[Senate Hearing 108-332] [From the U.S. Government Publishing Office] S. Hrg. 108-332 NOMINATION OF ADMIRAL JAMES M. LOY ======================================================================= HEARING before the COMMITTEE ON GOVERNMENTAL AFFAIRS UNITED STATES SENATE ONE HUNDRED EIGHTH CONGRESS FIRST SESSION ON THE NOMINATION OF ADMIRAL JAMES M. LOY TO BE DEPUTY SECRETARY OF HOMELAND SECURITY __________ NOVEMBER 18, 2003 __________ Printed for the use of the Committee on Governmental Affairs 91-044 U.S. GOVERNMENT PRINTING OFFICE WASHINGTON : 2003 ____________________________________________________________________________ For Sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512�091800 Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001 COMMITTEE ON GOVERNMENTAL AFFAIRS SUSAN M. COLLINS, Maine, Chairman TED STEVENS, Alaska JOSEPH I. LIEBERMAN, Connecticut GEORGE V. VOINOVICH, Ohio CARL LEVIN, Michigan NORM COLEMAN, Minnesota DANIEL K. AKAKA, Hawaii ARLEN SPECTER, Pennsylvania RICHARD J. DURBIN, Illinois ROBERT F. BENNETT, Utah THOMAS R. CARPER, Deleware PETER G. FITZGERALD, Illinois MARK DAYTON, Minnesota JOHN E. SUNUNU, New Hampshire FRANK LAUTENBERG, New Jersey RICHARD C. SHELBY, Alabama MARK PRYOR, Arkansas Michael D. Bopp, Staff Director and Chief Counsel Johanna L. Hardy, Senior Counsel Tim Raducha-Grace, Professional Staff Member Joyce A. Rechtschaffen, Minority Staff Director and Counsel Holly A. Idelson, Minority Counsel Jennifer E. Hamilton, Minority Research Assistant Amy B. Newhouse, Chief Clerk C O N T E N T S ------ Opening statements: Page Senator Collins.............................................. 1 Senator Stevens.............................................. 3 Senator Akaka................................................ 5 Senator Carper............................................... 6 Senator Lautenberg........................................... 7 Prepared statement: Senator Durbin............................................... 25 WITNESSES Tuesday, November 18, 2003 Hon. Daniel K. Inouye, a U.S. Senator from the State of Hawaii... 4 Admiral James M. Loy to be Deputy Secretary of Homeland Security. 9 Alphabetical List of Witnesses Inouye, Hon. Daniel K.: Testimony.................................................... 4 Prepared statement........................................... 25 Loy, Admiral James M.: Testimony.................................................... 9 Prepared statement........................................... 27 Biographical and professional information requested of nominees................................................... 30 Pre-hearing questionnaire and responses for the Record....... 39 Post-hearing questions and responses for the Record from: Senator Collins............................................ 162 Senator Lieberman.......................................... 181 Senator Durbin............................................. 184 Senator Lautenberg......................................... 186 Senator Specter............................................ 193 APPENDIX Letter from Admiral Loy, dated Feb. 23, 2004, with a correction for a factual error contained in response to pre-hearing question No. 63................................................ 194 NOMINATION OF ADMIRAL JAMES M. LOY ---------- TUESDAY, NOVEMBER 18, 2003 U.S. Senate, Committee on Governmental Affairs, Washington, DC. The Committee met, pursuant to notice, at 2:32 p.m., in room SD-342, Dirksen Senate Office Building, Hon. Susan M. Collins, Chairman of the Committee, presiding. Present: Senators Collins, Stevens, Akaka, Carper, and Lautenberg. OPENING STATEMENT OF SENATOR COLLINS Chairman Collins. The Committee will come to order. Today the Committee on Governmental Affairs will consider the nomination of Admiral James Loy to be the Deputy Secretary of the Department of Homeland Security, the No. 2 post in this important Department. We are fast approaching the first anniversary of the Homeland Security Act which established the new Department. Integrating 22 Federal agencies was necessary to enhance the security of the United States and the safety of its people in this environment of global terrorism. But unifying 22 agencies and more than 170,000 employees is an extraordinary challenge. Secretary Ridge and his team are to be commended for their tireless efforts on what is a monumental undertaking. But there is a seat at the helm that is now empty and I can think of no finer person to fill it than the nominee who is before us today. Admiral Loy, you have spent 40 years on the front lines of homeland security. In 1998, during your Commerce Committee hearing to be the commandant of the Coast Guard, Senator Inouye remarked, ``you are to be commended for the decades of superb service you have given to your country. You have gotten this nomination the