated with it, because we're going to just be overseeing 
what the private sector is doing for us. Our H.R. contract is 
into the private sector. We're not going to build a federal 
bureaucracy of H.R. experts in the TSA shop.
    Senator Hollings. Very good. Thank you, Mr. Chairman.
    Senator Lott. We'll do a second round if we need to.
    Senator McCain?
    Senator McCain. I thank you, Mr. Chairman, and thank the 
witnesses.
    I'll stop praising you, Admiral Loy, until you do something 
else good.
    [Laughter.]
    Admiral Loy. I've been in that camp a long time, sir, the 
``What have we done for you lately?''
    [Laughter.]
    Senator McCain. I do want to point out a couple of things 
in Mr. Mead's statement to you. One is this issue of cost 
controls. Whenever there's a new program like this, it 
inevitably leads to some cost overruns. We are breaking new 
ground in an entirely new area of security in this war on 
terrorism. But it is disturbing to read Mr. Mead's statement. 
Initial cost estimates of $104 million grew to $700 million; 
the NCS Pearson contract, $18 million in expenses; the DOT IG 
determining that six to nine million of these expenses appear 
to be of wasteful and abusive spending practices; and then 
again there are questions about the Boeing contract. Mr. Mead, 
I'd be interested in hearing immediately the results of your 
look at the Boeing contract, as well.
    Nothing hurts you more, Admiral Loy, than waste and abusive 
practices. And I fully understand how difficult it is when you 
are going from zero to $5.8 billion. But please take into 
account--seriously, cost controls must be a priority for TSA 
under Mr. Mead's contract.
    But the other thing I wanted to talk to you about, and I 
think it's a very serious issue, and it may not be your 
responsibility; it may be ours. But from reading Mr. Mead's 
statement, we're going to have--at current estimates, passenger 
security fee will generate about $1.66 billion in 2003 and 
$1.74 billion in 2004. Expenses will be $5.3 billion, roughly--
$5.3- to $5.8 billion. This gives us a $3.5-billion shortfall, 
which can only be made up by three ways, as I see it--AIP, 
increased fee to the passengers, or slash airlines, whatever--
whoever is going to pay it, or out of the general funds. I'm 
not sure how you justify another increase when passengers are 
already paying 26 percent in taxes and fees on a ticket. And we 
can't take it out of AIP funds if we expect to modernize our 
airports in America.
    So I would think, Mr. Chairman and Mr. Chairman, we're 
going to have to make this decision here in this Committee--
again, I'm sorry I flattered you so much--we're either going to 
have to make this decision here or it's going to be made in the 
Appropriations Committee. I hope that we would take on our 
responsibilities and decide where that funding is to come from. 
And I think it's serious. $3.5 billion, roughly, is a very 
large amount of money. And I'd be interested in both yours and 
Mr. Mead's recommendations as to how we make up a multibillion 
dollar shortfall that will probably be around for a number of 
years.
    You first, Admiral.
    Admiral Loy. Yes, sir. A couple of thoughts. First of all, 
I stand up for those management controls, as well, sir. I 
pledge to you that I will make it a high priority for myself. 
We were--we were very pleased to end up in our first year of 
operation with a clean audit as part of the process that is an 
enormously rigorous challenge that our IG provides to us in the 
Department every year. But there is absolutely no doubt that an 
organization is known for its fiscal management skill set. And 
I was enormously proud of what we got accomplished at Coast 
Guard, and we will be equally proud of what we're doing here.
    One of the things that we did when we recognized that we 
were exposed in that regard, Mr. Chairman, was to reach out to 
DCMA and DCAA and ask them to come into the game----"
    Senator McCain. I understand that.
    Admiral Loy.--and help us learn the game. We have, in fact, 
learned the game, and, in fact, have also asked them to be part 
of our auditing procedures for the NCS Pearson contract, as 
well.
    On the NCS Pearson contract, it is important for me, I 
think, to just leave on the table the amazing requirements 
growth that were part of an early read as what we were going to 
need from them and what we turned out to need from them, 1.6 
million applications, 360,000 assessments. When you stack up 
the dollar value to bring a TSA employee on, including that 
assessment process and the training, et cetera, it comes out 
around 10,000 a copy. It costs us about 13,000 for a new 
coastie, marine, airman, navy petty officer. It costs us about 
15,000 for a Peace Corps volunteer. So we're not far away from 
the ballpark as it relates to what was brought aboard in terms 
of that work force.
    On the ideas as to how to deal with funding the 
organization----
    Senator McCain. Let me just respond very quickly. According 
to Mr. Mead, six- to nine-million dollars appear to be wasteful 
and abusive spending practices. But go ahead. I accept----
    Admiral Loy. We're going back and----
    Senator McCain.--your explanation. Go ahead.
    Admiral Loy. We're going back and getting that, sir.
    Senator McCain. Yeah, go ahead.
    Admiral Loy. As it relates to how--where do we go from 
here, you itemized--in the AIP piece, there's a notion as to 
how the FAA does that over multiple years. And I have had a lot 
of conversations with Jeff Fagan, in Dallas, with Bruce 
Baumgartner, in Denver--these are airport directors who are--
and Chip Barclay, who you will have an opportunity to hear from 
shortly. Notionalize the idea of a--an LOI kind of process and 
security-enhancement projects in a TSA budget akin to what the 
FAA does with respect to AIP. If this is a means of getting us 
over this first year or two to get to a normal baseline, that's 
the only, quote, ``novel idea,'' Mr. Chairman, that's I've 
heard, and it, I think, deserves at least some attention and 
discussion. And I'd be happy to talk about that.
    Senator McCain. Basically, an earmarked appropriation, a 
line-item appropriation, for airport security.
    Admiral Loy. Just for airport security project 
enhancements, and with a feeder directly to the airports by way 
of an LOI, a letter of intent, that lets them go to the bond 
market with a promissory note that, sort of, says over the next 
three, four, 5 years, they can anticipate some reimbursement 
from the Federal Government.
    Senator McCain. Thank you.
    Mr. Mead?
    Mr. Mead. Yes, I would do something a little different, I 
think. As Admiral Loy was saying, you know, these facility 
modifications at airports could go up in the neighborhood of $5 
billion. I think, if I was the Congress, I would consider 
establishing a capital revolving fund that would have private-
sector and public-sector representatives on the governing 
board. It would probably only exist for three, four, or five 
years. I would take a small percentage of the AIP and send it 
to this revolving fund, and that percentage would be calculated 
according to what the historical spending patterns have been 
out of the AIP for security. And I would take a certain percent 
of the passenger security fee that's already law, and I would 
drive that money into a capital fund. Because you are going to 
need lots of capital money when you go into these large airport 
terminals and start taking apart the baggage systems. And I 
think you need a stable funding source, for everybody's sake.
    TSA, you know, they'll be up here in front of the Congress 
answering questions about why wasn't this or that done, and the 
real answer might be, well, we didn't have a stable money 
stream. And, on the other hand, the airports will be upset. 
They're wondering, who's going to pay for all this? You're 
talking about coming to my property and taking apart the 
baggage system. Who's going to pay for this? And right now we 
don't, in truth, know the answer to that.
    So I think you're right to explore, in a very hearty way, 
how to deal with that issue.
    Senator McCain. Thank you.
    Mr. Mead. Thank you, Mr. Chairman.
    Senator Lott. Senator Wyden?
    Senator Wyden. Thank you, Mr. Chairman.
    Question for you, Admiral Loy, with respect to airline 
contributions to TSA. Now, it's my understanding that the 
airlines originally said that they were paying about $1 billion 
annually to do passenger security screening. But now that the 
law requires them to contribute the same amount to the agency, 
they say their annual costs were only about $300 million. Now, 
my understanding is, they've had some back and forth with Mr. 
Mead on this particular question. And what I'd like to have you 
tell us is, how do you intend to settle the matter? And, in 
particular, would you be supportive of Mr. Mead's suggestion 
that independent audits be done? Because it seems to me that 
that would be one way to really get on top of this question. 
And, frankly, as you could tell from my opening statement, I 
don't want to see the airlines duck this issue and, in effect, 
just wait until TSA moves to the Department of Homeland 
Security and Mr. Mead isn't the cop on the beat anymore.
    I'd like to see us get this resolved now. And tell me how 
you would go about dealing with the issue, and, particularly, 
should we have these independent audits to resolve it.
    Admiral Loy. Yes, sir. We have--we have already been in the 
process of seeking independent audits of--what we want 
independently audited is the 2000 books, if you will, because 
it's the 2000 baseline that is really where we can find the 
answer to what the normal contribution had been toward aviation 
security by the airlines when they were responsible for it. So 
the auditing process for the 2000 books, if you will, both as 
it relates to the passenger fee and as it relates to the ASIF, 
if you will, the aircraft security fee.
    We have--we have asked for those audits. We are in the 
process of reviewing them. And I'll just say that it has been a 
very difficult process to make sense out of the data that we 
have been provided.
    So that's, sort of, where we are at the moment. There's a 
great frustration, I would offer, Senator Wyden, in the 
Department in that regard, to the point that they did go back 
to public statements and public correspondence of the period 
and simply ask the Congress to set the $750 million, you know, 
legislated fee as the--as the contribution level.
    That's my, sort of, history on it, sir. Mr. Mead may very 
well be able to provide more.
    Senator Wyden. Well, I think you've made my point. That's 
one of the reasons that I feel so strongly about these 
independent audits.
    Admiral Loy. Sure.
    Senator Wyden. I think that this math is fuzzy. I think, to 
get to the bottom of it, we've got to have them. I want to work 
with you and the department on nailing that down, because it's 
a big gap between what the airlines say they're contributing 
now, and what they said they were contributing before. We've 
got to get to the bottom of it, because it goes right to the 
heart of what those passengers are going to pay.
    Admiral Loy. Yes, sir. The other thing that I would--just 
as a point of reference--the projections with respect to the 
passenger fee are almost on-point to the money. In fact, 
there's a little more being actually collected than was 
projected to be the yield from the passenger fee so that we 
have actually suggested that there's no reason to do--to do any 
more audits, because we know for the airlines that's an 
expensive proposition in and of itself. So given the 
sensitivity of the financial circumstances we see them in, we 
don't believe there's any continuing reason to audit the 
passenger fee.
    Senator Wyden. Another question for you, Admiral. I think 
you've heard me say that I think Mr. Mead does very good work, 
certainly in the case of this report. He was blowing the 
whistle on weaknesses, for example, in controls over these 
contracts----
    Admiral Loy. Uh-huh.
    Senator Wyden.--with the screener companies. And, on March 
1st, Mr. Mead's office is no longer going to have, you know, 
jurisdiction over these kinds of issues. And I'm concerned 
that, for some period of time, we won't have tough oversight to 
deal with these questions.
    I've got a bill ready to--in effect, drafted--to ensure 
that Mr. Mead keeps these powers until the transition is fully 
in place. And I would like to have your thoughts as to whether 
something like that is needed, and, in effect, how you intend 
to deal with these questions in the handoff period.
    Admiral Loy. Sir, there is--well, first of all, on the 
``blowing the whistle'' comment, I never consider him blowing 
the whistle on me. I call him and ask him to get engaged in our 
business because I always find the constructive criticism there 
that enables us to be better at the other end of the day. But--
and I do endorse your notion, as well, sir, that Ken does a 
great job in his IG role.
    I can also say that my early conversations with Secretary 
Ridge and Secretary England and Under Secretary Hutchinson, 
there will be a pent-up demand there for them to be recognized 
as good at what they do early in their term.
    I do not know the new IG. I look forward to meeting him and 
working through issues with him, as well. But the oversight 
lapse is something we cannot abide. I tend to agree with you in 
that regard, sir. And I look forward to whatever might be an 
ongoing means of keeping our feet to the fire.
    Senator Wyden. Well, I'm going to send you a copy of this 
draft bill that I have. I'm open, for example, as to how this 
gets done. But I just think, with all of the cost problems 
we're having right now, we've got to keep vigorous oversight in 
place. I appreciate your answer.
    The last point I wanted to touch on deals with this 
question of sharing threat information.
    Admiral Loy. Sure.
    Senator Wyden. And you heard me talk about it in my opening 
statement. And suffice it to say that the real question is, 
what's going to happen. And maybe you could walk me through, 
for example, how new threat information is going to be dealt 
with today. You know, how is it going to get to the airport 
security guards? How is it going to get to the screeners at 
checkpoints? Make it clear to us how this new information is 
going to be used from this point on.
    Admiral Loy. Yes, sir. Let me--let me say, sort of, two 
areas of comment. The first is with respect to DHS.
    The cornerstone of the new department, as far as I can 
tell, that's different about departments past is the 
directorate known as Information Analysis and Critical 
Infrastructure Protection. The purpose of that shop is to be 
the synthesis point for incoming information to be shared, to 
be analyzed there, and to be disseminated in a fashion that it 
actually meets the requirements of the agencies that are a part 
of the new department.
    We have been--we have been enormously challenging as 
agencies on the way into the Department, that that is an 
absolute must. If that cornerstone of the Department's being is 
not--is not realized, we will have done not much good, frankly, 
over the--over the course of time.
    But on the other--I feel very much that it will happen. The 
beauty there is the potential to have those agencies that need 
the information define their requirements better for the 
intelligence community.
    To take a parallel, sir, back in the days when I was really 
into the drug business----
    [Laughter.]
    Admiral Loy.--well, now--maybe I didn't phrase that quite 
well----
    [Laughter.]
    Admiral Loy. Back when I was ``after those guys,'' Barry 
McCaffrey came into the drug czar's job and helped us 
understand that it was not fair for us to point at the intel 
community and say, ``You're not giving us what we need to do 
the job.'' We had to define the requirement set for the intel 
community to meet, and we had to help them help us. And that 
has been very clearly recognized in the new department.
    So I think the first order of business is going to be a 
synthesis of requirements that will be generated to enable the 
intel shops to serve the agencies well. But I--as I said at the 
beginning, sir, it's the key in the lock. If we do that well, 
we will succeed.
    Senator Wyden. Mr. Chairman, my time is up. I think that is 
the only answer I've heard the Admiral give today leaves me a 
little unsettled, because I still don't know specifically how 
you all intend to share this information. I hear about it 
constantly from airports and the people running these screening 
companies and the screeners and the like. I think we've got to 
get clear information out to them.
    Admiral Loy. I could suggest, sir--I could come and, 
offline, perhaps spend a little time with you.
    Senator Wyden. Good, we'll look forward to it.
    Thank you, Mr. Chairman.
    Senator Lott. Senator Hutchison?

