S. HRG. 113–667 

NOMINATION OF THE HON. SHAUN L. S. 

DONOVAN, OF NEW YORK, TO BE DIRECTOR OF OFFICE OF MANAGEMENT 

AND BUDGET 

HEARING 

BEFORE THE

COMMITTEE ON THE BUDGET 

UNITED STATES SENATE 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

June 11, 2014—NOMINATION OF THE HON. SHAUN L. S. DONOVAN, 

OF NEW YORK, TO BE DIRECTOR OF OFFICE OF MANAGEMENT 

AND BUDGET 

( 

printed for the use of the budget committee 
NOMINATION OF THE HON. SHAUN L. S. DONOVAN, OF NEW YORK, TO BE DIRECTOR OF OFFICE OF 

MANAGEMENT AND BUDGET 
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95–185pdf 2014

S. HRG. 113–667 

NOMINATION OF THE HON. SHAUN L. S. 

DONOVAN, OF NEW YORK, TO BE DIRECTOR OF OFFICE OF MANAGEMENT 

AND BUDGET 

HEARING 

BEFORE THE

COMMITTEE ON THE BUDGET 

UNITED STATES SENATE 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

June 11, 2014—NOMINATION OF THE HONORABLE SHAUN L. S. 

DONOVAN, OF NEW YORK, TO BE DIRECTOR OF OFFICE OF MANAGEMENT AND BUDGET 

( 

Printed for the use of the Committee on the Budget 
COMMITTEE ON THE BUDGET 

PATTY MURRAY, Washington, Chairman 

RON WYDEN, Oregon 

DEBBIE STABENOW, Michigan 

BERNARD SANDERS, Vermont 

SHELDON WHITEHOUSE, Rhode Island 

MARK R. WARNER, Virginia 

JEFF MERKLEY, Oregon 

CHRISTOPHER A. COONS, Delaware 

TAMMY BALDWIN, Wisconsin 

TIM KAINE, Virginia 

ANGUS S. KING, Jr., Maine 

JEFF SESSIONS, Alabama 

CHARLES E. GRASSLEY, Iowa 

MICHAEL ENZI, Wyoming 

MIKE CRAPO, Idaho 

LINDSEY O. GRAHAM, South Carolina 

ROB PORTMAN, Ohio 

PAT TOOMEY, Pennslyvanna 

RON JOHNSON, Wisconsin 

KELLY AYOTTE, New Hampshire 

ROGER F. WICKER, Mississippi 

EVAN T. SCHATZ, Majority Staff Director 

ERIC EULAND, Minority Staff Director 

(II) 
iii 

C O N T E N T S 

HEARING 

Page 

June 11, 2014—Nomination of the Honorable Shaun L. S. Donovan, of New 

York, to be Director of Office of Management and Budget ............................... 1 

STATEMENTS BY COMMITTEE MEMBERS 

Chairman Patty Murray ......................................................................................... 1 

Ranking Member Jeff Sessions ............................................................................... 4 

WITNESSES 

Donovan, Shaun, of New York, Nominee to be Deputy Director of the Office 

of Management and Budget ................................................................................ 7 

REDACTED 

Statement of Biographical and Financial Information Requested of Presidential Nominee Shaun L. S. Donovan to be Director of the Office of 

Management and Budget .................................................................................... 38 

ANSWERS TO QUESTIONS PRESENTED TO SHAUN L. S. DONOVAN 

BEFORE NOMINATION 

ANSWERS TO QUESTIONS PRESENTED TO SHAUN L. S. DONOVAN AFTER 

NOMINATION 

(1) 

THE NOMINATION OF THE HONORABLE 

SHAUN L.S. DONOVAN, Of NEW YORK, TO BE 

DIRECTOR OF THE OFFICE OF MANAGEMENT AND BUDGET 

WEDNESDAY, JUNE 11, 2014 

UNITED STATES SENATE, 

COMMITTEE ON THE BUDGET, 

Washington, D.C. 

The Committee met, pursuant to notice, at 2:02 p.m., in Room 

SD–608, Dirksen Senate Office Building, Hon. Patty Murray, 

Chairman of the Committee, presiding. 

Present: Senators Murray, Wyden, Nelson, Whitehouse, Coons, 

Kaine, King, Sessions, Johnson, and Wicker. 

Staff Present: Evan T. Schatz, Majority Staff Director; and Eric 

Ueland, Minority Staff Director. 

OPENING STATEMENT OF CHAIRMAN MURRAY 

Chairman MURRAY. Good afternoon. This hearing will come to 

order. I want to welcome everybody and thank my Ranking Member, Senator Sessions, and all of our colleagues who are joining us 

and will be joining us today. 

We are here this afternoon to consider President Obama’s nomination of Housing and Urban Development Secretary Shaun Donovan to the position of Director of the Office of Management and 

Budget. 

Thank you so much, Mr. Secretary, for joining us here today. I 

also do want to acknowledge the tremendous contributions of your 

family—your wife, Liza; your sons Lucas and Milo, who I know 

have been an incredible source of support for you today. And I understand they sat through the hearing this morning for you. That 

double duty requiring them to sit here behind you today would be 

more than a dad should ask if you want Father’s Day to be good 

for you. So tell them thank you for all of us. I know that all of us 

could not do our public service jobs without the support of our families, so tell them thank you on behalf of all of us. 

I also want to take a moment to recognize the work of former 

OMB Director and now Secretary of Health and Human Services 

Sylvia Burwell. She was a fantastic partner and leader of the OMB 

during a very demanding year. President Obama made a great 

choice in nominating Sylvia for her new role and bringing her leadership and skill to the Department of Health and Human Services. 

And he made an equally strong choice in nominating Secretary 

Donovan to take over at OMB. 
2 

Secretary Donovan, I am really glad to have the opportunity to 

speak with you now about how your experience has prepared you 

for new role. And I look forward to hearing your thoughts on some 

of the budget challenges we are going to need to address in the future. 

I know Secretary Donovan very well. We have worked together 

very closely over the last 5 years. And throughout that time, it has 

been very clear to me that he is focused first and foremost on 

strengthening our middle class by expanding opportunity for families and communities. 

Secretary Donovan was sworn in at the Department of Housing 

and Urban Development in January of 2009—as the fallout from 

the financial crisis caused millions of families across our country to 

lose their homes and their financial security. 

Faced with almost unprecedented circumstances, Secretary Donovan led HUD through the complex process of stabilizing the housing market. 

Secretary Donovan took steps to keep responsible families in 

their homes and has reinforced the agency’s role in providing access to affordable housing and building strong, sustainable neighborhoods. And he worked in a bipartisan manner—including with 

members of our Committee such as Senators Warner and Crapo— 

to rethink how the Nation continues to have a strong, durable, and 

affordable housing market going forward. 

So while more work remains, the Nation has come a long way 

under his leadership. 

Secretary Donovan has been a highly effective and responsive 

partner to those of us in Congress when it comes to disaster relief—an area that transcends party lines. 

Over his tenure, he fought to make sure that every community 

hit hard by a natural disaster has the resources to get back on its 

feet and come back stronger than before. 

Nowhere was this more apparent than in the wake of Hurricane 

Sandy, when President Obama created the Hurricane Sandy Rebuilding Task Force and appointed Secretary Donovan as Chair. 

Working together on these challenges, I know firsthand that Secretary Donovan confronted each one with a cool head, a deep commitment to service, and—as he has said himself—a lot of spreadsheets. 

I am confident he will bring each of those strengths—and many 

more—to the Office of Management and Budget. He is taking on 

this new role at a critical time, because although we have made 

progress—which I will discuss—there is a lot more to do. 

Our fiscal outlook has improved significantly in the near term. 

Since 2010, we have passed legislation now reducing our deficit by 

$3.3 trillion—most of the way toward the bipartisan goal of $4 trillion that was laid out by Simpson-Bowles. We have stabilized the 

deficit as a share of the economy over the next few years. And the 

deficit for this fiscal year is expected to be less than a third of what 

the Congressional Budget Office projected it would be 5 years ago. 

But we still face serious debt challenges in the coming decades 

that we will need to address. The 2-year budget agreement that 

Chairman Ryan and I reached was a step in the right direction. It 

moved us away from the dysfunction that has defined Congress 
3 

over the past few years. It prevented another unnecessary Government shutdown. It sent a strong signal that there is bipartisan 

support for replacing the automatic cuts from sequestration, which 

are scheduled to kick in again in 2016. And it laid out a blueprint 

for future negotiations over budget levels. 

But, all that said, our deal was only a step. And as we look toward fiscal year 2016, it is critical that we come together to build 

on it. I am confident that Secretary Donovan will be an invaluable 

partner in this effort, because I know that, just like his predecessor 

at OMB, when Secretary Donovan sees a problem, the question he 

asks is: ‘‘How can we fix this in a way that does the most to help 

families and communities get ahead?’’ 