old-fashioned way--you have earned it.'' You have certainly earned this one, too. Helping to run this enormous new Department will take all of your skills, dedication, and savvy. The Department of Homeland Security has to address an endless number of threats and issues each and every day, yet it must be able to balance security concerns with the need to preserve our American way of life. My home State of Maine shares more than 600 miles of border with Canada making border security issues especially important to me. The people, communities, and businesses on both sides of the border depend upon each other for friendship, mutual aid, and economic success. Many families, including my own, have relatives on both sides of the border and the ease of crossing has allowed them in the past to maintain strong family ties. I understand and certainly support the efforts that the United States is making to improve border security at home, but as the Department moves forward on policies that tighten border security it must also take into consideration the social and economic ramifications of any changes. Admiral Loy, should you be confirmed, as I believe you will be, the Committee will also support your efforts to improve the level of preparedness in every community. This Committee has held hearings and approved legislation to strengthen homeland security grant programs, to put cutting edge counterterrorism technologies in the hands of local law enforcement, and to strengthen American seaports against a terrorist attack. We must make certain that our communities receive a long-term, steady stream of funding to prevent a future terrorist attack and to respond should the worst occur. The Committee has already approved legislation that I introduced that provides a solid baseline of funding to each State but that allocates the majority of the funding, more than 60 percent, to States based on the individual circumstances of risk, threat, and vulnerability. We hope that you will work with the Committee to ensure that this legislation is enacted into law next year. I also appreciate your efforts to improve coordination within the Department and with other agencies. The Department's efforts to set up a single website for many homeland security grant programs is a step in the right direction. In addition, however, we need to reduce paperwork, standardize equipment and training standards, and coordinate emergency preparedness plans. If confirmed, I hope that you will work with this Committee to forge a bipartisan consensus on all of these issues, and I trust that you will let us know promptly if you need more tools or resources to help our States, communities, and first responders. Finally, let me comment on your outstanding 38-year career in the Coast Guard. When the new Department of Homeland Security was first being debated Senator Stevens and I joined forces to ensure that the Coast Guard's vital traditional missions, such as search and rescue, were not compromised as the Coast Guard took on additional homeland security responsibilities. I am confident that given your long career in the Coast Guard you will ensure that both the letter and the spirit of the Stevens-Collins amendment are followed. Perfect timing; the Senator from Alaska has come in. In short, we are very pleased to have you here today and I look forward to hearing the introduction of you, the formal introduction by two of our most esteemed colleagues. I would first call upon the--now you are each pointing at the other. Senator Stevens. He is senior. Chairman Collins. I will call on the distinguished senior Senator from Hawaii. I want to tell you that I had a big debate with my staff over whom I should call upon first, the President pro tempore or the senior member, and it was a toss-up. So since Senator Stevens has suggested I proceed with the distinguished Senator from Hawaii, I am going to follow his advice, which is always sound. Senator Inouye. Senator Inouye. Madam Chairman, I very seldom disagree with my brother but he is the President pro tempore, and most importantly, this day is his birthday. Chairman Collins. That is true and we hope to celebrate that later today. Senator Inouye. If you want this nomination to go through, you had better get the octogenarian---- [Laughter.] Chairman Collins. Senator Stevens, I think the distinguished Senator has yielded to you. Senator Stevens. Thank you very much, Madam Chairman. Chairman Collins. We welcome you. OPENING STATEMENT OF SENATOR STEVENS Senator Stevens. It is a privilege to be here with you and to introduce Admiral Loy to our Committee. He has had a long and distinguished record of public service. You may have already stated this, his career spans over 30 years with the Coast Guard. He graduated from the Coast Guard Academy in 1964 and came through the ranks to be the