            STATEMENT OF HON. KAY BAILEY HUTCHISON, 
                    U.S. SENATOR FROM TEXAS

    Senator Hutchison. Thank you, Mr. Chairman.
    Everyone has said it, but I haven't, and I want to add that 
I think you have done a remarkable job that many thought was 
impossible. And I even saw a little piece in the newspaper, a 
column called ``Miss Manners,'' that complimented the behavior 
of your employees. And I think every one of us who has traveled 
has really seen such a difference in----
    Admiral Loy. Thank you.
    Senator Hutchison.--the professionalism and the courtesy 
and the caring of these employees, but when you make Miss 
Manners, as an inspector, you have hit it really high.
    But let me turn to what I think is the last hole in the 
system that many of us are trying to work to fix. As you know, 
the Senate passed a bill last year----
    Admiral Loy. Yes, ma'am.
    Senator Hutchison.--to address air cargo. Twenty-two 
percent of all air cargo goes on passenger flights. So I do 
think we need to address the issue, and I would just ask you, 
if you were asking us to pass good legislation in this area, 
what would be the key points that you would want us to address?
    Admiral Loy. Yes, ma'am. Thank you very much for the 
comments, Senator. I'll pass those to those young people that 
are out there working so hard for us each and every day.
    There were what I'd call impulsive but correct instincts 
taken right after 9/11, where FAA and then TSA strengthened the 
requirements of the known-shipper program as, sort of, the 
first step toward taking on the cargo challenge in TSA.
    I think there's a number of--first of all, there's one of 
two roads we can go down. We can go down the road of putting 
all our eggs in the basket of screening cargo, not unlike we 
screen passengers and check baggage as it gets to the airport 
before it goes on the airplane. We simply do not have the 
technology available to us right now to do that, or if it's 
even remotely available, it's at the ten-million-a-copy kind of 
price tag that makes that very difficult and very unfeasible.
    What is available is the other path. While we continue to 
R&D the notion of how you get screening technology that's as 
effective in huge pieces of cargo or, frankly, even smaller 
pieces of cargo, like mail, so as to return that revenue source 
to the airlines. And it's an enormously important piece.
    Senator Hutchison. If I could, I was going to ask you what 
you thought we could do in regard to mail being carried by 
airlines again. Because whatever we do in cargo, we're going to 
have to do with mail. But I am very hopeful that you will 
approve something quickly that will allow them to----
    Admiral Loy. We have prototype efforts going on in 12 
airports, Senator Hutchison, as we speak. The volume of flow--
the Postal Service is concerned that there's not an adequate 
volume of flow through the 12 airports we've selected, so we 
may want to shift gears a little bit--we have a meeting, 
actually, on that at the end of this week--to satisfy the 
Postal Service's interest, because they're a key player in this 
efforts. But we know that's a $400 million revenue loss to the 
airlines, and we want very much to get mail back on the 
aircraft.
    We have found, after an awful lot of testing through the 
course of this year, that canine team searching, it seems to be 
the key to success here, and that's what we are prototyping and 
testing at the 12 airports at the moment. So I would like to 
think in the very near future, we will be able to make some 
good inroads there.
    To go back to your original question, we continue to 
prohibit all cargo from unknown shippers aboard passenger air 
carriers, and it's a matter of gaining greater confidence in 
this thought process of a known-shipper program IACs and making 
that system easier to use for all the players involved.
    So two data bases we've been working very hard on creating, 
such that if you are about to take a parcel and offer it to an 
airline, or if you are the airline, to be put in your--in the 
belly of your passenger aircraft, we want to make sure that 
it's instantly available, to figure out whether the guy that's 
handing it to you is a legitimate shipper in the known-shipper 
program.
    To go back up that supply chain is rife with potential 
mischief, as we all know. And so gaining confidence in the 
handover points between the IAC and whoever delivers it to the 
airline for actually including it onboard the aircraft is 
critical.
    So we're going to automate a data base for IACs, and we are 
going to automate a data base for known shippers so that that's 
much easier to deal with as we--as we press on.
    We mentioned this--the mail screening. The GAO report has 
examined vulnerabilities in air cargo for us and has pointed 
out a number of things, not the least of which is to develop, 
if you will, a comprehensive plan. That comprehensive plan is 
what we want your bill to be. And, frankly, most of the aspects 
of that comprehensive plan are already there.
    Senator Hutchison. In my bill, you mean?
    Admiral Loy. Yes, ma'am. So we look forward to working with 
you for the final tweaking that might be necessary on that 
bill.
    Senator Hutchison. OK. Well, I certainly have consulted 
with you in your office----
    Admiral Loy. Yes, ma'am.
    Senator Hutchison.--to try to make sure that we meet two 
criteria. One is that we have a way to track a package from the 
point at which it is taken, all the way through the system, 
until it's put on an aircraft; and, second, to make sure we 
have a level playing field between airlines and just air cargo 
carriers.
    Admiral Loy. Yes, ma'am.
    Senator Hutchison. So we want to work with you, but we do 
want to pass a bill this year. Well, we passed one last year, 
but the House didn't. But I hope we can come up with the right 
thing. Because I don't think we should wait on this. We've done 
too good a job in the other areas, and I want to finish the job 
with----
    Admiral Loy. Yes, ma'am.
    Senator Hutchison.--cargo.
    Admiral Loy. And while we do as much as we can down this, 
sort of, supply chain path, which is really the notions in the 
bill, we must R&D our way toward the silver bullet that might 
actually be there as, sort of, a next-generation screening 
technology capability that will----
    Senator Hutchison. Absolutely.
    Admiral Loy.--make all the rest of it unnecessary.
    Senator Hutchison. Absolutely. That is the end game.
    A second question. There has been, of course, a requirement 
to station law-enforcement personnel at every checkpoint in an 
airport.
    Admiral Loy. Yes, ma'am.
    Senator Hutchison. And the airports have suggested that 
Congress should provide more flexibility for those personnel to 
be able to leave that checkpoint and go check on something 
else----
    Admiral Loy. Uh-huh.
    Senator Hutchison.--as long as you are available to come 
back quickly and----
    Admiral Loy. Respond.
    Senator Hutchison.--deal with any issue. How would you 
respond to legislation that would allow that flexibility?
    Admiral Loy. I have two comments. First, as you recall, we 
sent up, from the Administration, a technical amendment to get 
the ``Federal'' out of the law. I think that's a good thing. We 
have--we have come to count on the state and local services 
that have been provided around the country at all of our 
commercial airports, and they've done a magnificent job for us.
    I think if we take the Federal out of there, know that 
we're going to be dealing with the state and locals well into 
the future, we can negotiate good contracts there, we can do 
the right thing.
    As it relates to the roving notion of that, I, frankly, 
support it. I think there is a--an unfortunate opportunity for 
fatigue and complacency to set in if you're standing by--you 
know, if you're the statue at the checkpoint. So I think our 
challenge would be to allow the Federal Security Director, 
given the unique physical layout of his particular airport, 
impose a response-time kind of criteria, that it would enable 
the roving law-enforcement presence to return to the checkpoint 
when and if it would be required.
    Senator Hutchison. And a better use of your personnel.
    Admiral Loy. I think so, yes, ma'am.
    Senator Hutchison. I'd like to just--could I ask one more 
question?
    Senator Lott. You may.
    Senator Hutchison. I had talked earlier to, actually, your 
predecessor about a timetable, if you foresee one, in which our 
non-traveling public would be able to go into an airport to 
take someone to the plane or pick someone up and use the 
restaurant facilities----
    Admiral Loy. Uh-huh.
    Senator Hutchison.--and as long as they are screened just 
like everyone else. Do you think we are close to having that 
capability again to make traveling a little more family 
friendly?
    Admiral Loy. Senator Hutchison, I think, as you know, we 
certainly encourage that already for parents and small children 
and folks who----
    Senator Hutchison. Special cases----
    Admiral Loy.--who are traveling----
    Senator Hutchison.--I know you do.
    Admiral Loy.--with special needs and such as that. We 
have--we have developed the protocols necessary to deal with 
those folks.
    I mean, as I sit here today, I think school is still out a 
little bit on enough data flow, because the challenge here is 
about world-class security and world-class customer service, 
and we need to get a sense for the volume that would be 
increased and hoping that we don't drive wait lines to a point 
that they are no longer keeping that world-class security and 
customer-service thing in balance. But it--certainly in the 
long run, we would like very much to go there and allow, you 
know, the public to return to using the airports in the fashion 
that was comfortable to all of us before 9/11.
    But the first order of business, ma'am, I think continues 
to be keeping a read on the balance. And when we have the data, 
we should make a good decision, not an impulsive one up front.
    Senator Hutchison. Do you have any pilot programs anywhere 
on doing this?
    Admiral Loy. We don't at the moment, no, ma'am.
    Senator Hutchison. All right, thank you.
    Now, I'm not going to submit this for the record, but I do 
have the Miss Manners column, which I think you should put out 
through your system so that your employees know what a great 
job they're doing.
    Admiral Loy. Thank you, ma'am. I'll do that.
    Senator Lott. Thank you, Senator Hutchison.
    And we do have another panel, but let me just take a moment 
more. I haven't asked you specifically about the sky marshal 
program and how it's working and is morale good there or not 
and who should be--you know, the airlines maintain that there's 
a cost factor that they're having to absorb because of the sky 
marshals, too.
    One thing Mr. Mead said, well, we don't want sky marshals 
maybe--we don't want the mission creep or having to get more 
sky marshals by using them in additional roles--I think that's 
what you were saying--at the airport. Well, I'm wondering if 
maybe, you know, if they had time between flights or if they're 
in the airport, maybe there is something more they can do 
without us having to add more people.
    I just--I'm concerned about the sky marshal program, and I 
do think that there is some cost that the airlines are having 
to absorb that we maybe ought to be having to pay for there. So 
just in that area generally, would you like to add anything?
    Admiral Loy. Yes, sir, I'd be happy to. I'm--I'd rather 
not, in the public sector, sir, give you some numbers that can 
go back to the classified number that we have, but I would be 
delighted to come and chat----
    Senator Lott. All right.
    Admiral Loy.--with you, sir, at your pleasure, about some 
numbers.
    But I think it's very--it's very important for us to 
recognize that even if we had X number of FAMs on X number of 
flights for--with an average dollar value of a first-class/
business-class seat, that is not anywhere close to the 
translation of lost revenue for the airlines there. The 
assumption that would have to be behind that would be that 
every first-class seat was sold and reserved as a first-class 
seat, and we know that's not even remotely the case.
    So we don't believe, at this point at least, that fare-
paying customers are either being bumped to the coach section 
or off the airplane, because that would be the circumstance 
when--you know, when the full-fare notion, if you tried to add 
up those things, would be the really--really the lost revenue.
    We should be working with ATA, the folks that represent the 
airlines, for at least exploring the potential of taking the 
curtains away between first class and coach and see if there is 
a--because I think we could--we could be of the mind to go 
toward, you know, front rows of the coach section, if that was 
appropriate.
    But, again, what the--what the Federal Air Marshals are on 
board for is enormously important, and the bottom line, when 
all is said and done, is to protect the cockpit. You know, the 
notion of why we have all of this investment in baggage 
checking is to keep the bomb off, so it is both the total 
aircraft cabin as well as cockpit that is involved with that 
program.
    And as Senator Hollings says and has told me several times, 
the Israeli version is a cocoon, if you will, literally, that 
the door never opens once in--once in flight. I would offer 
that a hardened cockpit door is not quite a cocoon, as the 
Israeli jetliners are configured for.
    So I think our job, one, with the FAM, continues to be to 
control access to the cockpit and allow the crew inside to do 
their job, which is safely fly the plane to the ground.
    The morale piece that you mentioned, sir, I'm enormously 
proud of--every one of these guys that I encounter, either on 
an airplane or in their respective office spaces, are committed 
to the task. This is a matter of how they are finding a way to 
contribute to the post-9/11 security environment that we all 
live in, and they're enormously proud of what they're doing.
    We have had, as you know, a bit of an exchange with the USA 
Today and other papers in terms of citations from one source or 
another. But the bottom line is, we inherited 33 FAMs who used 
to go, on occasion, on international flights, and today we've 
got thousands of them doing tens of thousands of flights and 
making a absolutely significant contribution to be one of the 
layers in the multilayered system that is our new aviation 
security paradigm.
    Senator Lott. Mr. Mead, would you like to respond?
    Mr. Mead. Yes, I'd like to comment on that, the FAMs. 
Generally, Mr. Chairman, I have quite bit of sympathy for the 
plight the airlines find themselves in, you know, this 
confluence of these additional security requirements and, at 
the same time, that they're in financial distress.
    On this particular one, though, I think the airlines ought 
to ask themselves, How many people are riding on that plane 
that would not be there but for the fact that there is a larger 
number of air marshals up there? I think that's a question the 
airlines ought to ask themselves.
    And as for what the FAMs do in their spare time, I'm more 
worried about it becoming more of a routine, that we take full-
time equivalent Federal Air Marshals, who are paid a fairly 
good sum of money, and then turn them into foot patrols or 
surveillance officers at the airport, and then, before you know 
it you have a large number of staff requirements. And that's 
what I'm counseling against.
    Admiral Loy. If I may, sir, just one last comment on that, 
because I forgot to mention it when you asked me.
    On the law-enforcement potential at the airport, you know, 
this notion of a series of rings associated with the security 
we're building, which sort of goes from intelligence and threat 
assessments way on the outside, comes in to airport perimeters, 
and goes to law-enforcement presence, and then baggage 
screening and passenger screening, and finally to what's 
actually up on the aircraft itself, that sort of sequence of 
events is all part of that layered system.
    There's two reasons that I would consider employing Federal 
Air Marshals in the airports. One of them is, if we are, as we 
are, sir, sort of, flying them into the ground 10 to 12 hours a 
day on aircraft day after day after day after day, there is a--
there is a--an edge that we want them to hold onto, and we need 
to be careful about that.
    So we're watching, simply from a ergonomic approach, if you 
will, to--you know, to watch the productivity and the edge that 
we want them to hold to. And if that gets to the point where we 
feel too much flying is the reason, we need to find a way to 
employ them in some other fashion. The skill set they bring to 
the table is not an unnatural law-enforcement, sort of, 
counter-surveillance activity approach that fits into one of 
those rings of security in our system.
    So what we don't need is an--there was an offer on the 
table for awhile about maybe we needed to generate within TSA 
another law-enforcement officer category, and we don't need to 
do that, because, as someone already pointed out, the local/
state folks that are already there are doing a great job for 
us.
    But if it's an employability piece to hold attrition to the 
right levels for FAMs, to hold them in place, to give them 
something a bit else to do rather than fly all the time, we 
have to take stock of that, and we'll do that.
    Senator Lott. Well, thank you very much. We appreciate your 
time. I look forward to talking to both of you further----
    Admiral Loy. Right, sir.
    Senator Lott.--as we go toward developing legislation in 
this area.
    Now let me call on the second panel, Mr. Bolen, Mr. May, 
and Mr. Barclay.
    Well, thank you very much, gentlemen. As you can see, we've 
been going here for about an hour and a half, and we've had 
some senators come and go. And I hope we'll have some others 
come in.
    But, regardless of that, we're looking forward to having 
your testimony. It will be made a part of this record that all 
the senators will consider as we take a look at what's 
happening in aviation and what is happening with security and 
security cost and what we can do to be helpful.
    And let's see here. I don't know what order we should go 
in, but since, Mr. Bolen, you were listed, maybe we'll just 
start on the left side, and then Mr. May--I mean, Mr. Bolen, 
Mr. May, and Mr. Barclay.
    Go ahead, Mr. Bolen.