This question is absolutely central to the challenges we face 

when it comes to the budget. It is true that the long-term debt is 

a threat to our economy, but a poorly educated workforce, inadequate infrastructure, and dampened innovation are just as much 

of a threat, both to our economy and to our workers and families 

seeking more opportunity. 

So we need to make sure we are investing appropriately in those 

areas. And that means for fiscal year 2016, we are going to need 

to find a way, again, to roll back sequestration and replace it with 

responsible, balanced deficit reduction. 

I am confident we can get this done, because the Bipartisan 

Budget Act proved that neither side is willing to accept sequestration as the status quo. 

I believe we can reach an agreement that ensures we are making 

smart choices and investing in priorities that we know will pay off 

in a more economically competitive workforce and country. 

But as we all know, the work does not stop at solving the next 

fiscal year. Far from it. 

To ensure the programs and services we currently benefit from 

are there for future generations, we absolutely need to reach a 

larger agreement that addresses the true drivers of our debt and 

sets us on a fiscally responsible path—not just for a few years but 

for the long haul. 

We all know Democrats and Republicans have fundamental differences about how to get that done. But I strongly believe that if 

each side comes to the table ready to make a few tough choices to 

reach a compromise; if, like Chairman Ryan and I did during the 

budget negotiations last year, we take the time to build trust and 

focus on reaching a deal rather than winning the news cycle, we 

can deliver that kind of deal for the American people. 

Confronting the two challenges that I have just laid out—making 

critical investments in jobs and opportunity and tackling our longterm budget challenges—would do an enormous amount for families and workers across the country, right now and for decades to 

come. 

And because these goals are so important, I am very hopeful that 

Secretary Donovan’s confirmation process will be a smooth and efficient one. 

We saw last year how critical it is to have a strong leader in 

place at the Office of Management and Budget. With Secretary 

Burwell already settling in now at HHS, there is every reason to 

move quickly and ensure the new OMB Director can get to work. 
4 

So, Secretary Donovan, I want to thank you again for being here, 

for joining us today, and being willing to take on this new challenge. And I also again just personally want to thank you for all 

the work you have done already on the part of our families and 

communities across the country. 

With that, I will turn to Senator Sessions for his opening remarks. 

OPENING STATEMENT OF SENATOR SESSIONS 

Senator SESSIONS. Thank you, Madam Chairman, and I am a little disappointed to hear you say that you are going to come back 

again next year and break the Budget Control Act limits that we 

agreed to just in January. But that is the danger we have here, Mr. 

Secretary. There is so much pressure to spend, to spend, to spend, 

and simply the Nation has got to rise up to that and be responsible 

in the actions that we take. 

So we thank you for being with us. We miss your family, but we 

understand, and look forward to questions today. But I would note 

that your appointment is somewhat unexpected since Director 

Burwell has only been there about 13 months. And so we really 

need some stability and strength in that office. 

You will get a fair hearing. I will carefully consider your record 

and your testimony today in reaching my decision about whether 

to support your confirmation. 

The Director of the Office of Management and Budget is one of 

the most critical positions in our Government, entrusted with overseeing our massive Federal budget during a time of great financial 

danger. The President is the Chief Executive, and the OMB Director is the chief executive for management for the President, and he 

must show integrity, efficiency, and productivity in all that you do. 

Only weeks ago, the Director of the Congressional Budget Office 

reaffirmed in testimony that we are on an unsustainable path financially and face the risk of a fiscal crisis as a result of our debt. 

So whoever holds this job must be one of the toughest, strongest, 

most disciplined managers we have in America. So that is the question before us today: Is Mr. Donovan that man? 

The fact is that OMB has consistently failed to meet many of its 

most basic obligations. Time and again, OMB has missed deadlines, ignored legal requirements, violated congressional spending 

caps, and misrepresented, really, financial data submitted to Congress. So that is why I feel that we must carefully examine Mr. 

Donovan’s qualifications. 

All of us have a deep responsibility to the American people for 

every dollar, every expenditure, every program that we fund. I 

must, therefore, express some concerns about Mr. Donovan’s time 

at the Department of Housing and Urban Development. 

First, HUD has never been known as the best-run agency in 

Washington. During his time at HUD—Mr. Donovan’s only real 

management experience has been at HUD during that time. But 

there is nothing in his track record there or anywhere else demonstrating a strong commitment to the financial discipline, a particular skill in managing taxpayers’ dollars, or a passion for saving 

money. To my knowledge, Mr. Donovan has nothing in his background that would suggest he has either a desire or a plan to con-
5 

front our fast-rising entitlement programs that are so near insolvency. 

Indeed, Mr. Donovan’s time at HUD was marred by a series of 

Inspector General reports raising questions about his management 

of even this small Department. One would want to see a sterling 

record, I think, of saving taxpayers’ dollars, finding new efficiencies, streamlining Government. 

But the record shows some concerning failures in regards to the 

American Recently and Reinforcement Act. The Inspector General 

of HUD, your own Inspector General, found, ‘‘HUD did not enforce 

the reporting requirements of this Section 3 program for ARRA 

public housing capital fund recipients. Specifically, HUD failed to 

collect Section 3 summary reports from all housing authorities by 

the required deadline and verify their accuracy and did not sanction housing authorities that failed to submit the required reporting information. As a result, 1,650 housing authorities did not provide HUD and the general public with the adequate employment 

and contracting information.’’ 

The Inspector General provided this summary of HUD’s record 

with the Homeless Prevention and Rapid Rehousing Program. They 

said this in another report: ‘‘Community advocates did not properly 

administer its Supportive Housing Program and ARRA grant 

funds. Specifically, it did not: one, ensure that Supportive Housing 

Program funds were used for eligible activities; two, maintain documentation to support required match contributions. It also failed to 

maintain a financial management system that separately tracked 

the source and application of ARRA funds and lacked sufficient 

documentation to support the allocation of operating costs.’’ 

The Inspector General further questioned the quality of the data provided about the $800 billion stimulus package. ‘‘Our limited review of the jobs data and calculations of the five selected HUD recipients disclosed inconsistencies in the methodology of counting 

the quarterly hours worked and various discrepancies between the 

hours recorded on time and payroll records and the hours included 

in Section 1512 reporting. We question the accuracy of the job calculations and in some instances the accuracy of the data used in 

these calculations.’’ Another criticism. 

The Inspector General also conducted a review of HUD’s toll-free 

phone lines. These are lines you are supposed to be able to call to 

get information about HUD programs that citizens can use. The 

summary of that report explains, ‘‘We conducted an evaluation of 

HUD’s toll-free lines. Our review disclosed that HUD could not determine, one, whether the toll-free phone lines were functioning at 

an optimal level; and, two, the level of service provided to its customers. We also identified numbers that were either disconnected 

and not HUD numbers that were advertised on HUD’s website.’’ 

In its report on the multifamily project refinances, the Inspector 

General, your Inspector General, found, ‘‘HUD did not have adequate controls to ensure that all Section 202 refinancing resulted 

in economical and efficient outcomes. Specifically, one, HUD did 

not ensure that at least half the debt service savings that resulted 

from refinancing were used to benefit tenants or reduce housing assistance payments; two, consistent accountability for the debt service savings was not always maintained; three, some refinancings 
6 

were processed for projects that had negative debt service ratings 

which resulted in higher debt service costs than before the refinancing. These deficiencies were due to HUD’s lack of adequate 

oversight and inconsistent nationwide policy implementation regarding debt service savings realized from Section 202 financing 

activities. As a result, millions of dollars in debt service savings 

were not properly accounted for and available. The savings may not 

have been used to benefit tenants or for the reduction of housing 

assistance payments. And some refinanced projects ended up costing HUD additional housing assistance payments because of the 

additional cost of debt service.’’ Pretty significant criticism. 

So this apparent record of failure to manage is ironic given Mr. 

Donovan’s faith in Government. Now, I know you believe in Government. You said once, ‘‘I would never believe that the private 

sector, left to its own devices, is the best possible solution. I am in 

Government because of the role of Government in setting rules and 

working in partnership with the private sector.’’ 

Well, we want to work with the private sector, but we know that 

Government must be efficient and productive and well run, or it 

will fail to meet the minimum requirements. 

So, Madam Chairman, I thank you for the opportunity of doing 

this, having this hearing. We need to go through it. You are seeking an exceedingly important job, Mr. Donovan. There have been 

problems in HUD, have been for a number of years. You have been 

there quite a number of years. I do not know that we have seen 

yet the commitment, the dedication, the drive, the real imperative 

to get this Government under control, whether we see it at the Veterans Administration, whether we see it at HUD, as we talked 

about, whether we see it at HHS with regard to the surge of illegal 

immigrants into the country, all in large part due to ineffective 

management. 

Thank you, Madam Chairman. 

Chairman MURRAY. Under the rules of the Committee, nominees 

are required to testify under oath. So, Secretary Donovan, would 

you please rise with me so I can administer the oath? Do you swear 

the testimony that you will give to the Senate Budget Committee 

will be the truth, the whole truth, and nothing but the truth? 