commandant in May 1998. Now my State has a unique relationship with the Coast Guard. We have more than half the coastline of the United States, 6,640 miles of coastline. That literally makes us stewards of the coastline longer than all 48 States combined. We have the Coast Guard's largest base on Kodiak Island. I had some experience with that when I was a brand new Senator. Senator Nixon wanted to close the Kodiak Naval Station and we thought it was a place that should have some presence. I went to the Coast Guard and asked them to come visit Kodiak and was able to convince them to move a small station there. They have since learned that that is the place from which we can guard the Pacific and all its resources for the United States. I got to know Admiral Loy well when he served as commandant. During his tenure he led the Coast Guard's effort to rebuild and restore readiness, he rebuilt the Coast Guard's workforce to authorized levels, improved retention and prepared the Coast Guard to fulfill its future duties and responsibilities. He also made sure the Coast Guard had the resources it needed to protect our coastline and our maritime boundary of Alaska, which is so important to all of us. Over half of the fishery resources in the United States are in the north Pacific, and the Admiral has had a commitment and a dedication to protect those resources. When our Nation needed Admiral Loy's expertise to secure our transportation systems after September 11, he answered the call to service and assumed a newly-created post of Deputy Undersecretary of Transportation for Security. In 2003, he became the administrator of the Transportation Security Administration and assumed the critical task of securing every facet of our Nation's transportation system. Admiral Loy successfully led TSA through the transition into the Department of Homeland Security, and furthered his agency's dedication to security while improving public outreach and customer service. I do believe that I know of no man more qualified to take over this position than Admiral Loy. He has completed enormous tasks as though they were small tasks, and I think the Committee would agree, the Admiral's experience and dedication will serve him well as the second in command at the Department of Homeland Security. I know of no greater honor than to ask the Committee to move very quickly on this nomination. Thank you very much. Chairman Collins. Thank you very much, Senator Stevens. Senator Inouye. Senator Inouye. Madam Chairman, I thank you very much. I wish to ask for your permission to have my statement made part of the record. Chairman Collins. Without objection. TESTIMONY OF SENATOR DANIEL K. INOUYE,\1\ A U.S. SENATOR FROM THE STATE OF HAWAII Senator Inouye. As my distinguished friend from Alaska indicated, he has the longest coastline. The State of Hawaii is surrounded by water. We have all the services on our islands, but the most favorite service is the Coast Guard. It saves more lives. We are surrounded by fishermen all the time, men who go out and surf, and without the Coast Guard we would have crise every day. Thanks to them, our families are happy, people are happy. --------------------------------------------------------------------------- \1\ The prepared statement of Senator Inouye appears in the Appendix on page 25 --------------------------------------------------------------------------- Admiral Loy has had a long and distinguished tenure with the Coast Guard. He has been commandant for 4 years. He has led the Coast Guard through one of the most significant periods of transformation in the history of that service. He has improved the readiness of the operation. He is preparing for the future. For many, many years they could not maintain their recruitment level. He has exceeded that. He has exceeded in retention, and he has ensured the personnel were properly supported by the finest equipment possible. He has had the training and the background and experience that we sorely need in this new position. So I am most pleased and proud to join Senator Stevens in commending Admiral Loy to you. Senator Stevens. Could I just add something, Madam Chairman? Chairman Collins. Senator Stevens. Senator Stevens. In my State, the Coast Guard operates helicopters that fly over barren seas and barren areas that are one-fifth the size of the United States. His people deliver babies, they pick up stranded people from ice floes, they patrol to see that the foreign fleets do not come into our shores, and they are really great neighbors. I think the fact that we have this nomination before us today demonstrates the wisdom of the battle that you and I fought that you were speaking of when I came in the room. But now, by having Admiral Loy in the position he is going to assume, it shows to everyone that that commitment is a real