   STATEMENT OF EDWARD M. BOLEN, PRESIDENT, GENERAL AVIATION 
                   MANUFACTURERS ASSOCIATION

    Mr. Bolen. Thank you, Mr. Chairman.
    The 9/11 attacks on America had a profound impact, I 
believe, on all Americans, and I think it's cost us all to look 
at everything through the prism of security. In response to the 
attacks, the general aviation industry hired security experts 
to do a vulnerability assessment of our industry and help us 
find ways to enhance security. We did so because we are 
extraordinarily serious about security. We recognize that the 
future of our industry is directly related to the security of 
our industry.
    What we learned from the experts was that we have many 
inherent security features in general aviation which terrorists 
would find discouraging. For example, according to the experts, 
terrorists like secrecy and anonymity, two things that are not 
readily found in general aviation because we are a relatively 
small, closely knit, and heavily regulated industry. Let me 
give some examples.
    All pilots are registered, names and addresses, with the 
Federal Government. They undergo periodic check rides and 
periodic medical examinations, so they're forced to interact 
with the community, with society, and with the Federal 
Government. And they operate out of general aviation airports 
and general aviation terminals, which operate very much like 
small communities. There's an aviation jargon spoken around 
these places. There's a camaraderie. People are airplane 
enthusiasts, so they look at the airplanes that are being 
flown, they talk to the pilots about what they're doing, they 
recognize unique parts of modified airplanes. According to the 
experts, this is not the ideal environment from which 
terrorists like to operate.
    When we asked the experts what we could do to enhance the 
security of general aviation, they said, ``Why don't you try to 
build on some of those inherent safety and security features 
that you have? For example, since it's a strength that the 
pilots are all registered with the Federal Government, try to 
make sure that the person proclaiming to be a pilot really is 
that person.'' The old pilots license do not have a photo. They 
said, ``Try to get a photo to be part of the Federal Aviation 
License.'' They said, ``You've got a registry where names and 
addresses are kept. Make sure it's kept up to date.'' They 
said, ``People are very suspicious around general aviation 
communities. Make sure that there's a place where they can 
report suspicious behavior if they're taking note of what's 
going on around them.''
    We took that advice that we were given by the security 
experts and we put them into 12 recommendations which we 
submitted to the Transportation Security Administration.
    So what's changed in general aviation since 9/11? Let me 
give you a couple of examples. Today, all foreign registered 
aircraft must be approved by the TSA and submit a complete 
passenger manifest before they will be allowed to enter the 
United States. As a result of the Patriot Act, companies that 
finance the sale and purchase of general-aviation aircraft 
follow guidelines that GAMA developed with the Treasury 
Department for identifying and reporting suspicious financial 
transactions. The Federal Government is now regularly combing 
the airman registry looking for persons they deem to be a 
security threat. New security procedures, including passenger 
screening, have been crafted for charter flights on aircraft 
weighing 12,500 pounds or more and will go operational soon. 
Persons are not allowed to fly over major sporting events at 
low altitudes unless they receive permission from the TSA. 
Pilots are now required to cover a, carry a government-issued 
ID in addition to their pilot's license whenever they fly. And, 
as a result of efforts by the Aircraft Owners and Pilots 
Association, Neighborhood Watch-type programs have been 
established at general aviation airports, complete with an 800-
number to call and report suspicious behavior.
    So, as you can see, Mr. Chairman, the general-aviation 
world has changed significantly since 9/11, and the general-
aviation industry itself is pushing for more changes. For 
example, GAMA supports improving the aircraft and the airman 
registry so it will be more up to date and have more 
descriptions. We support the concept of giving general-aviation 
companies that charter or rent aircraft access to the computer-
assisted passenger-screening system. And we support the concept 
of allowing Part 91 operators who voluntary participate in a 
federally certified security program the same access to air 
space as commercial operators, a program that is being refined 
by the National Business Aviation Association.
    Now, Mr. Chairman, when I was going through the list of 
examples of how general aviation has changed since 9/11, you 
may have noted that I did not mention that aliens seeking 
flight training in the United States must undergo a Department 
of Justice background check. The reason I did not mention that 
program, which was specifically mandated in the Aviation and 
Transportation Security Act, is because it has not gone 
operational yet. Despite the fact that it has been nearly 16 
months since that act was passed, the Department of Justice 
still does not have a process for conducting these checks.
    You may recall, Mr. Chairman, when that act was under 
consideration, GAMA did not oppose the background checks, but 
we were specifically concerned that there was no time limit on 
how long it could take the Department of Justice to conduct 
these background checks. We were pleased that this Committee 
and Congress heard our concerns and instituted a 45-day limit 
on the length of the background check.
    What the Department of Justice did, however, was say, 
``Well, that 45-day clock will only begin when we develop a 
process.'' And today, 16 months later, they still have not 
developed a process.
    We urge you to look into this matter so that we can begin 
training aliens seeking flight training in the United States 
under a full background check conducted by the Department of 
Justice.
    Mr. Chairman, the general-aviation industry is 
extraordinarily committed to security. We want to work with you 
and the TSA to continue to enhance our proven record of 
developing commonsense and effective solutions.
    Thank you.
    [The prepared statement of Mr. Bolen follows:]

  Prepared Statement of Edward M. Bolen, President, General Aviation 
                       Manufacturers Association
    Mr. Chairman, Senator Rockefeller, and Members of the Subcommittee, 
my name is Edward M. Bolen and I am President of the General Aviation 
Manufacturers Association (GAMA). GAMA represents approximately 50 of 
the world's leading manufacturers of general aviation airplanes, 
engines, avionics and component parts.
General Aviation
    As everyone on this Subcommittee well knows, general aviation is 
technically defined as all aviation other than commercial airlines and 
military aviation. Our airplanes range in size from small, single-
engine planes to mid-size turboprops to large turbofans capable of 
flying non-stop from New York to Tokyo.
    General aviation is the foundation of our air transportation 
infrastructure and the primary training ground for the commercial 
airline industry. We also help drive the economy and contribute 
positively to our nation's balance of trade. A recent DRI-WEFA study 
shows the industry's impact on the U.S. economy exceeds $40 billion 
annually.
General Aviation's Security Focus
    Mr. Chairman, the attacks that took place on September 11 had a 
profound impact on all Americans. Among other things, they caused us 
all to look at every aspect of life through the prism of security. The 
general aviation industry is extraordinarily serious about security. We 
recognize that the future viability and credibility of the industry is 
directly tied to security.
    In response to the terrorist attacks on America, the general 
aviation industry hired security experts to assess the vulnerability of 
the general aviation industry and to help find ways to enhance general 
aviation security. We did so because we are extraordinarily serious 
about security. We recognize that the future of our industry is 
directly tied to security.
    We learned from the experts who studied our industry that general 
aviation has many inherent security features that terrorists would find 
discouraging.
    For example, according to the experts, terrorists like secrecy and 
anonymity. They don't want people to know who they are, where they live 
or what they are up to. Instead, they want to get lost in a big crowd, 
they want to blend in with a mass of people, they want to go unnoticed.
    General aviation is not an industry that lends itself to secrecy or 
anonymity because it is a relatively small, closely-knit, and heavily 
regulated industry.
    All general aviation pilots are registered--names and addresses--
with the Federal Government. They are subject to periodic check rides 
and medical examinations so they are forced to interact with government 
and society. They operate out of general aviation terminals or airports 
that tend to be like small communities.
    If you have ever been to a general aviation terminal at a 
commercial airport or to a general aviation airport, you know that 
there is a strong sense of community. There is camaraderie between the 
pilots and airport personnel and an aviation jargon that lends itself 
to familiarization. There is also a strong interest in airplanes that 
translates into people closely watching what types of aircraft are 
being flown and by whom.
    According to the experts, this is not the ideal environment for 
terrorist operations.
    The experts noted other aspects of general aviation that they found 
positive. Among those is the fact that general aviation pilots and 
passengers know one another. And, as general aviation airplanes become 
larger they operate out of larger airports and, because of their cost, 
they are well cared for and secured.
    When we asked the experts how we could enhance security, they 
suggested we try to build on some of the industry's inherent security 
strengths. For example, since it is a strength that all pilots must be 
registered with the Federal Government, the experts suggested we make 
sure the Airman Registry is kept current. Since it is a strength that 
pilots have to carry an ID card known as a pilot's license, they 
suggested that a photo be added to the license to improve 
identification. Since it is a strength that general aviation airports 
are small communities, they suggested we establish neighborhood watch-
type programs where pilots would be told what kind of things to look 
for and where to report suspicious behavior.
    Based on this input, the general aviation community put together a 
list of 12 security recommendations and sent them to the Department of 
Transportation and the Federal Aviation Administration in December of 
2001. A copy of those recommendations is attached.
Since September 11
    So what has actually changed in the area of general aviation 
security since the September 11th attacks? Here are just a few 
examples:
    Today, all foreign-registered general aviation aircraft must be 
approved by the Transportation Security Administration (TSA) and submit 
a complete passenger manifest before they will be allowed to enter the 
United States.
    As a result of the Patriot Act, companies that finance the sale or 
purchase of general aviation aircraft follow guidelines GAMA developed 
with the Treasury Department for identifying and reporting suspicious 
financial transactions.
    The Federal Government is now regularly combing the Airman Registry 
looking for persons deemed to be a security threat.
    New security procedures, including passenger screening, have been 
crafted for charter flights on aircraft weighing 12,500 pounds or more.
    Aircraft are not allowed to fly over major sporting events at low 
altitudes unless they receive permission from the TSA.
    Pilots are now required to carry a government issued photo ID in 
addition to their pilot's license whenever they fly.
    And, as a result of efforts by the Aircraft Owners and Pilots 
Association, neighborhood watch-type programs have been established at 
general aviation airports complete with a toll-free number for 
reporting suspicious behavior (1-866-GA-SECURE).
    As you can see Mr. Chairman, the general aviation world has changed 
significantly since 9/11, and the general aviation industry itself is 
continuing to push for more changes.
    For example, GAMA supports improving the Airman and Aircraft 
Registries to better reflect all relevant pilot and aircraft 
information. We support the concept of giving general aviation 
companies that charter or rent aircraft weighing more than 12,500 
pounds access to the Computer Assisted Passenger Screening (CAPS) 
system used by commercial airlines. We support the concept of allowing 
Part 91 operators who voluntarily participate in a federally certified 
security program the same access to airspace as commercial operators--a 
concept that is being refined and tested through a demonstration 
program involving Teterboro Airport and the National Business Aviation 
Association.
    However, Mr. Chairman, another security measure required by the 
Aviation and Transportation Security Act (ATSA) that all aliens seeking 
flight training in aircraft weighing 12,500 pounds or more are now 
required to undergo a Department of Justice background check has yet to 
be implemented.
    The reason I omitted the DOJ background checks earlier is because 
the Department of Justice has ignored Congress by disregarding the 
clear intent of the Aviation and Transportation Security Act (ATSA).
    Members of this Committee will recall that early drafts of ATSA did 
not include a time limit in the provision requiring all aliens seeking 
flight training in aircraft weighing 12,500 pounds or more to undergo a 
Department of Justice background check. GAMA did not oppose the 
provision but expressed concern about the fact that there was no time 
limit on how long the DOJ could take to conduct its background check. 
We cautioned that without some statutory time limit, the DOJ might 
never get around to conducting the required background checks.
    We are grateful that Congress took our concerns to heart and 
inserted a 45-day limit to the final version of the bill which became 
law on November 19, 2001.
    Unfortunately, the Department of Justice has ignored the clear 
intent of the statutory time limit and refused to conduct the 
Congressionally mandated background checks. The way DOJ has avoided the 
45-day clock is by claiming that the clock did not start with bill's 
enactment. Instead, the DOJ claims the 45-day clock will start only if 
and when it gets around to putting a process in place for conducting 
the required background checks.
    It has now been nearly 15 months since ATSA became law and the DOJ 
has still not implemented such a procedure for aliens seeking flight 
training in aircraft weighing 12,500 pounds or more. This is an 
outrage. As a result of the DOJ's inaction, flight schools have lost 
students, flight instructors have lost their jobs, and domestic 
manufacturers have lost sales to foreign competitors. Perhaps most 
importantly, the safety of airline passengers around the world has been 
compromised.
    Mr. Chairman, there is a reason more pilots are trained in the U.S. 
than anywhere else in the world. The U.S. has the highest safety 
standards, best instructors and the most advanced flight training 
simulators in the world. We do not want foreign airlines that carry 
U.S. passengers or foreign corporations that carry U.S. business people 
to train elsewhere.
    Since passage of ATSA, the Department of Transportation has given 
life to the entire 70,000 person Transportation Security Administration 
(TSA). That agency, which was nothing more than a name on a piece of 
paper 15 months ago, has been able to conduct criminal and financial 
background checks, fingerprinting and drug testing on 44,000 baggage 
screeners, and has ordered over 150,000 background checks on pilots and 
airport personnel. Over that same period of time, the DOJ has not able 
to conduct a single background check on an alien seeking initial flight 
training on an aircraft weighing 12,500 pounds or more. That is 
inexcusable.
    We understand the rule that establishes the background check 
process is ready for publication. All the other federal agencies have 
signed off on it, and the rule has cleared the OMB.
    DOJ itself claims to be just about ready to publish the rule. They 
say they are just working out a few kinks in their software and should 
be ready to go in another week or two. Of course they told us that last 
February, and last March, and last October.
    DOJ's failure has financially damaged U.S. flight schools, cost 
hundreds of flight instructors their jobs, and cost U.S. manufacturers 
aircraft sales.
    Mr. Chairman, this is not what Congress intended when it passed 
ATSA. It is not what GAMA intended when we worked with you on the 
legislation. As a result, we are urging you to take steps to correct 
this action immediately. We can't keep waiting for DOJ to start the 
clock. It is possible they never will.
CONCLUSION
    In closing, I want to once again state clearly and unequivocally 
that the general aviation community takes its security seriously. The 
industry has come together on this issue and been very proactive 
promoting security enhancements.
    We look forward to working with Congress, the Department of 
Homeland Security, the Department of Transportation, and others as we 
continue to develop reasonable and effective security tools.
    Thank you for the opportunity to testify today. I am happy to 
answer any questions you might have.

    Senator Lott. Thank you, Mr. Bolen.
    Mr. May, president and CEO, Air Transport Association of 
America. I've enjoyed working with you for many years in this 
city. I know you're in a new role, but I have no doubt you will 
do a great job in this area, as you have in the other one, and 
we look forward to hearing from you and working with you in the 
future.

  STATEMENT OF JAMES C. MAY, PRESIDENT AND CEO, AIR TRANSPORT 
                  ASSOCIATION OF AMERICA, INC.

    Mr. May. Thank you, Mr. Chairman. I deeply appreciate it. I 
especially appreciate the 48 hours that you gave me since 
starting this job to get ready to----
    Senator Lott. I figured that's----
    Mr. May.--come up and testify today.
    Senator Lott.--all it would take for you to get fully 
familiar with all you need to know about this industry. So, 
good luck.
    [Laughter.]
    Mr. May. Well, it's been a great learning curve, and I've 
enjoyed it. Thank you for allowing us to come up today.
    The 9/11 attack on the United States--in the 9/11 attack on 
the United States, airlines were both an economic target and an 
instrument of terrorism, and I think they've suffered mightily 
since then as a consequence.
    In the United States, the role of aviation is without 
parallel. It links communities together, delivers our critical 
goods, drives essential industries, and employs or produces 
employment for more than 11-million Americans.
    Unfortunately, our airlines are in grave economic 
condition. Fully half the jobs lost in the economy since 9/11 
have been lost in the aviation and travel sectors. Two major 
airlines representing more than 20 percent of the industry are 
in bankruptcy. Passenger carriers have reported in excess of 
$10 billion in 2002 net losses.
    Now, the reasons for the imperiled condition of the 
industry, I think, are clear. We've always struggled with 
costs, high fuel, insurance, labor costs--have combined with a 
particular vengeance in an underperforming economy exacerbated 
by the aftermath of 9/11.
    In response, the airline CEOs have imposed very tough, 
disciplined self-help regimens. Last year, we cut more than $10 
billion in operating and capital expenses, and more is on the 
way. Yet despite these tough measures, analysts are projecting 
a $5- to $6 billion net loss for 2003. And despite all of our 
efforts, we really are being overwhelmed by new government-
imposed security costs being passed through to the airlines 
essentially as unfunded mandates.
    Let me share some examples, some of which we've talked 
about today. In excess of 300 million in costs for hardened 
cockpit doors, 100 million appropriated; hundreds of millions 
for ramped security, aircraft inspections, passenger document 
verification, extensive employee background-check expenses, and 
other new security requirements; tens of millions for screening 
of catering materials and supplies, as well as charter 
passengers; hundreds of millions in postal and freight 
restrictions that are lost opportunity.
    And the problems may well continue to grow. Last week, I 
was advised that the TSA staff, at least, are calling for cabin 
and cockpit crew defense training that could well cost hundreds 
of millions of dollars to our airlines.
    Just as alarmingly, and I suspect something that Chip will 
talk about, the addition of national security costs at airports 
is adding billions in expenses. And if those expenses are not 
covered by the Federal Government, they are ultimately likely 
to be absorbed by tenants, including airlines.
    Now, further, the economics of the airline competition in 
pricing, I think, have effectively precluded this industry from 
passing government security fees on to their customers. It may 
be on the ticket, but it's not necessarily being passed on.
    Mr. Chairman, I want to be clear that in presenting this 
picture, it's not intended as a criticism of TSA, the 
Administration, Congress, or--nor is it an attempt by our 
airlines to shirk our responsibilities. I think everyone's 
acting in good faith and trying to do what's best for the 
public interest.
    Admiral Loy, for example, has, in fact, been terrific. Even 
though I've only been on the job a couple of days, he and I 
have met a couple of times already, and we work closely 
together with him.
    But, you know, time is running out, and I would suggest 
three steps need to be taken immediately. First, I think 
Congress needs to affirm and enforce the unalterable policy 
that aviation security is, in fact, the responsibility of the 
Federal Government. Second, I think we need to work together, 
all of us--Admiral Loy, the Congress, this Committee, the 
aviation industry, airlines--to understand and assess the 
specific financial impact of unfunded security mandates, and 
we're happy to participate in that process. And, finally, I 
think we have to come up with a game plan. Congress, the 
agencies, and the industry must work in concert to identify 
very specific changes or actions that can take place that will 
minimize the cost of security requirements without compromising 
essential security goals.
    Now, our reasoning will not come as any surprise to you. I 
think it's clear the attacks on the United States which took 
place on 9/11 were just that, attacks on our country. And 
defending against foreign aggression and providing for our 
common defense are, without question, the responsibilities of 
the U.S. Government and not private industry.
    So in enacting the Aviation Transportation Security Act, 
Congress agreed with that fundamental reasoning and mandated 
the Federal Government assume responsibility for aviation 
security, something that this Committee participated in. The 
legislation made clear that, with the exception of specified 
airline responsibilities in only three limited areas, TSA was 
to take over all screening of passengers and property. Today, I 
ask that this Committee see that that mandate is met.
    Finally, Mr. Chairman, let me close by noting something 
that I think is critically important. Our message is made all 
the more urgent by the imminent prospect of war. Based on the 
industry's experience during Desert Storm, the prospect of 
increased losses of up to $4 billion a quarter from a 
combination of war-depressed travel and increased fuel costs is 
very real.
    In 1999, during Desert Storm, this industry had cash 
reserves and borrowing power. Today we have neither. The 
urgency of the case for fast action by Congress cannot be 
overstated.
    And I thank you for allowing me to appear today.
    [The prepared statement of Mr. May follows:]