Secretary Donovan. I do. 

Chairman MURRAY. If asked to do so and if given reasonable notice, will you agree to appear before this Committee in the future 

and answer any questions that members of this Committee might 

have? 

Secretary Donovan. Yes. 

Chairman MURRAY. Please be seated. 

Secretary Donovan. Thank you. 

Chairman MURRAY. Okay. We will now have a chance to hear 

from Secretary Donovan, and then members will have the opportunity to ask him questions. And, again, Mr. Secretary, thank you 

so much for the job you have done and for your willingness to take 

on this critically important task for all of us. Go ahead. 
7 

TESTIMONY OF THE HONORABLE SHAUN L.S. DONOVAN, OF 

NEW YORK, TO BE DIRECTOR, OFFICE OF MANAGEMENT 

AND BUDGET 

Secretary Donovan. Thank you, Chairman Murray, Ranking 

Member Sessions, and members of the Committee for welcoming 

me today. It is a privilege to be considered by this Committee as 

the President’s nominee to be Director of the Office of Management 

and Budget. 

I also want to say thank my wife, Liza, and my two sons, Milo 

and Lucas. In public service, the biggest burdens and sacrifices 

often fall on our families. So I deeply appreciate their continued 

support as I seek to take on this new challenge. 

I am also grateful to President Obama for nominating me. I continue to be honored and humbled by the confidence he has shown 

in me. 

Finally, I want to thank the members of the Committee and their 

staffs for meeting with me over the last few weeks and for sharing 

your insights. If I am confirmed, I very much look forward to continuing our conversations. 

I recognize, as you said, Chairman, that Secretary Burwell set a 

high bar for OMB Directors going forward—both with her strong 

leadership and her efforts to maintain solid relationships with Congress. If confirmed, I would look forward to picking up where Secretary Burwell left off by engaging with you and your colleagues 

to achieve common goals, to meet deadlines, and to work with Congress to restore regular order. 

During my time as the Secretary of the Department of Housing 

and Urban Development, I worked closely with you, Madam Chairman, and I want to thank you for all your leadership in so many 

areas. I worked tirelessly with you to ensure that the Federal Government is doing its part to help the American people secure safe 

and affordable housing. Homes are the center of every person’s life. 

They play a key role in shaping safe neighborhoods, good schools, 

solid businesses, and ultimately a strong economy. 

For the past 5–1/2 years, HUD has been creative in helping families obtain this key part of the American Dream and, during these 

tough fiscal times, has done so in a fiscally responsible fashion. 

Working with colleagues from across the administration, we have 

helped millions of families fight off foreclosure, reduced the number 

of veterans experiencing homelessness by 24 percent in the last 3 

years—and I want to thank you in particular, Chairman, for your 

leadership in that area—revitalized distressed neighborhoods, and 

helped communities hit by natural disaster rebuild stronger than 

before. Through all this work, I have seen firsthand how critical 

the Federal budget process is and how it makes an impact on the 

people we serve. The Federal budget is not just numbers on a page. 

It is a reflection of our values, and it is important to our future. 

I believe the President’s Budget shows a responsible path forward for the Nation. It creates jobs and lays a foundation for 

growth by investing in infrastructure, research, and manufacturing. It expands opportunity by ensuring health care is affordable 

and reliable, expanding access to housing, investing in job training 

and preschool, and providing pro-work tax cuts. And it ensures our 

long-term fiscal strength by fixing our broken immigration system 
8 

and addressing the primary drivers of long-term debt and deficits, 

health care cost growth, and inadequate revenues to meet the 

needs of our aging population. 

Over the last 5 years, the deficit has been cut in half as a share 

of the economy, the largest sustained period of deficit reduction 

since World War II. Our Nation can continue this progress while 

focusing on the critical goals of accelerating economic growth, creating jobs, and expanding opportunity for all Americans. 

I would like to briefly outline my priorities, if I am confirmed as 

Director. 

First, if confirmed, I look forward to working with Congress to 

continue the important progress made on the Budget over the past 

year. The Bipartisan Budget Act and Consolidated Appropriations 

Act for 2014 were good first steps in moving beyond the manufactured crises of the past few years and providing some measure of 

relief from the damaging cuts caused by sequestration. But there 

is more that we must do to invest in our economy, create jobs, and 

promote national security, while continuing to promote fiscal stability by addressing the key drivers of our long-term debt and deficits. 

Second, I want to acknowledge the critical management side of 

OMB’s responsibilities. I would work to advance the President’s 

Management Agenda, which is focused on making the Federal Government more efficient, effective, and supportive of economic 

growth. Under the President’s leadership, the administration is 

working to improve key citizen-and business-facing transactions 

with Federal agencies. It is working to increase the quality and 

value in core Government operations and enhance productivity to 

achieve cost savings for the American taxpayer. It is working to 

open Federal Government assets to the public, including data from 

federally funded research, to create a platform for innovation and 

job creation. And it is working to unlock the potential of the Federal workforce and build the workforce we need for tomorrow by investing in training and ensuring agencies can hire the best talent 

from all segments of society. 

Third, it is critical that OMB’s Office of Information and Regulatory Affairs continue the administration’s regulatory focus on 

maintaining a balance between protecting the health, welfare, and 

safety of Americans and promoting economic growth, job creation, 

competitiveness, and innovation. And I would seek to continue the 

President’s successful regulatory retrospective review, or regulatory 

‘‘lookback,’’ where the administration is streamlining, modifying, or 

repealing regulations to reduce unnecessary burdens and costs. 

Finally, I want to note what a particular honor it would be for 

me to serve as the head of OMB. OMB plays a unique and critical 

role in the functioning of the Federal Government. As HUD Secretary, I have worked closely with OMB’s leadership, including 

Deputy Directors Brian Deese and Beth Cobert, and I have seen 

the outstanding contributions made by the talented men and 

women who work throughout the institution. 

To give just one example, in my role as Chair of the Hurricane 

Sandy Rebuilding Task Force, I saw the tireless efforts made by 

OMB staff, many of them long-serving career employees, as they 

worked literally night and day for weeks and even months to en-
9 

sure that disaster relief was delivered swiftly, fairly, and responsibly. It was OMB employees who had the expertise, knowledge, 

and governmentwide perspective to help coordinate the effort and 

make sure it was done right. 

Again, I want to thank the President for giving me this opportunity and the Committee for considering my nomination. I look 

forward to answering any questions you may have. Thank you. 

[The prepared statement of Secretary Donovan follows:] 

Chairman MURRAY. Thank you very much, Mrs. 

As head of a major Department over the last 5 years, you got a 

fair amount of experience with OMB, and I would guess not all of 

it has been pleasant given the tough budget environment that we 

have all been working in. But more than most, I think you understand OMB and the role it plays within the budget process. And 

as I mentioned in my opening statement, you have also had to 

grapple with a number of tough fiscal issues over the last several 

years, including taking office in the midst of that very devastating 

housing and financial crisis and, again, as you just mentioned, 

overseeing the Federal response and recovery efforts following Hurricane Sandy. 

So I wanted to start off by asking how you see the experiences 

of your last few years as having helped you prepare now for what 

will be your next major challenge as head of the OMB and the 

President’s point person on the budget. 

Secretary Donovan. Madam Chair, first of all, the most significant crisis that we faced in this country when we took office was 

in our housing market, and as you know, FHA was at the center 

of that storm. Not only were we faced with helping keep families 

in their homes and helping recover from that crisis, but we were 

also facing the potential for a significant loss to the taxpayers at 

FHA as well. 

And so I worked very, very closely with agencies across the Federal Government, particularly with the Treasury Department and 

with the National Economic Council as well as others, many independent agencies, and one of the things I am proudest of is that 

we were able not only to help the housing market recover—independent economists who said the housing collapse would have been 

25 percent worse had it not been for FHA—but today FHA is not 

only making the highest-quality loans in its history, but is actually 

returning billions of dollars to taxpayers each year with the new 

loans that it makes, as you well know from your leadership of our 

Appropriations Committee. 

Much of that has been done in partnership with GAO and other 

agencies that have made recommendations that we followed to improve the way that we manage FHA with a $1 trillion portfolio. It 

is a significant, significant challenge. 

Beyond that, what I would say is my management experience not 

only here but for 5 previous years under Mayor Bloomberg leading 

the housing agency in New York, working closely with OMB in 

New York City, but also my work in the private sector leading companies that were involved in housing and real estate, it is, I believe, an important set of experiences that help me understand, 

particularly in tough fiscal times, how we work with the private 

sector to leverage critical private capital and investments in things 
10 

that we may not be able to afford with direct Government spending. And that is a partnership that I intend to leverage at OMB, 

should I be confirmed. 

Chairman MURRAY. Okay. I know from many of our discussions 

that you share my belief that lurching from crisis to crisis over the 

past few years and the lack of budget certainty has really hurt our 

economy and families and communities, and that was really why 

it was so important to me that Chairman Ryan and I do sit down 

together and reach an agreement on a 2-year Bipartisan Budget 

Act. 