commitment, to make sure the Coast Guard will survive and be really compatible with the whole concept of homeland security. So I really welcome this nomination and the assurance it gives those of us who had some fear about putting the Coast Guard in this new Department. I hope you will move the nomination quickly. Thank you very much. Chairman Collins. Thank you very much. I know that both Senators have other engagements and I am going to give you the opportunity to depart the Committee. But I want to thank you both for taking the time to be here and to endorse this nominee. Your endorsement means a great deal. Senator Inouye. Thank you very much, Madam Chairman. Chairman Collins. I would now like to call on the other distinguished Senator from Hawaii, Senator Akaka, for his opening comments. OPENING STATEMENT OF SENATOR AKAKA Senator Akaka. Thank you very much, Madam Chairman. Admiral Loy, you come before this Committee with high recommendations from two colleagues whose opinions I respect tremendously, my good friends Senators Stevens and Senator Inouye. I thank you for being here this afternoon, and I thank you for your visit with me earlier today. Admiral Loy, as Administrator of the Transportation Security Administration and the former Commandant of the Coast Guard, you have served your country well. As was mentioned, you were in the Coast Guard some 40 years. You understand firsthand the unique challenges faced by the Department of Homeland Security, and the experience you have had in the Coast Guard certainly will make a huge difference in securing our country. To be effective, policies within the Department must address the specific homeland security needs of each State and municipality. The State of Hawaii is over 2,500 miles from Los Angeles and is accessible only by plane or ship. It takes 5\1/ 2\ hours to fly from the mainland and 4\1/2\ days by sea. This distance makes mutual aid from mainland States or from other Pacific jurisdictions unfeasible. Hawaii is home to 53,600 military personnel and hosts about 160,000 tourists on any given day. I have joined with Senator Collins to ensure that first responder funding covers all who reside in a State including military and tourist populations. I look forward to working with you to ensure that this priority is addressed in first responder allocations. As the head of TSA, you serve on the DHS human resource system design team which has forwarded its recommendation for a new personnel system to DHS Secretary Ridge and OPM Director James. I expect you to foster an environment of inclusion that brings together the different talents of Federal workers and the different cultures of agencies included in this new Department. Your experience tells me that you will. As we protect America by reorganizing the Federal Government we cannot overlook the fundamental rights of Federal employees. Union representation, collective bargaining, and appeal rights whistleblower protections are all critical elements of a strong and stable workforce. The rights of Federal workers complement our ability to safeguard the country. Our goal is to protect the Nation. The key to attaining this goal is skilled and highly motivated employees and capable leadership. If the imposition of a new personnel system results in a demoralized workforce and accelerated retirement by skilled workers, then the question needs to be asked, is our Nation's security at risk? There will soon be new personnel systems for the largest Federal agency, the Department of Defense, and the third largest, the Department of Homeland Security, which will bring massive changes to those personnel essential to our national security. Any changes have to be looked at more seriously, and I want your commitment to work with me to ensure that we protect the rights and benefits of our Federal workforce. Much of the debate has focused on union rights. I, for one, believe that a modern and agile workforce is not incompatible with collective bargaining. Admiral Loy, you have an immense task before you. I commend you for accepting the responsibilities of this position, and I know you will continue to make significant contributions to protecting the people of our great country. I consider you as a tremendous plus for what we are doing to secure our country. Thank you very much, Madam Chairman. Chairman Collins. Thank you Senator. Senator Carper. OPENING STATEMENT OF SENATOR CARPER Senator Carper. Thank you, Madam Chairman. Earlier, Admiral Loy, when Senator Stevens and Senator Inouye were jockeying, debating about who was going to go first and Senator Inouye mentioned that it was Senator Stevens' 80th birthday today, I thought the person at that table who really receives the best gift is you. To be introduced by either of them at a confirmation hearing is a great honor. Admiral