 Prepared Statement of James C. May, President and CEO, Air Transport 
                      Association of America, Inc.
    On behalf of the Air Transport Association member airlines, thank 
you for the opportunity to appear before you this afternoon.
    Airline security is a policy matter of vital national interest. 
And, the financial impact of decisions made by the Congress and the 
Administration will have consequences for the very future of the 
airline industry. We applaud this Committee for moving promptly to 
address these issues and welcome the opportunity to work with you in 
finding solutions.
    Clearly, with just over forty-eight hours in my new position, I do 
not appear here as an authority on aviation security. What I can do, 
however, is provide you with candor and perspective. I offer you the 
same commitment I have given to the airline CEOs--the straight facts, 
to the best of my ability and that of the ATA, along with our best 
judgment with regard to solutions that will work in the national 
interest.
    As President Bush emphasized in his State of the Union address, 
reinvigorating our nation's economy is essential to our future. The 9/
11 attack on the United States unquestionably was intended to cause 
harm in every conceivable way, including undermining our national 
economic vitality--and its impact continues. While we have felt the 
pain, we have not, and will not, let that attack succeed.
    Among the key economic targets, was our airline industry. In a 
country the size of the United States, the role aviation plays in our 
success is without parallel--it links our communities together, it 
delivers our critical goods, it drives essential industries, and it 
employs or produces employment for more than 11 million people. I need 
not go through the litany of numbers with this Committee. You know them 
well. I would note, however, that fully half of the jobs lost in this 
country since 9/11, have been lost in the aviation and travel sectors. 
The fact is that our way of life depends, in a very fundamental way, on 
the airline industry and if we are to jumpstart our national economy, 
the airline industry issues being considered today must be resolved.
    The airlines, unfortunately, are in grave condition. Two major 
airlines, representing more than twenty percent of the industry, are in 
bankruptcy. Passenger carriers have reported over $10 billion in 2002 
net losses. Industry debt now exceeds $100 billion, while the 
industry's $15 billion total market capitalization continues to 
decline. Our ability to borrow is evaporating. The few airlines that 
have been able to achieve a profit, are doing so under tremendous 
adversity--and with the prospect of war on the horizon, the picture is 
not bright.
    The reasons for the imperiled condition of the industry are clear. 
The industry has always struggled with high costs. Stubbornly high fuel 
prices, escalating insurance costs and spiraling labor expenses, among 
other things, have combined with a particular vengeance in an 
underperforming economy exacerbated by the aftermath of 9/11.
    The airline CEOs recognize completely that ``self-help'' is 
imperative--and they are making the tough calls. For the top six 
network airlines in 2002, operating expenses have already been cut by 
$4.5 billion, with more to come. Capital spending has been slashed by 
almost 50 percent--some $5.6 billion from 2000 levels. Regrettably, to 
reduce operating expenses, staffing has been cut by over 90,000 
positions across the industry. It is well known that wage reductions 
and/or productivity increases are the order of the day.
    Despite these measures, many analysts are looking to an industry 
loss of between $5 and $6 billion in 2003--meaning, the airline 
industry will have incurred losses totaling nearly $25 billion over a 
three-year period--and it could well get worse.
    The picture is obviously bleak. The question is, beyond what 
airline managements and labor can do, what can be done to restore the 
industry and, with it, a huge portion of the national economy? That is 
where today's hearing and the role of this Committee becomes critical.
    Beyond the unprecedented push for internal cost reductions and 
improved productivity, our second major problem arises from the impact 
of government decisions. As a consequence, in addition to what the 
airlines can do, the government has a major role to play in restoring 
balance to the aviation sector. Let me be clear. The industry's self-
help measures are being counterbalanced by increased costs arising from 
the new national security requirements, which are being passed through 
to the airlines as unfunded mandates.
    Given the state of the economy and the public mood, capacity in the 
airline industry continues to substantially exceed demand. 
Consequently, any ability to pass these national security costs on to 
the consumer is non-existent. As the airlines struggle to climb out of 
the financial hole the industry is in, it keeps getting deeper and 
deeper as a result of new security costs. If the airline industry is 
going to succeed, the government must reverse this situation.
    Let me provide you with just a few examples of the kind of expenses 
I am referring to:

   Hardened cockpit doors are estimated to cost in excess of 
        $300 million. To date, less than $100 million has been 
        appropriated and obligated. While, with the help of this 
        Committee, more support is hoped for soon, major funding gaps 
        remain.

   Ramp security, aircraft inspections, passenger document 
        verification and extensive employee background-check expenses, 
        among the multitude of new security requirements, continue to 
        add hundreds of millions in new, post-9/11 costs.

   The screening of catering materials and supplies, and the 
        pre-flight screening of charter passengers by the airlines--
        both responsibilities which, we believe, were appropriately 
        vested in the TSA--continue to be performed by the airlines, 
        adding yet more major new costs.

   The booking of Federal Air Marshals into first class seats 
        (often displacing passengers at the last minute), particularly 
        at a time when every additional revenue dollar is so important 
        to the industry, is producing opportunity costs running again 
        over $100 million annually by some estimates.

   Postal and freight restrictions resulting in hundreds of 
        millions in lost revenue.

   Finally, in a period when the only effective way to 
        encourage people to get back in the air is through discounted 
        prices--as is reflected by the fact that 2003 airfares are 
        virtually identical to the fares charged in 1988 in actual, not 
        inflation-adjusted, dollars--the airlines have no ability to 
        pass on additional costs to consumers. Consequently, both the 
        Passenger Security Tax and the Air Carrier Security Fee come 
        right off the airlines' bottom line--with additional billions 
        lost.

   And the problems continue to grow. Just last week, I was 
        informed that, at least at the staff level, TSA is calling for 
        cabin and cockpit crew defense training that will cost hundreds 
        of millions if these plans proceed without change.

   The multitude of issues surrounding the use of guns in 
        aircraft cockpits threaten still further costs. As one example, 
        I just learned that at least some in the pilot community are 
        viewing the TSA-mandated procedures as a basis for adding more 
        time to their schedules.

   As Mr. Barclay notes in his testimony, the addition of 
        national security costs at airports is just as alarming. 
        Construction and reconfiguration of space for TSA processing, 
        offices and other facilities occupied by TSA, and the 
        additional demands for security personnel and procedures, are 
        again adding billions in new costs. While we are in complete 
        agreement with the airports in calling upon the government to 
        assume these expenses, it does bear noting that no matter what 
        is ultimately decided in this area, the airports, in the end, 
        do not absorb these expenses. Either the government will assume 
        these costs or they will be borne by the airport tenants. Yes, 
        again exposing airlines to billions in new costs.

    Mr. Chairman, I want to be clear that in presenting this picture to 
you, it is not intended as a criticism of TSA, the Administration or 
the Congress. Every party is acting in extraordinary good faith in 
trying to do what is best for the public interest within the limit of 
resources available. What is difficult for all of us, however, is 
bringing perspective to these issues--and that is where this Committee 
can be so helpful.
    In the brief time I have had to discuss and analyze the problems we 
are discussing today, it appears that there are three essential steps 
that should be taken immediately.

   First, Congress must establish and enforce an unalterable 
        policy that aviation security is the responsibility of the 
        Federal Government;

   Second, we must work together to jointly understand and 
        assess the financial impact of the unfunded security mandates. 
        While some estimates identify an annual cost to the industry in 
        the area of $4 billion, more work must be done to validate 
        these figures; and

   Third, once the unalterable policy is clear, Congress, the 
        agencies and the industry must work in concert to identify 
        changes to procedures that will minimize the cost of security 
        requirements without compromising essential security goals.

    Our reasoning is clear. The attacks on the United States, which 
took place on 9/11, were just that--attacks on our country and all that 
it stands for around the world. Although the instruments of the attacks 
were highjacked aircraft, the effect was no different than an attack on 
our nation by hostile foreign forces. Defending against such attacks--
defending against foreign aggression and providing for our common 
defense--are, without question, responsibilities of the United States 
government and not private industry.
    In enacting the Aviation and Transportation Security Act, Congress 
responded to the attack by mandating that the Federal Government assume 
responsibility for aviation security. That legislation made clear that, 
with the exception of specified airline responsibilities, TSA was to 
take over all screening of passengers and property.
    What the airlines are asking is that the Committee take action to 
see that this mandate is met and that the unfunded security mandates 
now being imposed upon the industry are eliminated. TSA must establish 
its security priorities and meet those priorities within its budget.
    If we are to begin to restore the health of the airline industry, 
we must adhere to the principle that protection against terrorism is a 
national defense function. As such, expenses associated with anti-
terrorism and airline security must be assumed as general taxpayer 
expenses. Doing so is not ``bailing out'' the airlines. Rather, it is 
recognizing that the extraordinary costs associated with national 
security cannot be supported by the private sector alone. The evidence 
is clear that the failure to do so is having a devastating impact on 
the fragile economic condition of the airline industry--with a growing 
threat to the broader economy.
    This message is made all the more urgent by the imminent prospect 
of war. Based on the industry's experience during the first Gulf War, 
and the current state of demand, the prospect of increased losses of $4 
billion per quarter from a combination of war-depressed travel and 
increased fuel costs, is very real. Given the depletion of the 
industry's borrowing power, however, should that occur the very 
functioning of this critical component of our economy would be in 
doubt. The urgency of the case for action by this Committee, the 
agencies involved and the Appropriations Committees cannot be 
overstated.
    In conclusion, let me thank you for all that you are doing to work 
with us in these exceptionally difficult times, and for all you have 
done in response to the 9/11 attack. Please be assured that the Air 
Transport Association will do everything possible to support your work 
on behalf of the public interest.
    Thank you.

    Senator Lott. Thank you, Mr. May, and I will come back with 
some questions for both of you.
    And now, Mr. Barclay, as I recognize you, I've told several 
of the people in the aviation industry recently, you know, one 
of the things that's dangerous about this area of legislation. 
And it's one of the few areas where all Members of Congress, 
House and Senate, actually have to endure the indignities of 
our constituents; we all use your facilities and we all fly a 
lot of airplanes, general aviation and commercial, and it makes 
us painfully aware of what's going on. And, therefore, 
sometimes we get right in your hair.
    I must say, with regard to the airports, you know, I've 
been in a few airports recently, including one in Lexington, 
Kentucky, where I was very impressed with the TSA officials and 
that we--you know, one of them was a part-time woman with a 
Ph.D., a professor at the University of Kentucky, pretty 
interesting for a TSA employee there at that Lexington Airport.
    I also have found that now, in this new position, that I 
guess I'm going to get to meet every one of your members as I 
fly to the airports, because the airport manager came down, 
pulled me out of the line, and said, ``You have 30 minutes 
before you have to board. Let me show you what we're doing.'' 
``Oh, good, thank you very much.'' So I guess I'll get to see 
the underbelly under every airport that I go into now.
    But your people, I think, are doing a great job, from where 
I've seen it, and we look forward to working with you and we're 
glad to hear your testimony now.

           STATEMENT OF CHARLES BARCLAY, PRESIDENT, 
           AMERICAN ASSOCIATION OF AIRPORT EXECUTIVES

    Mr. Barclay. Thank you, Mr. Chairman. We are into show-and-
tell when we get one of you into an airport.
    I'd like to emphasize just three points out of my written 
statement, and that is partnership, paying bills, and passenger 
accommodation.
    But, first, I'd like to start off by thanking and 
commending Secretary Mineta, Secretary Jackson, Deputy 
Secretary Jackson, Under Secretary and soon-to-be Administrator 
Loy, and the talented team he's put together. My candid 
recommendations for changes going forward are delivered side by 
side with my respect and admiration for their very good work 
and leadership to date.
    On partnership, while a great deal of good work has been 
done since 9/11 by Congress and TSA, we believe that a 
fundamental concept has been largely overlooked, and that is 
that throughout the history of our country, federal and local 
law-enforcement agencies have acted as partners, not regulator 
and regulated party. The--whether it's been partners on special 
task forces or in day-to-day operations, the model for law 
enforcement is agreeing on a division of responsibilities and 
then spending all our energies looking out for the bad guys, 
not spending our law-enforcement energies looking at each other 
as a regulator and a regulated party.
    TSA needs to put airport law enforcement in a different 
category from the private parties in the aviation industry, and 
then treat them differently. We are TSA's partners with law-
enforcement powers and identical incentives to keep our 
citizens safe. TSA has made some efforts in this direction, 
but, too often--and perhaps it's due to the difficult deadlines 
in the first year--fallen back into regulating their wishes 
upon airports, sharing too little information, and generally 
grouping airports with the private companies TSA appropriately 
regulates. The results are costs that are too high for TSA and 
airports pressured to have too many TSA employees, conflicts 
and inconsistencies that could be avoided.
    My testimony offers some specific examples, and some 
upcoming decisions on perimeter security will put this matter 
front and center. Legislative changes to codify the partnership 
model would be welcomed by our members.
    Paying the bills. When you order something, you need to pay 
for it. It's true for us all, and it's true for TSA. To the 
extent TSA believes it must use federal mandate to accomplish 
its mission, the Federal Government needs to pay the bills when 
they come due. Today's answer is too often, ``We hope to pay 
for that, if we're given room in our budget, but do it 
anyway.''
    The authority to order something be done without the 
concomitant responsibility to pay the cost is a power that 
should be used sparingly. Airports have delayed over $7 billion 
in safety and capacity projects in an effort to reprogram 
expenses for security costs and to reduce charges to airlines, 
a delay which will damage the system's future if it's continued 
indefinitely. We've spent ten times as much of our AIP money 
for security in 2002 as in 2001, and, as Inspector Mead pointed 
out, we remain un-reimbursed in areas detailed in our 
testimony, and we face $16 billion in annual construction 
requirements to meet the future system, safety, and capacity 
needs.
    Further, the Administration's budget request includes 
nothing we can see to accommodate the permanent buildout of EDS 
systems, something our members estimate as somewhere north of 
$4 billion. Financial demands on airports are nothing short of 
staggering.
    TSA and DHS need to decide what they need to operate, what 
they need to regulate, and what they want to delegate. They 
need to pay for the costs for the first two. We stand ready to 
help provide security and to control costs through the 
partnership model, as discussed above, with the third option.
    Accommodating passengers. The Federal Government cannot 
just not ignore the system's long-term safety and capacity 
needs, as has already been pointed out by several members, 
while focusing on the immediate security challenges. By 
definition, if we were to remedy the security concerns enough 
to return passengers to pre-9/11 levels, we would be back in 
our previous capacity crisis. We need to continue to invest in 
our system's long-term capacity through AIP, PFC's bonding in 
rates and charges, or we'll simply trade passenger 
inconvenience from security procedures today for passenger 
inconvenience from capacity shortages tomorrow. The 
Administration's budget proposal to draw down the Aviation 
Trust Fund balance to alarmingly low levels would seem unwise 
to us in this regard.
    Technology certainly has great potential to improve both 
security and convenience, and we applaud the efforts of the 
Committee and TSA to support research and implementation of 
improved technology.
    Finally, Mr. Chairman, I just want to say that, in my 
experience meeting airline CEOs, I always thought they were a 
smart bunch of folks, but when they hired Jim May, I was sure 
of it, and we welcome him to the industry.
    [The prepared statement of Mr. Barclay follows:]