As an administrator, you have some firsthand experience with 

the harmful impacts that are caused by political brinksmanship 

and dysfunction from within one agency or trying to fulfill its responsibilities. Can you comment on the importance today of having 

a 2-year budget agreement over the last year instead of having uncertainty and crisis management? 

Secretary Donovan. Well, Senator, let me just say thank you on 

behalf of all of us in the administration, but thank you as a citizen 

of the country as well. It was an absolutely critical step to help us 

begin to restore regular order in our budgeting process. And as you 

well know from your direct experience of our budget, not only did 

sequestration mean that more than 100,000 families lost vouchers 

across the country and that families who had finally gotten off our 

streets were turned back out to the streets because of those cuts; 

but, ironically, we actually ended up spending more money in certain programs as a result of sequestration because of the lack of 

ability to plan and execute efficiently. 

In some cases, we had to cut back on oversight or other key functions because of the dramatic cuts in sequestration that led to the 

potential for higher costs in the long run, not to mention the highest costs, for example, as you know, when a homeless person is 

turned back out on the streets, they are going to end up in shelters, 

emergency rooms that are actually more expensive to the experience than permanent housing. 

And so there are many ways that restoring regular order not 

only is better for the people in communities we serve, but actually 

helps us to plan and find smart ways to reduce the cost of Government rather than lurching from crisis to crisis. 

Chairman MURRAY. Thank you very much, and I do want to 

mention one parochial issue that is extremely important to me 

within the budget, and that is the Environmental Management 

Program. We talked about it when you came to my office. That is 

the program that funds defense environmental cleanup at the Hanford site in my home State of Washington and other sites across 

the country. It is really important to me and my constituents and 

to our country. 

I have been very clear with the administration that we have to 

provide the necessary funding. We have legal and moral obligations 

to clean that waste up. It is a legacy waste from the Manhattan 

Project and Cold War efforts, and I am deeply concerned about the 

fiscal year 2015 budget request which cut EM by $135 million, kind 

of foreshadowing what we might be seeing coming. 

This is really unacceptable. We have to make sure that annual 

budgets for the EM program will allow the Federal Government to 
11 

keep the commitments that have been made to thee communities, 

like the Tri-Cities in my home States. We keep doing these shortsighted budgets year to year, and it is not sustainable. We have to 

clean up these environmental disasters and waste sites from past 

wars, and I would just like your commitment to work with me, the 

Department of Energy, to develop a long-term, comprehensive plan 

to deal with this, because we keep losing sight of it in the shortterm budget crises. 

Secretary Donovan. Senator, should I be confirmed, I look forward to working with you on this to make sure we have a longterm perspective on this issue. 

Chairman MURRAY. Thank you very much. 

Senator Sessions? 

Senator SESSIONS. Thank you. 

Well, Mr. Secretary, you were talking about the largest debt reduction in history. Perhaps that is so in real numbers. But I have 

got to tell you, the highest deficit in the 8 years prior to President 

Obama taking office was $476 billion. The first year in office, he 

was over $1 trillion, over one thousand billion dollars. And for four 

consecutive years, we had deficits of over $1 trillion a year, a thousand billion. 

And so we are back on the path, or soon, showing growing deficits, according to CBO, and they say we are not on a sustainable 

path. So I just want to tell you, you have taken a tough job. This 

is not all fixed. This deficit financial situation in America is nowhere close to being fixed. We have not dealt with entitlements. 

We have not dealt with growth in spending and a whole lot of programs. And we are going to see the largest surge in interest we 

have ever seen from $220 billion last year to over $800 billion 10 

years from today—$650 billion or so a year in extra interest we 

have got to find money to pay before we fund anything else in Government. 

So I have got a chart that I just want to put up for you. I do 

not know if you can see that, but it shows in 2013, we had a total 

gross debt of $16.7 trillion. Can you read what the gross debt will 

be in 2024, projected gross debt? 

Secretary Donovan. Very small numbers, Senator. It looks like 

about $25 trillion? 

Senator SESSIONS. Yes, 24.9. So that indicates that we will be expected to add to the debt of the United States in the next 10-year 

budget window $8 trillion. So this was the table submitted by 

OMB, your predecessor, President Obama’s administration. So, in 

your view, is increasing the debt by $8 trillion over the next 10 

years, an average of $800 billion a year in added debt, is that a 

sustainable path? 

Secretary Donovan. Senator, first of all, I believe these are the 

gross debt numbers. I think the more important figure we should 

be looking at is the debt held by the public, and particularly, you 

know, most budget experts look at it relative to the size of GDP. 

And I think the important thing, whether it is CBO or in the President’s own calculations, OMB’s, we agree that the President’s budget would reduce the deficit by more than $1 trillion over that 10- 

year window compared to current law. And— 

Senator SESSIONS. Well, we just have— 
12 

Secretary Donovan. —so I would agree with you— 

Senator SESSIONS. —a couple of minutes left in my question 

time. I understand the difference in gross and public debt. This is 

gross, but the proportion is basically the same. I have checked 

those numbers too. They increase at the same rate. CBO says we 

are not on a sustainable path. Do you content that this is? Or do 

you believe if you take this office you need to look for ways to improve our financial situation and not average $800 billion a year 

in debt? 

Secretary Donovan. Senator, I agree with your statement that we 

are not done by any means, that we still need to take critical steps. 

We have over the last few years, on a bipartisan basis, reached 

more than $3 trillion of deficit reduction. The President’s budget 

would take that over $5 trillion. But ultimately the critical drivers 

of that debt and deficit, I hope we would agree, are long-term increases in health care costs and also the demographic changes that 

we have coming in this country that mean that we will have more 

seniors retiring and that we need to keep our promises to seniors. 

Senator SESSIONS. Well, I agree. So we have made promises in 

Medicare, and we have made promises in Social Security. Both of 

those programs are on a path that cannot be sustained. We are not 

going to be able to honor those promises at the current rate. 

Now you are taking on this August position, perhaps the most 

important position in the entire Government. Do you have any 

plans, have you expressed previous to this day any idea how to put 

Social Security and Medicare on a sound footing? 

Secretary Donovan. Well, certainly there has been a great deal 

of focus on what do we do about the rising costs of— 

Senator SESSIONS. Well, have you expressed— 

Secretary Donovan. —Medicare. 

Senator SESSIONS. First, have you expressed any? In other 

words, have you studied this and over any period of time have you 

laid out any ideas about how to fix Social Security and Medicare? 

Secretary Donovan. So, first of all, I believe strongly that the reforms that we have begun to see in medical care are a very important step forward. CBO— 

Senator SESSIONS. Just first, I just want to ask that simple question. Have you previous to this day laid out any plans that you 

have how to fix these programs? Just yes or no. Have you laid out 

any plan? 

Secretary Donovan. I am not sure what you mean, Senator, by 

‘‘laid out plans.’’ 

Senator SESSIONS. Well, have you expressed any ideas? Have you 

written any articles? Have you done anything in a specific way to 

fix those programs? 

Secretary Donovan. I have worked extensively on the ways that 

we can make sure in housing and a range of other economic areas 

that we are growing our economy and dealing with long-term challenges. 

Senator SESSIONS. Well, I would just take it that you have not, 

unless you submit something for the record. I would appreciate just 

a simple answer. You have not written on it. You are taking an important job, and you do not bring any previous commitment to fixing these programs, which is a lack, I think, in the nominee. 
13 

Thank you, Madam Chairman. 

Chairman MURRAY. Senator King. 

Senator KING. Thank you, Madam Chair. 

Mr. Donovan, are you willing to be the most hated person in 

Washington? 

[Laughter.] 

Senator KING. I ask that question somewhat— 

Secretary Donovan. I am not taking the job to be popular, Senator. 

Senator KING. Well, that was the right answer. In looking back 

over the historical sweep of the last 50, 60, or 70 years, I think one 

of the problems that has gotten us into the mess that we are in 

was, historically, Presidents were the enforcers of the budget, and 

the Congress always wanted to spend more, and the President was 

the guy who said you have got to eat your spinach. In fact, I remember the term ‘‘sequester’’ was invented during the Nixon administration when I worked here. Somewhere—I think it was during the Reagan administration—Presidents joined the party, if you 

will, and that is when spending really started to go through the 

roof, and we have had persistent deficits, except, as you know, for 

a couple of years in the latter part of the Clinton administration. 

You have got to be the guy that says no, and it is not—and I 

think that is an important—the President has to be the one that 

enforces budget constraint, I think, because the tendency is always 

to spend more. It is always more fun to spend than it is to tax, and 

that had led us into this very unsustainable position. So I hope you 

will take my question seriously, that you are not going to be—if 

you are doing your job, you are not going to be popular. 

Second question: Interest. And Senator Sessions was talking 

about this. I am gravely worried about interest, and the problem 

is we are in a wonderland of 2 percent interest that is not going 

to last forever. Would you agree with that? 

Secretary Donovan. I do agree. 

Senator KING. So when interest rates go up, if they go up just 

to 5 percent, which is about where they were historically, we are 

talking about $850 billion a year in interest, which is larger than 

the defense budget. It would be one of the largest expenditures. It 

is dead money. It is not buying us anything. The only thing it is 

buying is railroads and airports and roads for China and other 

places that hold our debt. 

And, by the way, I do not agree, the distinction between gross 

debt and public debt. Most people I know—as you know, the $5 

trillion that is not public debt is owed to the Social Security Trust 

Fund. Most people I know that are getting Social Security benefits 

want checks, not IOUs. And interest has to be paid on that money. 

So I really think $17 trillion is the right number. 

In any case, if we do not do something about this now when we 

are in the world of 2 percent interest, it is going to be too late when 

it is 5 or 6 percent, because all fiscal hell is going to break loose 

around here. Talk to me about trying to help us to find some solutions to this debt problem now rather than when it is too late. 

Here is another way to put it in perspective. A 1-percent increase 

in interest is more than twice—is not quite twice as much as the 

sequester. We are all talking about how bad the sequester is. The 
14 

sequester was $91 billion last—proposed to be $91 billion. A 1-percent increase in interest is $170 billion. Help me figure out how 

you are going to help us get out of this hole, because we have got 

to start now—this is the good times compared with what it is going 

to be when interest rates go up. 

Secretary Donovan. Yes, so as I was starting to say before, Senator, I hope we would all agree that the fundamental challenges 

have been around health care costs— 

Senator KING. I completely agree. 

Secretary Donovan. —and the long-term demographic changes 

that we are seeing in our country. I think the good news here, if 

there is good news, is that we are starting to see some real changes 

on the medical cost side. We have health care costs that are rising 

at the slowest rate now they have in more than 50 years. And, in 

fact, CBO just in terms of what we will spend between now and 

2020, they have lowered their projections by $900 billion given the 

changes that we have seen over the last few years in health care 

costs. So I think we have got to build on those. And as you know, 

just like interest, those compound, right? If we have a lower rate 

this year and a lower rate next year, we get double benefit from 

that in terms of— 

Senator KING. And I think you will agree with me that the way 

to deal with that health care cost issue is to try to deal with it globally, not just shift the Federal health care bill to seniors or to the 

States or somewhere else. It has got to be across the board. 

Secretary Donovan. I agree, and this is the reason why in the 

President’s budget this year there is $400 billion of additional savings in Medicare and Medicaid, but also a real focus on how do we 

change the system—accountable care organizations, a range of 

other approaches, the Innovation Center that I think can contribute to changes that are not just about shifting but actually getting better care for lower dollars. 

Obviously, that is not the only thing we should talk about. There 

is also wasteful spending in our Tax Code that we ought to be looking at, and other areas, but I think that is the center of the longterm challenge. 

Senator KING. Well, you have talked about demographic changes. 

The reality, I take it, that you are alluding to is that the aging of 

the population is going to put more demands on things like Social 

Security and Medicare, and it is unrealistic to think that past revenue percentages of GDP will suffice given those changes. Is that 

your testimony? 

Secretary Donovan. That is definitely part of it. And, look, the 

President’s has laid out principles for Social Security reform. I 

would certainly argue that Social Security is not as significant a 

driver of long-term deficits because in the later years in the decade, 

it actually sort of smoothes out because of the demographic changes 

as the effects of the baby boom start to play out later. But, clearly, 

that is something that we need to deal with in the longer run as 

well. 

Senator KING. A final short question. Would you be willing to 

consider the idea of a biennial budget—in effect, we just had one— 

as a more efficient way to do our budgeting here? I am a former 
15 

Governor. Others are. We do it in our State. Most States have biennial budgets. Is that something you think we should look at? 

Secretary Donovan. And, again, I would pay tribute to the Chairman here for helping to bring us back toward regular order. I think 

biennial budgeting is an idea worth exploring further. If I were 

confirmed, I would certainly want to talk to you more about it. 

There are a number of benefits that I could see. I think there are 

some real reasonable questions about whether it might require 

more supplementals or others. But as I said, I think it is an idea 

worth exploring. 

Senator KING. Thank you. And I was delighted to hear you emphasize OIRA in your opening statement. Do not forget that. 

Secretary Donovan. Very important. 

Senator KING. Thank you, Madam Chair. 

Chairman MURRAY. Senator Johnson. 

Senator JOHNSON. Thank you, Madam Chair. 

Secretary Donovan, welcome. I appreciate you spending some 

time in my office. As I indicated in the office, I want to talk during 

the testimony here about Social Security and Medicare. Let us first 

start with Medicare. I am assuming you had a chance to kind of 

bone up on the issues. 

Secretary Donovan. I did, and I appreciated our conversation and 

your PowerPoint, which I have spent some real time looking 

through and thinking about. 

Senator JOHNSON. Not everybody does. 

So having studied this, are you aware of the fact that in the 

President’s 2015 budget Medicare will run a deficit; in other words, 

it will pay out more in benefits than it takes in in the payroll tax 

to the tune of about $4.3 trillion? Does that sound about right to 

you? 

Secretary Donovan. I do not have those numbers in front of me. 

Senator JOHNSON. It is about $3 trillion in revenue, about $7.3 

trillion in benefits, so it is about $4.2 trillion. Over 30 years, are 

you aware that, according to CBO, their alternate fiscal scenario, 

Medicare will pay out $35 trillion more in benefits than it takes in 

in the payroll tax? Is that— 

Secretary Donovan. Again, I do not have those numbers in front 

of me, but as I was just referring to— 

Senator JOHNSON. So let us stipulate that those are correct numbers, and they are. Do you believe that is a program, Medicare, 

that requires more than modest reforms? 

Secretary Donovan. I am not sure what your definition of ‘‘modest’’ would be. I just talked about the fact that— 

Senator JOHNSON. That is what President— 

Secretary Donovan. —it requires reform. 

Senator JOHNSON. That is what President Obama has repeatedly 

said, Medicare just require modest reforms. Don’t you think that 

program requires far more than just modest reforms? 

Secretary Donovan. Senator, as I just mentioned, with changes 

in medical costs, we can have huge impacts, $900 billion in savings 

that— 

Senator JOHNSON. Again, 35— 

Secretary Donovan. —CBO estimates. 
16 

Senator JOHNSON. $35 trillion, so just kind of look at the alternate fiscal scenario, and we will take a look at that. 

If you would put up on the screen—I have got a couple quotes 

from an Office of Management and Budget report, the 2010 Analytical Perspective, page 345. I just wanted to read through this and 

get your reaction. They are talking about the Social Security Trust 

Fund that right now has $2.77 trillion of U.S. Government bonds, 

and OMB’s own report says, ‘‘These balances are available for future benefit payments and other trust fund expenditures, but only 

in a bookkeeping sense. The holdings of the trust fund are not assets of the Government as a whole that can be drawn down in the 

future to fund benefits. Instead, they are claims on the Treasury.’’ 

Next: ‘‘The existence of large trust fund balances, therefore, does 

not by itself increase the Government’s ability to pay benefits. Put 

differently, these trust fund balances are assets of the program 

agencies and corresponding liabilities of the Treasury’’—and here is 

the punch line—‘‘netting to zero.’’ 

Do you agree with what OMB in its 2010 publication stated 

about the trust fund, that you have an asset in the trust fund offset by a liability netting to zero for the Federal Government? 

Secretary Donovan. So, Senator, first of all, I think it is very important that seniors understand that those obligations are full 

faith— 

Senator JOHNSON. Please, just answer— 

Secretary Donovan. Full faith and credit— 

Senator JOHNSON. Do you agree with this statement in OMB’s 

own publication that the trust fund is an asset offset by a liability 

netting to zero value to the Federal Government? By the way, CBO 

Director Elmendorf did, Federal— 

Secretary Donovan. Senator, if I could finish, I would just say— 

as I said, we spent time talking about this. I looked through the 

materials that you got to me. I thought they were very helpful. 

Senator JOHNSON. Okay. I have limited here, so— 

Secretary Donovan. I understand. It is important for seniors to 

understand those are full faith and credit obligations of the U.S. 

Government, that they are real obligations, and even if— 

Senator JOHNSON. What is your— 

Secretary Donovan. If I could just— 

Senator JOHNSON. No, because I— 

Secretary Donovan. Even—even if those are—they are offsetting, 

I believe, based on the what I have done since we met, that the 

trust fund is a useful tool for the American people and seniors to 

understand transparently— 

Senator JOHNSON. No, let— 

Secretary Donovan. —the long-term costs— 

Senator JOHNSON. Again, I am running out of time. 

Secretary Donovan. —of Social Security. 