Prepared Statement of Charles Barclay, President, American Association 
                         of Airport Executives
    On behalf of the men and women who operate and manage America's 
airports, I appreciate the opportunity to reflect on our recent efforts 
to enhance aviation security and to outline a few of the challenges 
that lie ahead. While much remains to be done, it is clear that a great 
deal of progress has been made in recent months and that our nation's 
aviation system is more secure than it has ever been.
    Before moving into some of the specific challenges that loom on the 
horizon, I want to first thank Chairman Lott and the Subcommittee for 
delving further into aviation security. With several high-profile 
deadlines behind us and with the Transportation Security Administration 
finally ramped up and fully operational, this is absolutely the right 
time to address fundamental questions about aviation security and how 
we can make further improvements in a reasonable and cost effective 
way.
Challenge: Recognition of Airports as Public in Nature With Similar 
        Mission to TSA
    For airport operators, the questions contemplated today must go 
beyond the basic matter of who should pay for what. Clearly, cost 
implications are a key concern and one that we believe the Federal 
Government should take into account as it considers security 
requirements and procedures. Equally important, however, is the 
fundamental question of how the Federal Government will choose to view 
airport operators--as a partner or as an impediment--as we move forward 
to address security challenges.
    While the situation has improved dramatically under the leadership 
of Admiral Loy, TSA, at best, still views airports with suspicion. The 
effort to install explosive detection equipment in airports over this 
past year to screen checked baggage offers a perfect example. Rather 
than drawing upon the local knowledge and expertise of airport 
officials, who repeatedly offered their assistance, the TSA chose to 
keep airports at arms length as extensive plans for baggage screening 
configurations were drafted and re-drafted by government contractors at 
great expense and often without airport input. This decision to ignore 
airport operators cost the TSA critical time and many millions of 
dollars. It likewise cost a number of airports additional resources as 
many were forced to undertake design and engineering work at their own 
expense because the TSA's work and final planning was either 
dramatically delayed or unfeasible.
    As we move forward, it is clear that the TSA can and should do even 
more to turn to airports as a partner in the quest to develop and 
implement cost-effective solutions to security issues. Airports are at 
their very core public institutions and therefore much different from 
the rest of the aviation industry, which is to a large extent driven by 
the need to show profits. The primary mission of an airport is not to 
make money, but rather to serve the community and the national aviation 
system by encouraging competitive air service and ensuring a safe and 
secure environment for the public. As local governments, airports have 
always been responsible for the safety and security of their facilities 
and the people who use them. This will continue to be so, regardless of 
the roles assumed by the TSA. Since we share the same mission as the 
TSA with regard to security, it is only appropriate that we develop a 
cooperative and coordinated approach to solving problems.
    The use of local law enforcement resources at airports is but one 
area where airports and local governments can and should work with the 
TSA. For more than 30 years, airports and local governments have 
provided a law enforcement presence at airports throughout airport 
terminals and around airport perimeters. Without question, local 
governments have performed these law enforcement duties with great 
success. Yet, there are those within TSA who would like the Agency to 
get more involved in these areas, a prospect that ignores past success 
and, if implemented, would impose further costs on the system.
    Parking is another area that continues to cause problems despite 
the reported elimination of the irrelevant 300-foot-rule that 
prohibited parking close to terminal buildings. There remain a number 
of hoops for airports to jump through for approvals of parking plans, 
and serious questions remain at some bigger airports as to how the new 
system, which is based on Homeland Security threat levels, will operate 
and be funded. Again, these types of problems could be eliminated if 
only the Federal Government would recognize the public nature of 
airports and allow them to develop plans that best serve local 
circumstances. The Federal Government does not dictate to local 
governments how to protect shopping malls, office buildings, museums, 
or sports stadiums. What public purpose is served by treating airports 
differently?
    Mr. Chairman, the TSA has a daunting mission with responsibilities 
not only for aviation security but also for our nation's entire 
transportation system. It is in the Agency's interest and the public 
interest to reach out to airports and work collaboratively when 
possible to solve problems. Building a cooperative relationship based 
on mutual trust will both enhance security and ensure that limited 
resources are wisely spent.
Challenge: Federal Funding to Meet Federal Mandates
    While working more closely with airports would represent a good 
start, it will obviously take more to comprehensively address airport 
security, comprehensively, into the future. Funding challenges, as you 
are well aware, remain a serious problem that we believe should be 
addressed with both a renewed effort to keep the TSA in-check and 
focused on its core mission and as well with new federal resources.
    On the former, there seems to be a pervasive urge on the part of 
the Agency to expand its reach as the law enforcement and parking 
examples previously mentioned illustrate. To address this situation, 
Congress may want to consider requiring either regulatory burden or 
cost-benefit tests for the TSA to ensure that the Agency avoids 
continued ``mission creep.''
    In terms of federal funding, it is clear that new federal resources 
must accompany federal requirements. Airport operators can no longer 
absorb additional security costs without serious consequences to 
capital improvement programs and other airport operations. Airports are 
already stretched thin trying to deal with a number of unfunded 
mandates imposed on them by the Federal Government. In addition, the 
Airport Improvement Program, which many in the Administration seem to 
look at as a magic funding pot, has already been tapped heavily for 
security-related items, with more than $560 million in FY 2002 devoted 
for security, up from $57 million the previous year. Without 
incremental federal assistance, airports would have no choice but to 
lay off part of the burden on our partners in the airline industry, 
which is for assistance also is not a viable option given their dire 
financial situation.
    The case for federal support is evident. The attacks of September 
11 were more than an attack on the aviation system; they were an attack 
on our nation. The threats that exist today are a matter of national 
security, and the Federal Government must take an active role in 
meeting airport security requirements.
    For airports, the situation was worsening before 9/11 and has grown 
much worse in the aftermath. Many of the mandates issued by the FAA and 
TSA to provide additional law enforcement personnel, enhance airport 
surveillance and revalidate all airport-issued identification, for 
example, remain unfunded. In Fiscal Year 2002, Congress appropriated 
$175 million to reimburse airports for a portion of these costs. As 
part of the process of applying for those funds, airports collectively 
submitted requests for $444 million in expenses that the FAA deemed 
acceptable, leaving a roughly $270 million gap that airports have been 
forced to absorb. An additional $150 million was provided for 
reimbursement as part of the FY 2002 supplemental spending bill, but 
those funds evaporated when the President rejected the ``contingent 
emergency'' portions of the bill.
    At the Jackson International Airport in Jackson, Mississippi, for 
example, new mandates have led to a nearly 70 percent increase in law 
enforcement expenses, among others. The roughly $45,000 a month that 
the airport has been forced to shoulder may seem insignificant, but for 
smaller facilities those costs are extremely difficult to deal with. In 
the case of Jackson, the airport has reluctantly increased landing fees 
for carriers, a result that could adversely affect air service for the 
community. There are numerous other examples from airports throughout 
the country.
Explosive Detection System Installation
    Unfortunately, there are even bigger cost concerns on the horizon. 
Chief among them is the multi-billion dollar cost of permanently 
installing explosive detection equipment in 429 commercial service 
airports across the country. As anyone who recently has traveled 
through airports knows, a majority of these machines currently sit in 
already crowded terminal areas, where they were dumped in order to meet 
the 12/31/02 deadline for screening all checked baggage. The longer the 
existing ``temporary'' arrangement persists, the bigger the security 
threat to waiting passengers and the more inconvenienced they are as 
they attempt to check baggage and board flights.
    The estimated costs of moving the equipment ``in-line'' with 
baggage systems out of the way of check-in areas are staggering. 
Estimates vary from $3 billion to $5 billion and up to complete the 
extensive work required to make space available and to create new space 
in airports for the truck-sized EDS machines, to create and expand 
baggage make-up facilities, to integrate the various systems, to 
reinforce existing floors, as necessary, and the like. While it might 
be easier from a funding perspective to simply ignore these costs and 
try to ``get by,'' with leaving the machinery where it now sits, doing 
so would have serious ramifications on security and passenger flows and 
processing. The passenger's difficulties in dealing with today's 
security mazes, the latter of which remains extremely important given 
the current state of the aviation industry and the need to eliminate 
the passenger ``hassle factor.''
    While the depth of the problem varies, virtually all airports face 
serious challenges in moving to in-line systems. Below are some 
estimates our members have provided to us or that have been reported in 
the press over the past several months for long-term EDS integration. 
These figures could, of course, change depending on final TSA planning:

    Seattle                                   $400 million
    San Jose                                  $241 million
    Newark                                    $200 million
    Las Vegas                                 $200 million
    Dallas/Fort Worth                         $193 million
    Boston                                    $146 million
    LAX                                       $135 million
    National/Dulles                           $125 million
    LaGuardia                                 $100 million
    San Diego                                 $90 million
    Denver                                    $85 million
    Kansas City                               $66 million
    San Francisco                             $65 million
    Phoenix                                   $60 million
    Minneapolis/St. Paul                      $40-$50 million
    Salt Lake                                 $30 million
    Nashville                                 $30 million
    Jacksonville                              $20 million
    Miami                                     $20 million
    John Wayne                                $20 million
    Richmond                                  $20 million
    Oakland                                   $16 million
    Memphis                                   $10 million
    Boise                                     $7-8 million
    Sarasota                                  $5-6 million
    Gunnison-Crested Butte                    $5 million
    Lexington                                 $3.5 million
    Tallahassee                               $3-4 million
    Louisville                                $3.25 million
    Tucson                                    $2.35 million
    Kalispell, Montana                        $1.5 million

    To its credit, the Congress has been willing to step forward and 
begin providing resources to install EDS equipment. As part of the 2002 
supplemental spending bill (Pub.L. 107-206), $738 million was 
appropriated specifically for that purpose. While that theoretically 
provided a good down payment, we have recently learned that the TSA has 
shifted most--if not all--of those funds to help pay Boeing for the 
TSA's design, engineering, and construction work, conducted to deploy 
baggage screening equipment, including design work. It is unclear what 
portion has gone to make terminal modifications.
    Since the supplemental appropriations bill was signed into law this 
past summer, AAAE and ACI-NA have repeatedly asked TSA officials about 
the distribution of the $738 million in an effort to provide guidance 
to airports interested in moving forward with terminal modifications 
needed to accommodate EDS equipment. Repeatedly, we have been led to 
believe that the funds would be released to airports for TSA-related 
terminal modifications through a formulaic approach, only to find out 
in recent days that would not be the case.
    We are struggling to understand how paying for a significant 
portion of the Boeing contract with these funds met the requirement 
established in the law, since airport costs to accommodate baggage 
screening continue to be ignored. Airports, in some cases, provided 
their own money to pay for design work that was ultimately used because 
of the delay in getting the government work completed and because of 
problems with implementation of the government plans. In Jackson, 
again, the airport used $50,000 of its own resources to develop the 
plan that was ultimately implemented. It is our hope that Congress will 
act quickly to ensure that the funds in question are in fact used for 
airport terminal modifications as intended.
    As we move forward, airports recognize the difficulty we face in 
gaining the billions in funding necessary for terminal modifications in 
one year. Therefore, we have joined the TSA in advocating for the 
creation of a new program within the TSA's budget--perhaps modeled 
after the current FAA Letter of Intent process, FTAs Full Funding Grant 
Agreements, or something similar--that would allow airports to leverage 
their own resources to pay for the construction necessary to 
accommodate EDS equipment.
    The notion would be to have interested airports provide immediate 
funding for key projects with a promise that the Federal Government 
would reimburse the airport for those expenses over several years. This 
approach would maximize the use of limited federal resources and ensure 
that key construction projects get underway as soon as possible. We 
hope that Congress will act quickly on this proposal given the urgency 
of the problem.
    Before moving on to other funding issues for the airport community, 
I again want to emphasize to the Subcommittee our concerns about the 
possibility of using Airport Improvement Program funds for EDS 
installation and other pressing security needs. As I mentioned earlier, 
more than $560 million in AIP for FY 2002 has been used for security. 
That is $560 million that was not used for other important safety, 
capacity, renewal, and noise-mitigation projects at airports.
    TSA officials have publicly announced their intention to rely on 
AIP in the current fiscal year once again to meet security 
requirements. Already, airport operators across the country have 
reported hearing from FAA officials ``encouraging'' them to devote 
their AIP dollars to security projects.
    This is a very dangerous precedent, Mr. Chairman, and one that I 
don't think we can take lightly. While using some AIP funds has been 
helpful to some airports in the short-term, it would be incredibly 
short-sighted to rely on AIP funding for future security requirements. 
The events of September 11 have taken some focus away from the issue of 
airport capacity, but it is clear that serious needs remain. Many 
airports were feeling the strain of congestion before the current 
downturn and FAA projects passenger traffic is expected to grow 
significantly, from its current level of 680 million to one billion, 
annually, within the next decade. Cargo and general aviation operations 
will likely continue to skyrocket. Airports' capital investment needs 
for renewal, modernization, and security-related improvements continue 
to grow, unabated.
Other Funding Requirements
    Beyond EDS installation, airports continue to struggle with a 
number of other new requirements, including necessary parking changes, 
as well as access control and perimeter security upgrades. ACI-NA 
projects that on-going and future capital needs are expected to exceed 
an average of $16 billion per year for the next five years.
    The use of space by the TSA in airports is also a big concern. The 
TSA has requested significant amounts of space at airports, not only 
for screening passengers, but also for employee training, office space, 
break rooms, and other purposes. For decades, the FAA has paid airports 
for the Agency's use of space at airports, and we believe the policy 
should be the same for the TSA. Congress should permanently extend a 
requirement that has been included in recent funding bills requiring 
the TSA to pay for all the space it uses in airports outside of 
screening checkpoints. Without this change, airports will be forced to 
build additional facilities, without compensation, and thereby shoulder 
an even greater economic burden.
    The issue of permanent positioning of law enforcement personnel at 
security screening checkpoints has also caused a great deal of concern. 
Prior to the passage of the Aviation and Transportation Security Act 
last November, airport and local law enforcement were responsible for 
law enforcement activities at airports and were required to respond to 
incidents at screening checkpoints within a time certain. With the 
passage of ATSA, a law enforcement presence was required at all 
security screening checkpoints. While the National Guard initially 
fulfilled this requirement, state and local law enforcement officials 
have done so since the Guard was removed from airports last May. They 
have done so with the understanding that they would be reimbursed by 
the Federal Government for meeting this new federal requirement. We 
need to ensure that funding is available to meet these costs.
    As was mentioned previously, airports and local governments, 
traditionally, have performed law enforcement duties throughout 
airports. It is an effective and efficient model and it only stands to 
reason that this arrangement should be allowed to continue, with the 
local forces meeting what is now essentially a federal as well as local 
requirement. Ideally, checkpoint law enforcement officers would be 
given the flexibility to move beyond their fixed stations in order to 
both make better use of personnel resources and to ensure a broader, 
more comprehensive, and more effective approach to security, provided, 
of course, that they can respond to a checkpoint incident in a time 
certain as necessary. These changes require a modification to existing 
law. Both TSA and the airport community are in agreement that those 
changes should be made.
    Another area of concern that I would like to touch on is general 
aviation security, a topic that will likely begin to receive more 
attention this year. To address security concerns at GA airports, AAAE 
created a task force to make recommendations on the future of GA 
airport security. Task force members included officials from numerous 
GA airports, as well as representatives from the National Association 
of State Aviation Officials (NASAO).
    In its final report, the task force emphasized that the ability of 
the large majority of GA airports, many of which are not self-
sustaining, to implement enhanced security measures will be contingent 
upon the provision of extensive financial assistance from the Federal 
Government. Any new regulations should not be promulgated without an 
appropriate new funding source from the Federal Government to finance 
new security requirements at GA airports. Simply diverting funds from 
AIP or other existing federal programs would only serve to reduce 
funding for necessary airport safety and capacity projects.
Challenge: Increase Customer Service, Utilize New Technology
    Before closing on our list of specific concerns, I want to note a 
couple of broader areas that need additional attention from TSA and 
from the Congress. The first is customer service, which has largely 
been put on the back burner since the events of September 11. While 
security is obviously an a primary imperative, maintaining the 
efficient, effective functioning of the aviation system is also 
important. We cannot realistically expect the traveling public forever 
to wait patiently on a system that they view as unnecessarily intrusive 
and inefficient. The more hassle involved, the less inclined people 
will be to board aircraft, especially as time passes. We have already 
seen convincing evidence that passengers who have an option have 
already forsaken air travel: short distance trips have seen the 
greatest decline in patronage. Those truths have had and will continue 
to have a profound affect on the airline industry and its financial 
well-being.
    We are pleased that Secretary Mineta and others have made 
efficiency and customer service a key goal of the TSA. Given the 
importance of this issue, it is our hope that DOT will collect and 
publish performance data on the wait times at security processing 
points at every airport. We believe that having this information 
available to the public can provide much needed accountability in this 
area.
    Finally, I want to encourage the Subcommittee to give greater 
attention to the promise of new technology. To this point, much of the 
debate in Congress on aviation security has largely focused on those 
responsible for screening passengers and their carry-on baggage, 
cockpit security and Federal Air Marshals. While appropriate and 
necessary, we must also look to new technology to ensure that the 
hijackings and terrorist attacks that occurred on September 11 will not 
happen ever again.
    Just a few days after the terrorist attacks, Secretary Mineta 
formed two teams to examine ways to improve airport and aircraft 
security. I served on the Rapid Response Team on Airport Security, 
which issued its report last year. We concluded that new technologies 
must be deployed more widely to augment aviation security. I remain 
convinced that there is an urgent need at minimum to establish 
centralized databases for both trusted travelers and industry workers 
that will provide for the continuous vetting of the hundreds of 
thousands of individuals who frequently travel or who work within the 
aviation system. I believe there are a number of additional 
applications for new technology to enhance perimeter security and 
access control, improve baggage and passenger screening, and numerous 
others.
    In closing, Mr. Chairman, I again want to thank you for the 
opportunity to outline a number of concerns for airports across the 
country. Security remains a pressing issue that requires our continued 
attention. Airports stand ready to work with the TSA with the hope that 
we can continue to find reasonable and cost-efficient solutions to 
ongoing problems.