Senator JOHNSON. The trust fund is a useful tool for showing 

how much the Federal Government has spent of seniors’ money, 

about $2.77 trillion. It is gone. It has no value to the Federal Government. So how are we going to fund Social Security because it 

is going to run—again, do you understand these numbers? In the 

next decade, it will be about a $1.5 trillion deficit; a decade after 

that, about $4.7 trillion, according to CBO. So about $6 trillion of 
17 

deficits. How is a trust fund that has no value to the Federal Government going to fund Social Security over the next 20 years? How 

does that work? And, again, not from a bookkeeping convention, 

but how do you actually fund Social Security for the next 20 years? 

Secretary Donovan. The actuaries recently published, they believe that the trust fund is solvent through 2033, and I agree, as 

I said earlier, that—and the President has put forward principles 

for Social Security reform. We need to move forward in the long 

run to make sure— 

Senator JOHNSON. Where do we get— 

Secretary Donovan. —those reforms— 

Senator JOHNSON. Where do we get the money to redeem the 

bonds, when the Social Security Trust Fund comes to the Treasury 

and says, okay, redeem these bonds to fund benefits, where does 

the money come from? 

Secretary Donovan. The money comes from contributions that— 

Senator JOHNSON. No, no, no. 

Secretary Donovan. —people are paying in— 

Senator JOHNSON. Because—no. The only reason they redeem the 

bonds is because the payroll tax is not covering the benefits. So 

they redeem the bonds at the Treasury. Where does the Treasury 

get the money to redeem the bonds? 

Secretary Donovan. Senator, there— 

Senator JOHNSON. It is a pretty simple question. Where does 

the— 

Secretary Donovan. If you look— 

Senator JOHNSON. —Treasury get the money to redeem the 

bonds when payroll taxes do not cover the benefits, which is happening today? Where does the Treasury get the money to pay 

that— 

Secretary Donovan. If you look at the way the trust fund is constructed, there are payments coming in, which— 

Senator JOHNSON. No, again—no, answer the question. Where 

does— 

Secretary Donovan. There is—there is— 

Senator JOHNSON. Where does the—answer the question. Where 

does the Treasury get the money to redeem the bonds from the 

trust fund? Where does the Treasury get the money? Very simple 

question, particularly if you are going to be Director of OMB. 

Where does the Treasury get the money to redeem its liability on 

those bonds? 

Secretary Donovan. In order to make the—you are asking how do 

we— 

Senator JOHNSON. Correct— 

Secretary Donovan. —make payments to beneficiaries of Social 

Security? 

Senator JOHNSON. No, I am asking how the Treasury makes good 

on the U.S. Government bonds that the trust fund presents to it 

when payroll taxes do not cover the benefits, which is going to happen to the tune of about $6 trillion over the next 20 years. Where 

does the Treasury Department get the money to redeem the bonds? 

Secretary Donovan. So the— 

Senator JOHNSON. Do you really not know? 
18 

Secretary Donovan. There are—there are sources for Social Security which include the payments that are made into the system 

each year, the interest that is available, and any deficits beyond 

that would have to be financed. That is—those are the— 

Senator JOHNSON. That is all—so what does the Treasury do? 

They float additional Government bonds or they have to increase 

taxes, correct? 

Chairman MURRAY. Senator Johnson, we are way over time. 

Senator JOHNSON. Well, it is only 2 minutes, but whatever. 

Thank you, Madam Chair. Thank you, Mr. Secretary. 

Chairman MURRAY. Thank you very much. 

Senator Whitehouse? 

Senator WHITEHOUSE. Mr. Secretary, welcome. We have had 

some discussion on this before, but I wanted to run a couple of topics by you in the public forum. I think we have touched on the one 

that I am most persistent about in this Committee, and that is, 

lowering health care costs through delivery system reform. I agree 

absolutely with Senator King’s principle that you have to solve the 

health care problem in the health care system. If you solve the 

health care problem just in Medicare by burden shifting, you actually probably raise the costs of the health care system rather than 

helping and imperil a lot of other people at the expense of making 

the Medicare dollars look nominally better on the books of the Federal Government. 

So my first urge to you is please look at health care as a system 

reform, looking at the national health care system, which has appalling numbers in terms of how inefficient it is at providing health 

care, and creates an enormous opportunity for reform in ways that 

actually improve the quality of health care for Americans. It is a 

win-win proposition. And my great frustration with the administration is that, although it goes in the right direction in this area and 

it has very talented people working very hard to go in the right direction in this area, it has set no meaningful benchmarks for itself 

as to where it is going to be in 4 years, where it is going to be in 

10 years, where the Government should be in solving this problem. 

And I think you and I both believe that we all work better when 

we are working towards an identified, accountable goal of some 

kind. And certainly big government bureaucracies work better 

when they have a real target, and it is not just, ‘‘Well, we tried 

hard, sir, to bend the health care cost curve.’’ 

So what can you tell me about your commitment to seeing that 

there are some actual metrics out there showing where is this Government’s commitment to go at taking advantage of the huge 

health care opportunity we have and reducing the inordinate 

amount of waste and excess cost and, frankly, poor care for patients in our system? 

Secretary Donovan. Senator, I enjoyed our conversation about 

this, and as I think you have heard in the prior discussion, this is 

obviously an area where, if I am confirmed, I would be very focused. I do think we are making progress. 

As I understand more specifically your question, it seems to me 

it is about how do we actually potentially score these savings, 

and— 
19 

Senator WHITEHOUSE. More than just score, because scoring has 

a technical significance in this room. 

Secretary Donovan. Yes. 

Senator WHITEHOUSE. And it is limited by actuarial precepts that 

prevent you from scoring things that you can actually probably 

make a pretty safe bet will save money. So it is really more than 

just about technical scoring. It is about goal setting, and it is about 

setting really specific goals, not just something as mushy as bending the health care cost curve, but a dollar amount, a date by 

which it is going to be achieved, and some limitations to make sure 

that people did not cheat and take it away out of benefits and take 

it away in cost shifting rather than in real reform. 

Secretary Donovan. Yes. Well, generally speaking, I am a big believer in setting goals and making those targets a management 

tool. I think there are some challenges around how do we actually 

score, based on my experience with health care, of how we score 

these. But what I would like to do is, should I be confirmed, sit 

down with you quickly and talk through a little bit more of exactly 

what you are looking for here. 

Senator WHITEHOUSE. Bear in mind that, with the personnel 

shifts that have happened in the course of this conversation, I am 

on my third Groundhog Day starting on this, and my patience is 

wearing a bit thin because this is a problem we actually absolutely 

need to solve, and if this administration goes out the door in a couple years without having solved it, there are still going to be a lot 

of people in this building who are going to have to clean up that 

mess and who are going to have to fix that problem. We have to 

get this done, and we have to get it done now. 

Secretary Donovan. I hear your impatience, Senator. 

Senator WHITEHOUSE. The other thing is cyber. We are being attacked in unprecedented ways, and every day a new technique 

emerges to attack our businesses, to attack our infrastructure, to 

attack our national security. And I would like to have the chance 

to sit down with you and have you bring OMB into a conversation 

about what our cyber defenses need to look at in the out-years. 

I will tell you that, from everybody I have talked to in the administration, they are so busy fighting off this battle day to day that 

there is not long-term planning being done. And OMB is the right 

place to organize all the different agency—it is spread across many, 

many agencies—to start thinking about what our defense should 

look like 4 years out, 8 years out, again, being prepared for the future. 

Secretary Donovan. I look forward to that conversation. 

Senator WHITEHOUSE. Very well. Thank you, sir. Good luck to 

you. 

Secretary Donovan. Thanks. 

Chairman MURRAY. Senator Kaine. 

Senator KAINE. Thank you, Madam Chairwoman, and thank you, 

Mr. Donovan, for your service. I congratulate you on your nomination. 

Just a couple of points. The return to regular budgetary order is 

something that I am passionate about. Maybe coming out of a local 

and State government background, that gives me a particular passion. And both the executive and the legislative do not have much 
20 

to brag about on that score in recent years, but I do think we are 

taking steps back. I think the Chairwoman’s work with Chairman 

Ryan on trying to come out of a shutdown with a meaningful budget conference and a meaningful 2-year budget document was very 

salutary. Both sides had to give. That is the way these things happen. 

One of the things that the administration can do that will make 

it better is be timely in the submission of budgets. The Obama 

track record has generally been pretty poor on that. Last year, I 

think you kind of got it passed because we were so late with the 

budget and so late with the appropriations bills, and we had done 

a 2-year budget anyway, so the 2015 budget submission was a little 

bit odd, that I think being late was somewhat understandable, but 

generally before 2014, more often than not, budgets were late, even 

quite late. 

And I think that it was not a competence issue because OMB has 

been directed by extremely competent people. My read of it is it is 

kind of a little bit of an indifference, like, ‘‘Eh, it is not that important; we can be a little bit late. Why does it matter?’’ 

We are in a time where returning to order is important, I think. 

I think it sends a message about seriousness of purpose. I think it 

sends a message about you can rely on us and you ought to be able 

to rely on the Executive and Congress on these matters. 

And so the first thing I would just like to ask you is your philosophy about regular budgetary order, not just in terms of what we 

need to do, and we have got some cleaning up we need to do, but 

the administration’s philosophy on trying to follow the basic rules 

set out in the 1974 Budget Act and why it is important to follow 

those rules. 

Secretary Donovan. Well, I think you heard earlier, Senator, the 

very direct impact that the sort of manufactured crises, sequestration, all that we have been through the last few years has had on 

real people in communities that we have served at HUD, but also, 

ironically, in making it harder for us to plan and making it more 

expensive to execute in many of our programs. 

So I would applaud the work that has been done on the Bipartisan Budget Act, and anything that we can do to get back to regular order I think is a very important step. You have my commitment that I will do whatever I can on that front. 

I will tell you, from where I have sat, the tension—we put together a budget, you were talking about this past year, in 71 days, 

and the tension has been between doing a budget that reflects the 

very latest reality of what has happened in Congress versus getting 

it done more quickly. And so that has been the tension that we felt 

on our side, is, you know, taking the time to actually reflect the 

latest agreements that have been made in the most current budget 

year to get a budget that is accurate versus, you know, trying to 

meet deadlines when the processes run late. 

So I really do hope that we can work together effectively on that, 

and I do hope— 

Senator KAINE. Can you see any reason, sitting here today, June 

11, 2014, why the administration’s budget should not be filed timely in the February date that is specified in the Budget Act? 
21 

Secretary Donovan. I guess just to expand on my comment a moment ago, the concern, I guess, would be do we get budget bills 

done in regular order this year. If we end up with a CR that runs 

into January, let us say, the choice that we would be faced with 

is putting together a budget that is based on assumptions about 

what 2015 looks like versus waiting to get actual numbers for 

2015. That is the tension that I am talking about. 

And so obviously you have my commitment to communicate fully 

and openly with the Committee to try to be as helpful as we can, 

but ultimately the difficulty for the Executive is if we do not have 

a clear blueprint of what 2015 looks like, if we are living with appropriations bills that are, you know, CRs, that just makes it harder to meet the February deadline, obviously. 

You have my commitment that I will do whatever I can on my 

side. This is a real—a plea that we continue the progress that you 

have been making towards getting back to regular order. 

Senator KAINE. Yes. The only thing I would say about it is if you 

look at the structure of the act, the structure of the act starts with 

the executive submission, and, you know, the idea of blaming, well, 

we could not do the executive submission because of something 

that happened in the previous year, the whole process starts with 

the executive submission. And then there is a set of time deadlines 

and, you know, we are supposed to act in Committee by March, 

and then they are supposed to, by April—you know, and I recognize 

that we have slipped on our side. I would just point out that if the 

executive starts off slipping, it kind of sends the message—and we 

kind of absorb it, too—that it is okay to slip, and we end up with 

all of our planners internally and, probably more importantly, the 

private sector, you know, getting less and less confidence in the enterprise. This regular order stuff is pretty important. 

Secretary Donovan. Very important. 

Senator KAINE. And I trust your commitment to it. 

Let me ask a second question. The ‘‘M’’ in OMB is often underdone, in my view. You have been a Cabinet Secretary. What are 

some management innovation initiatives during your time at HUD 

that you are proud of to give us an idea about how you might approach the management side of the OMB job? 

Secretary Donovan. I appreciate you asking that, Senator, and I 

would say not only do I believe the ‘‘M’’ side is incredibly important, but I think connecting the ‘‘M’’ side to the ‘‘B’’ side, because, 

frankly, one of the most important ways that we can make Government more effective and save money is by doing better on the management side. So a few things I would mention. 

One is I believe very deeply that—I often say to my team, too 

often we do not know what success looks like in Government, and 

so it is really defining success and making it measurable by 

metrics, and then tracking the heck out of it. And so I created 

something called ‘‘HUDStat’’ at HUD, which, you know, the 

CompStat model from New York, I did this when I was in New 

York as well. But I personally led every one of those meetings 

across 5 years where we picked a few critical goals, we actually set 

them across agencies, so veterans’ homelessness is a good example 

where we shared it with VA. We set the same target, put our data 

systems together. We have been able to reduce veterans’ homeless-
22 

ness by 24 percent over the last 3 years, and I give a lot of—a lot 

of the reason, I think, is because we really focused on evidence and 

metrics. 

Second, I think there is a lot that we can do to do a better job 

to move toward what we call shared services. HUD is actually pursuing the largest shared services effort across the whole Federal 

Government. We are moving our entire financial systems over to a 

system at Treasury, which will mean that we will save money, we 

will get better financial systems, and we will have the project done 

faster than we would if we had pursued what was underway when 

I arrived. That is a very, very important area as well. 

I am also a big believer— 

Chairman MURRAY. Mr. Secretary, he is way over his— 

Secretary Donovan. Sorry. You can tell I am passionate about 

this. I could have kept going. But thank you. 

Chairman MURRAY. Thank you. 

Senator Wyden? 

Senator WYDEN. Thank you, Madam Chair. 

Mr. Secretary, I very much share Chair Murray’s views about 

your qualifications. I am looking forward to supporting you. 

Secretary Donovan. Thank you. 

Senator WYDEN. A few questions, if I might. A couple of weeks 

ago, I was at Gowen Field in Idaho where Oregon’s National Guard 

members have been training for some very dangerous missions in 

Afghanistan. And as I visited with them—we had lunch—some helicopters flew over the air base, and several of the soldiers said, 

‘‘Ron, do not let them take those helicopters away from us. We very 

much need that for us to carry out the mission of the Guard.’’ 

As I think you are aware—we talked about it in the office—the 

Army has a proposal to transfer 192 helicopters from the Guard to 

active duty, in effect taking those helicopters away that the soldiers were so concerned about. 

There is an effort to make sure that, before that is done, there 

would be an independent panel of experts to look at the aviation 

restructuring proposal before the Army moves ahead. 

Can you let me know whether you will support that? Because 

that is extremely important to the Guard in the Pacific Northwest. 

Senator Murray has many members of the Guard as well. Can you 

get back to me and let me know your position on that? 

Secretary Donovan. Senator, I cannot give you a commitment 

today. 

Senator WYDEN. Right. 

Secretary Donovan. I need, obviously, if I am confirmed, to get 

up to speed on it. But you have my commitment that I will work 

with the team at OMB as quickly as possible to get back to you. 

Senator WYDEN. Very good. Just get back to me and let me know 

whether you can support that. 

Second is the fire situation. As you know, the fires came earlier 

this year. They are getting hotter. They are getting bigger. They 

know no geographical lines and just move across Federal and State 

and private lands. And over the last few days, Bend, Oregon, got 

a huge scare when the Two Bulls fire got dangerously close to the 

city and they had evacuations. 
23 

On Monday, the administration alerted the appropriators that 

fire suppression budgets for the year exceed available funding, and 

the Forest Service anticipates having to transfer $350 million to 

$800 million this year. 

Senator Crapo and I have a bipartisan proposal to treat the 

worst 1 percent of fires like the disasters that they are. The administration has supported the proposal. I need you to get up to speed 

on that so that you can be a vocal advocate for that proposal. Can 

we get a commitment to do that? 

Secretary Donovan. You have my commitment I will work with 

you. In fact, this is an area where, given my work on disaster, what 

I have seen is that smart investments in mitigation, for every dollar we save $4 down the road. This seems to me like a proposal 

that would not only help make sure we are responding to disasters 

within the cap with this cap proposal we have, but also would 

allow us to invest in the smart things that will reduce the risk of 

forest fires going forward. So I look forward to working with you 

on it. 

Senator WYDEN. Thank you. The third area that I have a great 

concern about—the Chair has done very good work as well—is the 

transportation area. The Finance Committee is shortly going to 

have to deal with this huge crunch that we are facing in terms of 

transportation funds with the July 17th date of, in effect, the fund 

being in a position to not be able to pay the bills. 

I have said as part of a bipartisan effort to get the funding we 

need, both for the short term and the long term, we are going to 

try to find ways to streamline the permitting process for transportation. I need you to get back to us very quickly on what OMB’s 

ideas are for streamlining the permitting process for transportation. Can you commit to getting back to us shortly on that? 

Secretary Donovan. Absolutely, and I think there has been very 

good work done on this already. I have been very involved in it in 

the Sandy rebuilding process because of all the infrastructure investments that we have made, and I look forward to talking to you 

more about it. 

Senator WYDEN. And we will need something really in the next 

10 days from OMB. I know you are, in effect, in this sort of state 

of suspended animation, but because we really have to get this 

transportation issue resolved before the August recess—and it is 

certainly my hope that you will be confirmed before the August recess—I really need to hear from OMB within 10 days. So if you 

can, with the staff that are available, help with that, that would 

be great. 