    Senator Lott. Thank you, Mr. Barclay.
    It sounds to me like the relationship between the airports 
and airport executives and local law enforcement with TSA has 
not been good. Isn't that what you were saying?
    Mr. Barclay. No, I think that would go--I'm here focusing 
on the problems that we need to fix and not all the things that 
have gone right. And I think Administrator--Admiral Loy went 
over several of them where they have worked with us. There's 
just a--such a great range of things you've got to get done 
quickly at airports.
    Senator Lott. And that was going to be my next question. I 
was going to back away from the first question and say, look, 
they had a lot to do in a short period of time. They did it. 
And sometimes I'm sure they did pretty aggressively or even 
heavy-handedly in order to get it accomplished at the airports. 
But, you know, are those--I mean, I assume you're working with 
TSA to make sure that the concerns of the airports executives 
and the local law enforcement are being considered now.
    Mr. Barclay. Well, we are. And some of it is in Congress' 
jurisdiction. And the law that was written gave things, like 
perimeter security, and it said ``Federal'' on some of those.
    Senator Lott. Uh-huh.
    Mr. Barclay. As the Admiral said, they said a Federal 
Officer at the checkpoint. And that really doesn't make sense.
    Senator Lott. You know, I would hope somebody, as we go 
forward, will begin to apply some common sense to some of these 
things. You know, we--typically for Americans, we moved in 
aggressively and with--you know, a total sledgehammer. And we 
looked at these outer perimeters, and then we kind of worked 
inward when maybe we should have been going the other way all 
along. And I hope that you'll be aggressive in making that 
point.
    One of the things you said, and I've wondered about many 
times, where the TSA came in and said, you know, ``Do this,'' 
and you said, ``Well, we can't, because who will pay for it,'' 
and they said, ``Well, we don't know, but do it anyway.'' What 
happens if you said, ``No, we're not going to do that''----
    Mr. Barclay. Well----
    Senator Lott.--``We can't afford it, and just because you 
told us to, unless you provide a way for it to be paid, we 
don't have to do that.'' Is the only thing that forces you to 
go ahead and do it is fear that something will go wrong and 
then you'll get the blame? Are they going to--are they going to 
take you to court? What are they going to do with you?
    Mr. Barclay. Well, we're public agencies, as well, and 
sensitive to what can happen in the press if we're labeled as 
non-cooperative or not caring about aviation security.
    The --we've tried to work out those issues, and so has TSA. 
You're going to see a number, the $738 million example that's 
being talked about now. Nobody that I know is trying to say TSA 
didn't follow the letter of the law there, but that was a--that 
was a pot of money we lobbied for and got put in the bill. The 
Administration lobbied against us. Now, we're not exactly 
seeing where it's all going. And that's a function of there's 
too little money. We both--neither TSA nor airports have enough 
money--we're both going after some of the same pots in some 
places. And I think we're going to have to compartmentalize 
some of our arguments over money and our cooperation as 
partners in law enforcement. I mean, there's going to be places 
where we agree and places where it's going to be hard----
    Senator Lott. Obviously I'm concerned about that, and 
that's why we're having this hearing. I do feel like there have 
been, again, unfunded mandates we've dumped off on the airlines 
and the airports and, you know, the--aviation, in general, and 
we're going to have to take another look at that and assume 
some of the responsibilities.
    However, I also think that the airports are going to make 
sure that the--you know, I mean, this is not the AIP program. 
The security--improving the airport or changing the airport in 
the name of security if it's not always security is not good 
either.
    And I have to say, right now I don't think Congress is real 
interested in aesthetics. When Mr. Mead was talking about up to 
$5 billion to, what, redo the airports, I'm not sure you're 
ever going to get that kind of help from the Congress. Security 
is one thing. I do think, you know, aprons and runways and all 
that's very important, but I just--I don't know that--I have 
reservations about how much responsibility the Federal 
Government has in, you know, reconstruction or, you know, 
overhaul of the main airport building, for instance. Do you 
want to respond to any of that?
    Mr. Barclay. I would like to, Senator. If you take a look 
at some terminals today, they look like--from an above shot, 
they look like maze down there for laboratory animals and 
you're queuing up two and three times. All the airports want to 
do is build in baggage screening into the baggage systems 
themselves behind the scenes so you're not queuing several 
times, and we think that's key to the whole economic foundation 
of the industry to get passengers back on airplanes.
    So that's where all that money is. It's in the buildout of 
buildings that weren't designed for inline baggage screening 
systems, and we've got to put them back there unless we want to 
leave our terminals looking like they do today.
    Senator Lott. Well, you know, maybe it was just the size of 
the airport. I guess this would be a mid-size regional airport, 
Lexington, Kentucky. But I was very impressed. I didn't see 
mazes. And they've had these new conveyor belts behind the 
ticket counter, modern equipment was being used. And the 
airport director actually said that they were going to be 
saving money with this new equipment, almost enough to, as I 
recall he said, within 2 years, to pay for the additional costs 
of what they had to put in.
    What about that?
    Mr. Barclay. Well, it varies enormously. The smaller 
airports have less of a problem where they have buildings with 
sufficient place--or space to put these things in behind the 
counters. Many of your major airports--if you picture Dallas/
Fort Worth with those very narrow terminals--they have no 
choice but to do a very expensive buildout behind the scenes--
--
    Senator Lott. Yeah.
    Mr. Barclay.--and that's where all the money is at the 
relatively few larger airports. Boston, alone, has done it 
already and spent over $140 million. Seattle has an estimate of 
$400 million. I mean, there's great variation from airport to 
airport in what the costs are.
    But it's not for aesthetics; it's for passenger convenience 
to get passengers in and out without queuing them up several 
times.
    Senator Lott. Congress authorized $1.5 billion for FY 
2003--2002 and 2003 for reimbursement of airport operators for 
additional security costs imposed by ATSA. How much money have 
you received under that provision?
    Mr. Barclay. 175 million. Another 150 million was provided 
in the emergency supplement that the President did not allow to 
go forward and get spent. So we thought we were going to get 
another chunk of 150, but--and that was for the actual 
operating costs that airports immediately ramped up after 9/11, 
just on the request, and we were told we'd be reimbursed. And 
the total amount of reimbursement so far--we've calculated 
airports have spent something north of a billion dollars, 
operating and capital, since 9/11 directly on the security 
costs, and we've gotten 150 million.
    Senator Lott. Ten percent. Not quite what it should be.
    Let's see. Mr. May, talking about the security fee and 
the--you know, that we've put on the tickets--what was it, 
$2.50 each leg? And I'm being told by the airlines that 
basically the fact is they had to eat that, that the market has 
sort of set the price and they couldn't add that on top of the 
tickets. Is that, you know, the understanding that you have? 
And are there any innovative ways that we could deal with that 
fee that would help solve that problem?
    Mr. May. Mr. Chairman, that is, in fact, my understanding, 
and I think, that of all of the economists that I've talked to 
that understand the competitive nature of the business and the 
pricing strategies in this business, that even though you see 
some fees that are printed on the ticket--and one might expect, 
at the outset, that they're being passed through to the 
ultimate consumer--the bottom line is that a lot of that money 
is coming off of the bottom line of the industry and not being 
passed on because competition will not permit that.
    I think that as we go forward, we have to take a look at, 
as I indicated in my testimony, all of the security expenses 
and reassess what is happening to this industry, try to 
quantify, as much as possible, the exact dollar impact, and 
then come up with a plan to address it, whether it's finding a 
way to get full reimbursement for cockpit doors--by the way, 
there is $150 million in the 2003 conference, in the House 
version, not in the Senate version, and so the conference is 
going to have to go to work to come up with some additional 
moneys.
    Senator Lott. I know that Senator Stevens understands that. 
I don't know whether he can get it done. That's a very 
difficult conference that he's working on.
    Mr. May. And I think the Congress is going to have to--you 
know, this may seem heresy, but I think we need to consider 
whether or not we want to continue that $2.50 segment fee or go 
to the general treasury.
    Senator Lott. Well, let me--let me--I was afraid you might 
say that. I remember what some in your industry said when we 
did it, but I do think the passengers should pay for some of 
the cost of their security. I think they should pay, not the 
airline.
    Mr. May. I understand.
    Senator Lott. Although the airline has certain areas that 
they're just going to have to pay, too. But I think our intent 
was for the passengers to pay part of the cost of the extra 
security they were going to have. But----
    Mr. May. And it is----
    Senator Lott.--that's not what--I mean, they paid, but the 
airline actually absorbed the cost and--maybe there's--isn't 
there some way we could deal with that?
    I mean, we were talking about it the other day. Is there 
some way that fee could be paid separately? Now, that would add 
to the lines of people. I don't know the answer, but I don't 
think the airlines ought to have to pay for that. I think the 
passengers ought to have to pay for it. Now, is there a way to 
get that done?
    Mr. May. That's the 64-dollar question, and I don't have 
the answer for you today, sir.
    Senator Lott. Well, I hope you'll work on that, because 
we're going to be looking for some innovative ideas as we try 
to help you deal with, you know, this extra security cost that 
we've dumped on the industry and then have not lived up to our 
obligations, although there's a limit of what we're going to be 
able to do. Sooner or later, this Committee can deal with the 
authorization, but we've got to get the money out of the 
appropriators, and that's a real challenge for us, obviously.
    Mr. Bolen, just one question on you. This alien, sort of, 
occasion for flight training that the Justice Department has 
not developed the system that's going to be done, I can 
understand how they were pretty wise, ``OK, we only have 45 
days, so we won't let the 45 days start running until we've 
devised the system.'' But, I mean, how difficult should this 
be? It looks to me like, you know, 16 months is more than 
enough. But there's got to be some relatively simple answer. 
They just haven't gotten around to it, or they don't want to do 
it?
    Mr. Bolen. We don't know what the real answer is. A year 
ago at this time, we were told they were working on a computer 
program, that it was a couple of days away; we could expect, by 
February 1st of last year, to have it done. On February 1st, we 
were told that the computer program would be ready in April. 
And in April, we were told it would be a couple more months. 
And so we've been kicking the can down the road for quite a 
long time here.
    In the time that we have been waiting on the Department of 
Justice to figure out how to screen the aliens, I might point 
out that the department, or the Transportation Security 
Administration has gone from a name on a piece of paper to a 
fully staffed 70,000-person agency that has conducted 
background checks on thousands--40,000 baggage screeners. 
Pilots have been screened throughout the United States. Airport 
personnel has been screened throughout the United States. But 
the Department of Justice hasn't figured out a way to do this. 
And I think that that really is inexcusable.
    Senator Lott. Well, maybe we can make an inquiry----
    Mr. Bolen. I'd appreciate that, thank you.
    Senator Lott.--as to what's happened there that would be 
helpful.
    Mr. May, you know, this area is going to need a lot of 
attention this year. We've got the FAA reauthorization, and, 
obviously, Senator McCain and Senator Hutchison and Rockefeller 
and Hollings are, all of us are interested in this area, and 
we're going to try to move forward on it. We also have the 
cargo security legislation that has been introduced by Senator 
Hutchison. We want to make sure we have thought that through 
and that if we need to do it, we do it in the right way. We 
also are going to need some vehicle to deal with these security 
costs that the industry has had to deal with that we haven't 
done our part on. And, of course, there is the labor reform 
legislation that Senator McCain and others have introduced, and 
we would want to take a serious look at that, too.
    Now, I don't know whether we can get one of those done or 
two of those or wrap them all in one, but it's an area that we 
intend to take action in--or areas we intend to take action in 
this year, and we'll be looking forward to working with you and 
hearing from your--all of the people in your industry as to the 
best way to get--deal with those very important issue.
    Mr. May. Mr. Chairman, we look forward to working with both 
you and your staff and the other Members of the Committee.
    Senator Lott. Thank you very much for your time.
    The hearing is adjourned.
    [Whereupon, at 4:40 p.m., the hearing was adjourned.]
                            A P P E N D I X