The last point is a follow-up. I care very deeply about moving 

health care in America away from this volume-driven fee-for-service kind of system, and we made some headway, obviously, in the 

Affordable Care Act with the ACOs. But we still have a long way 

to go, and nothing will help more than moving this dysfunctional 

Medicare reimbursement system, the SGR system, away from feefor-service. 

Your soon-to-be colleague Sylvia Burwell indicated in the Finance Committee that she would work with us to repeal and replace this flawed Medicare reimbursement system this year. Can 

you agree to work with your colleague— 
24 

Secretary Donovan. I would reaffirm what was in the President’s 

budget, that we are committed to fiscally responsible reform on 

that issue. 

Senator WYDEN. Very good. 

Thank you, Madam Chair. 

Chairman MURRAY. Thank you very much. I do want to thank 

all of our colleagues for their participation and cooperation, and I 

especially want to thank you, Secretary Donovan, for your willingness to continue serving the Nation and to take on this important 

assignment. This Committee greatly appreciates the sacrifice of you 

and your family. 

Senator SESSIONS. Could I ask a few more questions, Madam 

Chairman? I think it is a very important issue. I do not like to drag 

out hearings, but this is an important appointment, and I would 

like to give him a chance to answer something that just came to 

my attention, actually, during the hearing. 

So, Mr. Donovan, I see there is a May 30th report from the Inspector General—are you aware of it?—dealing with the Anti-Deficiency Act? 

Secretary Donovan. I think I may be aware of the one you are 

talking about. I do not have it front of me, obviously. 

Senator SESSIONS. All right. It is May 30th, and I was really 

rather shocked by it. It says in the introduction—this is your own 

Inspector General: ‘‘Specifically, the U.S. Department of Housing 

and Urban Development incorrectly used more than $620,000 in 

Office of Public and Indian Housing and Office of Federal Housing 

Commissioner personnel compensation funds to pay the salary of a 

senior adviser to the HUD Secretary.’’ You. ‘‘Additionally, HUD 

paid more than the agreement allowed to this individual and made 

payments without an agreement in place.’’ And the Inspector General, of course, notes that Congress has the power of the purse. It 

violates the Anti-Deficiency Act for an agency or department head 

in the Government to spend money on something not appropriated 

by Congress. You are aware of that, are you not? 

Secretary Donovan. Yes. 

Senator SESSIONS. And it goes on to say the employee served as 

an adviser to you, the Secretary; therefore, HUD’s reimbursement 

to Community Builders Inc. should have been made from the Office 

of the Secretary’s Executive Direction account. And, in addition, it 

appears that this is a sore spot for some years with HUD. Back in 

2010, the House of Representatives did a report that said senior 

advisers to the Secretary should be funded directly through the Office of the Secretary. And the Inspector General—they go on to say, 

‘‘To date’’—this was in 2011—‘‘HUD has not even tried to address 

these problems and, thus, the Committee has no faith in HUD’s 

ability to appropriately staff its operations.’’ 

And so here, again, after these problems with the House, you 

have now spent $620,000, taking it from some other account that 

you apparently are not authorized to take it from, to some personal 

adviser for you, even without a contract, even without the appropriations provided for by law. Do you have any response to that? 

You are about to—you are seeking the appointment of the position 

in Government more than any other position that should discipline 
25 

and maintain integrity by all Cabinet officers, of which you are 

now one. 

Secretary Donovan. Senator, first of all, I would invite you to 

reach out to our Inspector General and talk to him further about 

this. This is a potential issue that the Inspector General has asked 

us to look into. It is an accounting matter in terms of which source 

of salaries and expense dollars an employee is paid out of. I was 

not directly involved or aware of how this employee was paid. And 

it is something that we are looking into right now and we are 

working closely with the Inspector General on. 

Senator SESSIONS. Well, you would agree that if it has not been 

funded, appropriated for your office, you are not entitled to take 

money from some other program of HUD and spend it to hire, at 

$620,000 apparently, some personal assistant to yourself? 

Secretary Donovan. Again, Senator, this is a matter of how we 

account for salaries and expense dollars within the agency. It is an 

issue that we are working closely with the Inspector General to determine if it was done appropriately, and that review is ongoing. 

Senator SESSIONS. Well, I just have to tell you, people in this 

Government need to follow the law. I do not know how it is that 

we are at a point where people think they can do whatever they 

want to with the taxpayers’ money and not enforce plain law, do 

what they want to in agencies and departments. And the Office of 

Management and Budget is an absolute enforcement of integrity in 

the system. And I am troubled at how this continued to go on at 

your Department, even after the House apparently complained 

about it several years before. 

You have to start managing—you know, you have to—Cabinet 

Secretaries have to manage their departments. You have that responsibility. You cannot just always push it off on somebody else. 

And when you—so I would like more explanation from you, what 

you knew about this, and we would look forward to it. 

Do you have any other explanations you might share with us? 

Secretary Donovan. Senator, I would go farther than that. I 

would invite you to talk directly to my Inspector General and to get 

his own view on whether I have been responsive to issues that he 

has found and whether we have worked closely together to try to 

make HUD a better Department. 

Senator SESSIONS. Well, I would like to know how it happened, 

what you knew about it, and if it was in violation of the law, why 

you should be promoted if you are not willing to follow the law in 

your own Department. But I would offer it for the record, Madam 

Chairman, this Inspector General report from the Department of 

Housing and Urban Development. 

Chairman MURRAY. Thank you. 

Senator Wicker has come in, and I am going to allow him to ask 

his questions before we close here. 

Senator WICKER. Thank you very much, Madam Chair, and I will 

be brief. 

I just wanted to come in and say that I am highly inclined to be 

supportive of this nomination. I suspect that his views on budgeting are considerably different from mine. That is because his candidate won the Presidential election and mine did not. 
26 

But that being the case, I have appreciated the fact that Secretary Donovan has been so responsive as HUD Secretary to situations which have arisen in my home State. I remember 3 years 

ago—it was almost exactly 3 years ago—Mr. Secretary, when a 

devastating tornado hit Smithville, Mississippi, and Secretary 

Donovan came down within days with two other members of the 

administration, showed real concern, showed real responsiveness, 

and worked with us on a nonpartisan basis to help bring that community back. I am so grateful for that, and the people of northeast 

Mississippi, Mr. Secretary, are so grateful for that. 

And then I absolutely would be remiss if I did not thank you, Mr. 

Secretary, for your heroic effort and the work you have done on the 

Port of Gulfport restoration project. It takes a long time sometimes 

for compliance to be done at the State, local, and Federal levels, 

and this action plan was approved in 2007. Following a site visit 

in August of 2012, the Community Planning and Development Division completed its compliance assessment and stated the project 

was in compliance with regard to requirements concerning jobs, 

concerning contracting, benefitting low-income individuals and 

businesses. 

And then after that, a misunderstanding arose because of another division of HUD conducting what I think some people refer 

to as a ‘‘desk audit’’ without a site visit and without a formal complaint or any other indication of compliance, notified us that we 

were not in compliance. And, Madam Chair, it was the Secretary 

that came in, worked with a Republican Governor in Mississippi, 

with the Mississippi Development Authority, and got into the details of this, and helped us to show that, in fact, we were in compliance, and resulted in a success story for people who want a job on 

the gulf coast of Mississippi and who would hope and aspire that 

this port would be the great engine of economic activity that we believe it is. 

So, Mr. Secretary, with your assistance, this issue was resolved. 

We were quite worried about it for a long time, and since working 

with us for almost a year now and resolving it in favor of going forward there, your office has given us technical assistance, and we 

appreciate that. 

I hope you will convey to your successor at HUD the importance 

of this project to the rebuilding of—the continued, longstanding rebuilding of Mississippi’s coastal economy. And we have worked on 

it together on behalf of average workers and average Americans 

who want nothing more than to have a job at a first-class, stateof-the-art port. So thank you very much. 

Thank you, Madam Chair. 

Secretary Donovan. Thank you, Senator. 

Chairman MURRAY. Thank you, Senator. And I echo your experience with the Secretary. I have worked very closely with him, and 

he is a hands-on problem solver, and I think he will do a great job 

at his next assignment. So thank you very much. And, again, thank 

you for the participation of all the Senators here today. 

I want to remind all of our colleagues, because this is an afternoon hearing, additional statements and questions for the record 

will be due in by noon tomorrow to be signed and submitted to the 

chief clerk. 
27 

Also, I just want to say for the information of all our colleagues, 

it is my intention to move the Secretary’s nomination as expeditiously as possible. I will be talking with Senator Sessions about 

that. I want members to know that I plan on doing it as soon as 

possible. As Senator Wyden indicated a moment ago, it is extremely important we have somebody in this position to work with 

as we face the challenges that are in front of us. 

So thank you again, Mr. Secretary, and with that this hearing 

is adjourned. 

Secretary Donovan. Thank you. 

[Whereupon, at 3:25 p.m., the Committee was adjourned.] 
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