               Prepared Statement of Hon. Barbara Boxer, 
                      U.S. Senator from California
    Good afternoon. The terrorist attacks were almost 17 months ago. 
Soon after the attacks, we passed the Aviation and Transportation 
Security Act. And, the Homeland Security bill had additional aviation 
security measures.
    Mr. Chairman, I can say that air travel today is more secure than 
it was last year. But, air travel is not as secure as it could be. Our 
job is not done.
    Last November, two shoulder-fired SA-7 missiles were launched at an 
Israeli airliner taking off from a Kenyan airport.
    This is not the first time that shoulder-fired missiles were used 
by terrorists. In 1998, 40 people were killed when a Congolese 727 was 
shot down with a shoulder-fired missile. In addition, Al Qaeda is also 
suspected of targeting U.S. military aircraft in Saudi Arabia last May 
with an SA-7 missile. Saudi authorities found an empty launch tube near 
an airbase used by U.S. aircraft.
    The threat is in the United States. Last May, the FBI warned 
airlines that terrorists may have smuggled surface-to-air missiles into 
the United States. The threat warned, ``given al Qaeda's demonstrated 
objective to target the U.S. airline industry, its access to U.S. and 
Russian-made MANPAD systems, and recent apparent targeting of U.S.-led 
military forces in Saudi Arabia, law enforcement agencies in the United 
States should remain alert to potential use of MANPADs against U.S. 
aircraft.''
    We cannot wait to act until a plane in the United States or 
traveling to the United States is shot down by a terrorist. We must act 
now, which is why, today, I introduced legislation, the ``Commercial 
Airline Missile Defense Act.'' This would require that countermeasures 
be placed on all U.S. commercial turbojet aircraft.
    We also must continue to ensure that the legislation that Congress 
passed is implemented. First, the air marshal program is extremely 
important. Last summer, I was extremely concerned about news reports 
about problems in the air marshal program. Six months later the 
problems persist. Less than two weeks ago, an MSNBC report stated ``the 
program is suffering.'' The report continued that the air marshal 
program's recruitment and retention are in trouble; TSA cannot reach 
the target recruitment numbers; and there continues to be inadequate 
training. I urge TSA to ``get-to-the-bottom'' of any reported problems 
in the program.
    Another issue that we passed in the last Congress is armed pilots. 
This program--the federal flight deck officers program provides a 
final, last resort for the crew and passengers on a hijacked plane 
before the plane is shot down by our own military. As one of the 
primary cosponsors of this legislation, I will closely follow, the 
implementation of this program.
    In the last Congress, the Senate passed key aviation security 
legislation, which the House did not. This legislation included a 
provision based on my legislation on ID verification technology. A year 
ago, I was troubled by a CBS news investigation that showed people 
getting through security with fake IDs. Therefore, I introduced 
legislation to provide for training of airline personnel in the 
detection of fake IDs and to provide for the deployment of technology 
at airport security checkpoints, which would determine if a passenger 
had a fake ID or not. I intend to reintroduce my legislation again this 
year.
    Also in the bill that passed the Senate last year was a provision 
to study the use of hardened baggage containers. This technology was 
shown as part of the technology demonstration in the Commerce Committee 
hearing that I held in Los Angeles last August. These containers--many 
using Kevlar--can contain a bomb blast from bringing down the plane. We 
need to examine the best way to use these containers and get them 
aboard our planes.
    We cannot stop fighting terrorism. Now is not the time to slow down 
or delay our efforts to increase and improve aviation security. The job 
is not done and it must be done.
    I know that we have a lot to accomplish. We owe this to the 
American people to ensure their security when they fly.
    Thank you, Mr. Chairman.
                                 ______
                                 
     Response to Written Questions Submitted by Hon. John McCain to
                              James M. Loy
    Question 1. At most airports, TSA met the requirement to screen 100 
percent of checked baggage by using explosives detection equipment or 
EDS installed in airport lobbies. These methods of screening are less 
efficient and require more screening staff than integrated EDS 
machines. What plans does TSA have for integrating EDS into baggage 
systems at the largest airport[s]?
    Answer. TSA is developing an EDS in-line integration plan. In the 
interim, TSA has installed in-line systems at seven U.S. airports. TSA 
will continue to work directly with airport operators on plans for 
integrating EDS at additional locations. At the present time, TSA is 
focusing on those locations that have not yet achieved 100 percent 
electronic baggage screening.

    Question 2. Admiral Loy, in his testimony, Mr. Barclay says that 
relations with TSA are strained. Do you share that view? To what do you 
attribute these poor relations? What can be done to change this?
    Answer. My direct conversations with Mr. Barclay do not indicate a 
strained relationship between AAAE and TSA. While individual airports 
across the country have experienced some challenges working with TSA, 
all indications from AAAE are that relations are working quite well at 
the headquarters level. TSA has worked closely with AAAE on meeting the 
2002 congressionally mandated deadlines and continues almost daily 
contact with AAAE.

    Question 3. Admiral Loy, there has been a great deal of complaints 
from the industry of the lost ``opportunity costs'' because of air 
marshals sitting in first class seats. What is your position on this 
issue?
    Answer. As I indicated in my oral testimony, Federal Air Marshals 
(FAMs) serve an enormously important function, which is to control 
access to aircraft cockpits and to allow aircraft crew to concentrate 
on navigating aircraft safely. I am exceptionally proud of their 
dedication, commitment, and daily contribution in the multilayered 
system that is now our aviation security paradigm.
    Generally, FAMs are seated in particular sections and seats in 
order to maintain the maximum tactical advantage against would-be 
hijackers and terrorists. This positioning is fundamental to the FAMs' 
mission of thwarting another terrorist operation aimed at using a 
commercial airliner as a weapon of mass destruction.
    Under ATSA, air carriers must provide seating for FAMs without 
regard to availability and at no cost to the U.S. Nevertheless, TSA 
recognizes that airlines are losing significant sums due to increased 
costs and decreased revenues. While we are sensitive to concerns about 
lost ``opportunity costs'' arising from the deployment of FAMs, we do 
not believe that airlines are experiencing significant loss of revenues 
as a direct result of air marshals sitting in first class seats. 
However, TSA is sympathetic to the financial plight of the airlines and 
will continue to work with them to address various issues relating to 
the airlines' underlying profitability, consistent with the post 
September 11 security paradigm.

    Question 4. TSA has hired over 67,000 screeners. Let's just say 
that in the next 2 years 30 airports go with EDS in-line solutions for 
screening checked baggage. How many screeners can we expect to be let 
go because their services are no longer required with a more efficient 
screening method?
    Answer. When airports transition to a 100 percent in-line checked 
baggage system, staffing needs will be reduced because higher capacity 
equipment will replace lower capacity equipment currently installed in 
airport lobbies. In addition, the use of on-screen resolution 
procedures will reduce the number of bags that must be subjected to a 
secondary search. With fewer bags requiring a secondary search, TSA 
will be able to reduce the number of ETD units deployed for this 
purpose, which will allow for additional reductions in staffing.

    Question 5. The DOT/IG has raised concerns about who will bear the 
ultimate cost of integrating EDS machines into baggage systems at 
airports. Do you expect TSA to fund the conversion, as it is their 
responsibility to ensure that the process is being done effectively?
    Answer. Integrating baggage systems in-line must be a shared cost 
with an airport. Where the TSA determines an in-line solution is 
appropriate, it has established guidelines to determine integration 
expenses that will be covered. Expenses covered by TSA include:

   the acquisition and transportation of EDS/ETD units,
   direct costs to make the unit operational (i.e. permitting, 
        architectural and engineering fees, rigging, HVAC, electrical 
        requirements, etc),
   a reasonable level of site clearance,
   reasonable amount of in/out conveyor,
   tie-in to the existing baggage handling system, and
   environmental enclosures for equipment if necessary.

    Question 6. What is the biggest obstacle facing TSA today?
    Answer. TSA achieved enormous success in its first year of 
existence. It simultaneously focused on meeting a variety of 
Congressional mandates; hired, trained and deployed an efficient, 
courteous and professional aviation security screener workforce; began 
the process of addressing the security needs in other transportation 
modes; and did all this while building the infrastructure and personnel 
required of a new organization. In achieving these objectives, TSA also 
had to be constantly vigilant on the need to maximize efficient use of 
the resources made available to the agency.
    However, short and long-term challenges remain. The establishment 
of DHS has brought forward a new paradigm for homeland security that 
all legacy agencies, including TSA, will have to meet. Our challenge 
will be to ensure that transportation security needs are met in a 
comprehensive and strategic manner and TSA will work with all DHS 
organizations to ensure that this is done well. Furthermore, TSA will 
strive to maintain the progress already made in securing the nation's 
transportation systems while bearing in mind the constant need to 
allocate resources and personnel made available to the agency in a 
prudent fashion.
                                 ______
                                 
     Response to Written Questions Submitted by Hon. John McCain to
                          Hon. Kenneth M. Mead
    Question 1. Mr. Mead, in the Administration's budget, the President 
has proposed spending down the Airport and Airway Trust Fund balance to 
ensure a stable general fund component in the FAA operations budget. 
You have expressed concern about the growing general fund component of 
the FAA budget. Do you agree with this approach? Do you have an opinion 
about what would happen to the trust fund if we were to grant the 
airlines ticket tax relief?
    Answer. Given the current budgetary issues facing the Federal 
Government, we believe that all options should be looked at in order to 
fund FAA. However, by spending down the Trust Fund to pay for FAA's 
operations budget, it reduces funds that could be used for modernizing 
and expanding the National Airspace System, and limits the ability of 
FAA to pay for unexpected costs. Regardless of where the funds come 
from FAA's continued growth in cost is unsustainable. FAA must look 
internally for ways to control its rising costs. This includes 
implementing cost accounting and labor distribution systems, having 
better cost controls over contracts, looking to the private sector for 
``best-business'' practices, and by holding managers accountable for 
meeting the core missions of the agency.
    Also, if Congress granted the airlines ticket tax relief, the 
remaining Trust Fund balance could be liquidated by FY 2004. Due to the 
decline in air travel along with the events of September 11th the Trust 
Fund balance has already dropped dramatically. According to FAA's 
figures, the Trust Fund balance is expected to drop from $7.3 billion 
at the beginning of FY 2002 to $4.6 billion by the end of FY 2003. If 
Congress grants the airlines ticket tax relief and no new tax revenues 
are collected, the remaining $4.6 billion Trust Fund balance would 
cover only 72 percent of FAA's FY 2004 modernization and capacity 
budgets. FAA's remaining funding would have to compete with the rest of 
the Federal Government in a time of decreased resources.

    Question 2. Mr. Mead, in your testimony you discuss the lack of 
cost controls at TSA in its formative months. Have steps been taken to 
address this issue?
    Answer. TSA has taken some steps to strengthen its controls and 
contract oversight. For example, in August 2002, TSA contracted with 
Defense Contract Management Agency and Defense Contract Audit Agency 
(DCAA) for contract administration and contract audit services, 
respectively, of its security screener contracts. TSA reported contract 
management of the contract screener program as a material weakness in 
the Department of Transportation's 2002 Federal Managers Financial 
Integrity Act (FMFIA) report and has implemented plans to improve its 
oversight.
    These actions represent notable first steps but more remains to be 
done. We believe that the weakness in contract oversight extends beyond 
the scope of the security screening contracts, and have recommended 
that future reporting of FMFIA. material weaknesses be expanded to 
include TSA's lack of contract oversight for all major contracts, and a 
corrective action plan be implemented to improve its oversight 
practices.
    For example, a TSA review of one NCS Pearson subcontractor with $18 
million in expenses, determined that between $6 million and $9 million 
of these expense appear to be attributed to wasteful and abusive 
spending. As we requested, TSA hired DCAA to audit the over $700 
million NCS Pearson contract and is considering hiring DCAA to audit 
the Boeing Service Company contract as well.
    Key issues facing TSA as it moves to the Department of Homeland 
Security (DHS) will be capitalizing on economies of scale and improving 
ftiture cost controls. There are at least three different levels where 
savings can be realized: (1) centralized administrative services, (2) 
use of airport space, and (3) use of law enforcement personnel.

   A key cost savings is whether TSA will have its own separate 
        staff and bureaucracy for general counsel, budgeting, human 
        resources, and internal affairs or whether the creation of DHS 
        will offer centralized services and control costs in these 
        areas. Centralizing services could improve TSA's contract 
        oversight without significant increases in contract staff.

   At individual airports, TSA should explore ways to 
        consolidate its airport space requirements for functions like 
        office space, break rooms, training facilities, and holding 
        cells with other organizations that are merged into DHS. Some 
        of these organizations, such as Customs and INS, already have 
        space at airports, and consolidating these facilities will save 
        resources.

   With the tremendous tasks facing TSA, it is important that 
        the agency avoid extending itself beyond the basic tenets of 
        the Act's requirements. For example, we previously testified 
        that TSA needed to avoid mission creep. While the law is only 
        explicit about a Federal law enforcement presence at 
        checkpoints, TSA was considering expanding its law enforcement 
        presence at the airports. TSA later abandoned these plans.

    Question 3. Most people generally give TSA a good grade, especially 
in light of the significant pressure and deadlines that Congress placed 
upon them. What grade would you give TSA?
    Answer. I would have to give TSA two grades. TSA deserves a B for 
accomplishing the unprecedented mandates in the law by the statutory 
deadlines. By the end of 2002, TSA met the demanding deadlines to have 
a federalized passenger screener workforce in place by November 19th 
and, for the most part, to begin screening all checked baggage using 
explosives detection equipment by December 31st. An effort of this 
magnitude--hiring and training over 60,000 screeners and deploying an 
estimated 1,100 EDS and 5,000 explosives trace detection (trace) 
machines--has never been executed in any single country or group of 
countries. It also built up the Federal Air Marshal workforce.
    However, it met these formable challenges and deadlines without 
controlling the costs. TSA needs to better control its workforce costs 
by making full use of part-time positions to better match screener 
staffing to passenger flows at many airports. In June 2002, TSA 
announced that 20 percent of its total screener workforce would be 
part-time and seasonal positions. However, as of December 31, 2002, 
only 1,225 (approximately 2 percent) of TSA's total screener workforce 
were part-time employees. TSA also faces the challenge of building the 
infrastructure to monitor and control costs, especially given the large 
number and dollar volume of contracts it is managing, about $8.5 
billion at the end of calendar year 2002 and continuing to grow. There 
has also been growth on individual contracts. An example of a 
significant cost growth is the contract with NCS Pearson for hiring of 
screeners and human resources support from February to December 2002. 
The initial contract cost of $104 million grew to an estimated $700 
million. On TSA cost controls, our overall assessment is a D.

    Question 4. What is going to be the single biggest key to TSA's 
future success?
    Answer. There are several keys to TSA's future success. First, TSA 
must be able to effectively manage its workforce, the largest civilian 
workforce of any federal agency outside the Department of Defense. TSA 
has nearly 70,000 employees in a wide variety of jobs that have 
different needs with respect to such things as training, career 
development, and advancement. These jobs are vital to transportation 
security, and TSA must work to maintain a highly skilled workforce. 
They must develop performance standards for the screener workiorce and 
conduct recurrent training to ensure the workforce is prepared to 
respond to the latest threats.
    Second, TSA must get control over its costs of operations, 
facilities and equipment, and research and development. To do so, TSA 
must work with DHS to establish an infrastructure to support its daily 
operations. For example, there have already been significant cost 
increases, along with significant questionable costs, in TSA's initial 
contracts for hiring, training, and deploying a screener workforce. 
With over $8 billion under existing contracts, TSA will need the 
necessary infrastructure and expertise to effectively oversee 
contractor costs, schedules, and performance. With 70,000 employees 
they must also control payroll costs and work toward providing 
effective security more efficiently.
    Lastly, TSA must continue to build on its efforts to develop 
effective working relationships with the entities it is now responsible 
for regulating. The regulated entities include aviation, maritime, 
pipeline, rail, and trucking companies; and state and local governments 
that are also responsible for transportation security at airports, 
transit systems, etc. As was witnessed earlier on in its attempts to 
meet the December 31st deadline to screen all checked baggage, TSA's 
working relationship with both the airlines and airport operators got 
off to a rocky start resulting in differences on how and where best to 
deploy the equipment needed to screen all checked baggage. As it moves 
towards integrating EDS into the airports' baggage handling systems, 
TSA must ensure that both the airlines and airport operators play a 
critical role in the deployment decision-making process. This will also 
be true with the other regulated industries and entities when TSA moves 
forward in its efforts to secure the Nation's transportation system 
including general aviation airports, oil and natural gas pipelines, 
ports, transit and rail systems, and bridges. At the same time, TSA 
must work with those federal agencies where responsibilities overlap, 
such as in the movement of hazardous materials.

    Question 5. Concerns have lingered with regard to EDS and their 
high false alarm rates, are these false alarm rates contributing to a 
great deal of congestion or inefficiency? Is the government not getting 
the most for its money?
    Answer. We are not aware of any empirical evidence that supports 
EDS false alarm rates contributing to checked baggage screening 
congestion or inefficiency. Despite the machines' higher-than-desired 
false alarm rates, it should be recognized that these machines are the 
best technology available for overall effectiveness and efficiency in 
screening checked baggage for explosives. These machines have 
successfully completed TSA's certification process for explosives 
detection, false alarms, and throughput. Although there are other 
manufacturers of bulk explosives detection machines, that advertise 
lower false alarm rates and higher throughput, the detection 
performance of these machines has not met the TSA-certified standards.
    Also, since the first U.S. deployment of EDS back in 1996, 
manufacturers of EDS have improved the machines' false alarm rates 
without compromising the machines' detection performance. Further 
improvements can be expected in reducing the machines' false alarm 
rates now that EDS manufacturers, by contract, are required to develop 
a continuous improvement program that decreases false alarm rates. If 
the manufacturers meet the performance requirement, an incentive fee 
applies. Likewise, if the manufacturers do not meet the performance 
requirement, the incentive fee no longer applies and a penalty 
assessment is levied.
    However, in today's operational environment, the real problem with 
inefficiencies lies in the way the machines have been installed. Nearly 
all EDS in use today are lobby-installed or stand-alone machines and do 
not offer the efficiencies that are available with an in-line system. 
Lobby-installed or stand-alone operations are very labor intensive, 
with passengers' checked baggage being handled multiple times 
throughout the screening process causing less-than-desirable throughput 
rates. Compare this to an in-line system where the bag is handled just 
once before being sent to the EDS machine for screening resulting in 
significantly higher throughput rates. This type of system also 
requires fewer screeners which lends itself to less cost for screening 
all checked baggage.
    Nevertheless, the need to deploy better, more effective equipment 
to meet current and future threats will be an ongoing need for years to 
come. TSA must continue to invest in research and development for 
cheaper, faster, and more effective equipment for screening passengers, 
their carry-on and checked baggage, and air cargo.
                                 ______
                                 
     Response to Written Questions Submitted by Hon. John McCain to
                            Edward M. Bolen
    Question 1. I know that National Airport is still closed to general 
aviation traffic. What is the likelihood of DCA opening back up to 
general aviation? If opened, does the GA community have a security plan 
proposal to ensure the GA aircraft flying in and out of DCA are secure?
    Answer. The general aviation community is not optimistic about the 
reopening of DCA to general aviation. All indications from the 
Department of Transportation is that it will not reopen to general 
aviation.
    If DCA were to reopen to general aviation, the industry has 
developed several plans to ensure the aircraft are secure and safe. 
These plans were discussed with the DOT. They include background checks 
for pilots and crew, screening of passengers and baggage, discrete 
codes for detection by air traffic control and the use of ``feeder'' 
airports for screening purposes before flying into DCA.

    Question 2. You have mentioned several issues that your members 
face as a result of security burdens. What other negative impacts have 
the security measures had upon your members?
    Answer. The most severe negative impact on the industry has been 
our gradual restriction to airspace. General aviation is not looking 
for a federal bailout. Instead, we are asking is that the Federal 
Government ensure that general aviation has reasonable access to our 
nation's airspace and airports. If we cannot provide transportation 
through our nation's airspace and land where people want to go, we 
cannot remain viable link in the nation's transportation system.
    We believe our concerns about losing access are justified. Over the 
past several weeks and months, a handful of private enterprises and 
local governments, long opposed to general aviation operations for non-
security reasons, have begun using security as a pretext for airspace 
restrictions. Regrettably, there are instances where the security ruse 
has worked. Sports leagues, Disney and the City of Chicago are among 
those who have successfully lobbied for general aviation airspace 
restrictions--despite the fact that our national security community has 
not identified any specific or credible risk that would merit such 
restrictions.
    Our national air transportation system is far too important to the 
United States to allow powerful private enterprises and local 
communities to use their political clout to create an unjustified, ad 
hoc patchwork of airspace restrictions. If allowed to spread, such a 
regulatory patchwork could easily degrade the margin of safety in our 
air transportation system.
    It is time for the Federal Government, Congress and the 
Administration, to be accountable for developing and implementing a 
security process that protects the integrity of our national air 
transportation system, objectively assesses security threats, mitigates 
risk, minimizes economic impact and maintains the margin of aviation 
safety. Mr. Chairman, we need your leadership and the leadership of 
this Subcommittee to put an end to the practice of dispensing airspace 
restrictions to the highest bidder. The future of our entire air 
transportation system depends on it.
                                 ______
                                 
     Response to Written Questions Submitted by Hon. John McCain to
                              James C. May
    Question 1. The ATA web site has the following quote ``If steps are 
not taken now to address future growth, the system will descend into 
gridlock. Though the 2001 recession and September 11 tragedy created a 
brief respite in the capacity crunch, enhancing the performance of the 
nation's aviation infrastructure is imperative if we are to preserve 
the sector's contribution to the global economy.'' I believe that if we 
grant you tax relief, we will not be able to make substantial progress 
in enhancing our infrastructure. Is that a consequence you are willing 
to accept?
    Answer. Mr. Chairman, the Aviation Trust Fund has an uncommitted 
balance in excess of $4.5 billion and a cash balance in excess of $12.3 
billion. The cash spendout rate of the committed balance of almost $8 
billion is spread over a five-year period. Should the Congress enact 
the tax suspension we seek for the period of time we recommend, 
(estimated at less than five calendar quarters) the trust fund will 
have a sufficient amount of cash to meet obligations at the current 
rate for the foreseeable future.
    Second, we recommend that the trust fund be replenished from the 
general fund during the time of the tax suspension in as much as a 
national defense matter occasions the tax suspension, e.g. the 
hostilities in Iraq.
    By keeping the airline industry economically viable through the 
suspension of the taxes for the limited period of the war and 
reconstruction, there is a better chance that the industry will grow 
and flourish than is the case if the taxes are kept in place during the 
period of hostilities.

    Question 2. Airlines continually argue that security costs and 
taxes are considerably contributing to the difficult financial position 
of airlines, though Southwest, a low-far carrier, is able to turn a 
profit. They are subject to the same security costs as larger airlines, 
aren't these financial difficulties of larger airlines truly the result 
of failed business decisions?
    Answer. Mr. Chairman, your question implies that Southwest's 
business model is to be preferred and raises profound questions of 
national policy. Southwest and other low cost carriers such as Jet 
Blue--both of which are ATA member carriers--provide important, 
competitive air transportation for many travelers. However there is no 
one business model that provides the complete range of service to all 
travelers. To suggest that all airlines should emulate Southwest's 
model runs the risk of disenfranchising many potential customers form 
access to air transportation.
    For example, using data from the second quarter of 2002, we find 
that of the approximately 26,000 city pairs for which customers 
purchased tickets, Southwest sold tickets in only 6 percent of the 
markets, and none smaller than city pair # 1582, Spokane WA to 
Harlingen, TX. Thus, if all airlines emulated southwest, there would be 
no service available in the following city pairs:

        City Pair Number 5,000        Atlanta, GA to Kileen, TX
        City Pair Number 10,000      Omaha, NB to Toledo, OH
        City Pair Number 15,000      Spokane, WA to LaCrosse, WI
        City Pair Number 25,000      Scottsbluff, NB to New York, NY

    Furthermore, of the 489 cities or metropolitan areas which received 
service in that quarter, only 54 cities or markets--11 percent of the 
total--received service from Southwest and no city smaller than number 
104, Corpus Christi, TX received service from Southwest.
    I would also note that Southwest's business model does not 
contemplate service to international destinations, interline baggage 
handling between itself and other carriers, code sharing with regional 
airlines serving very small communities, or the carriage of a variety 
of goods which require special handling. There are customers who 
require these services, none of which would be available, if all 
airlines adopted Southwest business model.
    Lastly, let me note that Southwest Airlines is a member of ATA and 
joins with the rest of our member carriers in supporting a reduction in 
security costs and taxes.

    Question 3. Mr. May during deliberations over the Aviation and 
transportation security Act, the industry communicated to Congress and 
GAO that the security costs were about $1 billion. Now it is claiming 
that its costs, the one Congress required that the industry pay, are 
only $300 million. How do you explain that discrepancy?
    Answer. In April 2000 ATA was contacted by the GAO and asked to 
identify and provide carrier screening costs. Because neither ATA nor 
the carriers' accounting systems tracked these costs, the data was not 
readily available. Nevertheless, several carriers were able to generate 
data and estimates for the total cost of implementing federal security 
requirements, as opposed to carrier screening costs. From the data 
submitted by the carriers an arithmetic extrapolation was made 
resulting in an estimate that the cost of implementing federal security 
requirements was $1 billion. This $1 billion figure was for total 
security program costs including carrier screening costs, foreign 
security expenses, training, employee salaries and even equipment 
funded directly by the U.S. government.
    Following the events of 9/11/01, this $1 billion figure became a 
reference point or shorthand description for carrier screening costs, 
despite the fact that carrier screening costs are but a subset of $1 
billion. As the Aviation and Transportation Security Act moved through 
the Congress the decision was made to levy not just a carrier screening 
fee but also a $2.50 per flight segment fee--designed to raise some 
$1.6 billion.
    Subsequent to the statute's enactment, TSA commenced a regulatory 
process to ascertain and collect ``carrier screening costs'' as 
described by the statute, (not the $1 billion ``cost of implementing 
federal security requirements'' as provided to GAO and the Congress by 
ATA). This exercise has proven to be particularly vexatious. Certified 
public accountants working for air carriers as well as the American 
Institute of Certified Public Accountants have raised serious issues 
with the TSA regarding the process. Essentially the problem is that TSA 
is asking for costs that had not been broken out, accounted for, or 
otherwise tracked when the expenditures were actually incurred. 
Unfortunately, TSA refused to resolve these fundamental accounting 
issues and concerns prior to demanding that the forms be completed and 
the fees be paid.
    The resulting screening figure (which is reported to be in the 
$300-350 million range) has been repeatedly contrasted to the $1 
billion total security cost estimate to suggest bad faith despite the 
lack of any relevant foundation for such a claim. Moreover, OMB appears 
to have introduced a $750 million figure into the debate--the source of 
which is unknown--by assuming in the President's budget that a figure 
in that range reflects the Air Carrier Security Service Fee. We have 
been unable to ascertain the source of information explaining the 
derivation of this figure.
    The issue remains what, if anything, should the airlines be paying 
the government for protection against terrorism. At present, they are 
paying directly the Air Carrier Security Service Fee ($300-350 million) 
and indirectly (through lower ticket revenues) the $2.50 per passenger 
Security Service Fee (estimated in the President's budget to total 
approximately $1.7 billion) since under current competitive market 
conditions these fees cannot be passed through to our customers. In 
addition, and notwithstanding the statute's requirements that all 
screening of passengers and property, including United States mail, 
cargo, carry-on and checked baggage, and other articles that will be 
carried aboard a passenger aircraft ``shall take place before boarding 
and shall be carried out by a Federal government employee'', airlines 
have encountered massive added security costs or lost revenues as a 
result of these government policy decision. ATA estimates that the 
total impact on the industry (increased costs/decreased revenues) is in 
the range of $4 billion.
    Protection against terrorist attacks targeting the United States is 
a responsibility of the Federal Government and the airlines remain 
convinced that the distortion of normal market forces which has 
occurred as a result of these burdens being shifted to the private 
sector is contributing substantially to the economically imperiled 
condition of the industry.
                                 ______
                                 
     Response to Written Questions Submitted by Hon. John McCain to
                            Charles Barclay
    Question 1. Without the airlines, some would argue that you don't 
need airports. Are you willing to give up infrastructure spending in 
the next few years to ensure a viable airline industry?
    Answer. Clearly, the financial condition of our airline partners is 
a serious concern, and we believe that efforts should be undertaken to 
address the security costs that have been imposed on the industry 
recently. In light of the events of September 11, it is abundantly 
clear that aviation security is now a matter of national security and 
therefore rightly a responsibility of the Federal Government. 
Unfortunately, a large portion of the costs associated with improving 
aviation security have been borne by airports and air carriers to this 
point. We remain hopeful that Congress will consider authorizing funds 
from the general treasury to reimburse airports and air carriers for 
any and all security costs imposed on them by the Federal Government. 
Doing so will go a long way toward ensuring the continued viability of 
the airline industry and airports.
    With regard to continued spending on infrastructure, we believe it 
would be both unfortunate and shortsighted to abandon--even 
temporarily--important safety and capacity-related projects at 
airports. We vigorously oppose any proposal that would negatively 
impact airport infrastructure spending or the trust fund that supports 
such spending.
    Despite the events of September 11 and the subsequent reductions in 
traffic levels, the Federal Aviation Administration expects airline 
passenger traffic will increase by an average rate of 4 percent a year 
and reach one billion passengers by 2013, which is just a few years 
later than the agency predicted prior to September 11. In our view, we 
should use the temporary downturn that now exists to continue our 
important efforts to increase aviation capacity and address aviation 
safety so as to avoid the situation that existed in the summer of 2000 
when 163 million passengers were affected by flight delays, 
cancellations or diversions. Improvements at airports are central to 
that goal and should be pursued without delay.

    Question 2. How involved are the airports in the next step of EDS 
installation? That is, are your members conferring with TSA to discuss 
how to integrate the EDSs into the baggage systems? In your view, who 
is going to pay for that? Who should pay?
    Answer. The experiences of different airports in dealing with the 
TSA and its contractors to develop and implement plans to permanently 
install explosive detection equipment ``in-line'' varies greatly. As a 
general rule, we have found that the greater the cooperation and 
consultation between the TSA and airport operators, the more likely 
that planning has proceeded smoothly and smartly. It is our hope that 
TSA, under Admiral Loy' s capable leadership, will continue to reach 
out to airports for input in the process, recognizing their unique 
expertise and their public nature.
    The question of who is going to pay for the estimated $5 billion it 
will take to install EDS equipment inline remains unanswered at the 
moment. To this point, Congress has appropriated more than $1 billion 
toward making the necessary terminal modifications at airports. In 
addition, the fiscal year 2003 omnibus spending bill authorized $500 
million a year for five years to fund terminal modifications through a 
``Letter of Intent'' program within the TSA budget. It remains to be 
seen if the funding will materialize to accompany the authorization and 
how TSA will actually utilize this program.
    Another several hundred million in Fiscal Year 2002 Airport 
Improvement Program funds have been used for terminal modifications as 
well. TSA officials have stated publicly that it is their intention to 
use another $500 million to $600 million in Fiscal Year 2003, a fact 
that concerns airports and should concern Congress because those funds 
would otherwise be used for important airport safety and capacity-
related projects.
    As for who should pay for these modifications, airports believe 
strongly that the Federal Government should be responsible for these 
costs. While airports are willing to play a role and have done so to 
this point using both AIP funding and their own limited resources, the 
Federal Government clearly has an obligation under the Aviation and 
Transportation Security Act to address all aspects of passenger and 
baggage screening.
    Unfortunately, it appears as though the TSA is content to have met 
the technical requirements of the law to have EDS equipment in place to 
screen all checked baggage by the December 31, 2002 deadline, and is 
not terribly interested in going much further to complete the job. No 
funding for EDS installation has been requested in either Fiscal Year 
2003 or Fiscal Year 2004 by the Administration, leaving the matter for 
Congress to address.
    Given the importance from a public safety, security, and customer 
convenience standpoint of moving forward quickly and efficiently to 
install EDS equipment in-line at airports, it is our sincere hope that 
Congress will continue to appropriate federal dollars for this purpose.

                                  

```