Loy. Indeed. Senator Carper. To be introduced by not one but by both of them is really quite extraordinary. As an old Navy guy for 23 years active and reserve duty and someone who served for 10 years on the Coast Guard Subcommittee in the House of Representatives before I was elected governor, I just want to express my thanks to you for your service to our country, my great respect for the Coast Guard for the good they do in Delaware and the Delaware Bay, the Delaware River, and the Atlantic Ocean not far from where we live. I am grateful for the work that you have done in leading TSA within this new Department over the last couple of years. And I appreciate the chance to have sat down with you and to have spoken earlier today about some issues and when we get into questions I hope to be able to revisit a couple of those. I will just mention them again. One of those was the issue of the funding formula for first responders that Senator Collins and I have worked on. I would like to discuss that with you a bit more. Among the responsibilities that TSA has is not only aviation security and important transit security but also rail security and I would like to revisit that with you, if I might. Finally, I would like to talk a bit more about the concerns that have been expressed to us by port workers. The Port of Wilmington--and I know you have heard these from workers in other ports--employs some people who have had problems with the law and have some criminal violations on their records. They have gone straight. They have become law-abiding citizens and contributing members of our society, and a number of them have, I think, real concerns about their future as breadwinners for themselves and for their families. I would like to have a chance to delve into that with you as well. We will have a chance for that here shortly. I want to thank you again for your service to our country and for your family to be willing to share you with the rest of us. Admiral Loy. Thank you, sir. Chairman Collins. Thank you very much, Senator. Senator Lautenberg. OPENING STATEMENT OF SENATOR LAUTENBERG Senator Lautenberg. Thank you, Madam Chairman. My respect for holding this hearing and dealing with this complicated problem of having a nominee about whom there is virtually no controversy. It is not usual that we do these things. But also, I always think about New Jersey and its relatively enormous coastline for the landmass that we have. Then we get Hawaii and Alaska. Ain't nothing there but water. But the fact that you have enjoyed the universal respect, and I might even say, Admiral James Loy, the affection of people you work with, because it is not just a pleasing personality. You have taken to your tasks very well. Few have had the rich experience that Admiral Loy has had. To come to this fairly complicated job, having been with the Coast Guard, and commandant, I think it equips you particularly well because for a relatively small agency they have more responsibilities, the Coast Guard. And it is constantly enlarging the responsibilities without commensurately enlarging the budget. The Coast Guard has, I think, performed miracles. When you think of all the duties they have, everything from ship manifests, to pollution control, to illegal refugee movements, the drug enforcement, to picking people off the high seas, and to contributing as well to being a good neighbor to make sure that things operate well. We are very fortunate in the State of New Jersey to have the Coast Guard training base there. Admiral Loy and I had a fair amount of contact in his days as the Coast Guard commandant and it was always a pleasure to see him and to hear from others who served with and for him, the respect that he enjoyed. Having said all those nice things now I want to get down to the nub of some things that we are going to have to be concerned about. One of them was mentioned by our friend from Delaware, and from Hawaii as well. I served as the commissioner of the Port Authority before I came to the U.S. Senate so I know quite a bit about how the port operates, its importance to our economy, its vulnerability to terrorism. By the way I mentioned, Admiral Loy, yesterday we had a chance to chat, to see a couple of Coast Guardsmen out there post-September 11. The Hudson River compared to the Atlantic Ocean may not look like a place that you have got to worry about, but there is an awful lot of ship traffic, a lot of turbulence in that river because of the ship traffic. Out there in a rubber dinghy with a machine gun mounted, making sure that they did whatever they could to protect us and to protect the commerce that goes through the harbor. The Coast Guard estimated that they needed $963 million this year and $4.4 billion over the next 10 years to make our ports safe. I hope that Admiral Loy, in his new post, can pry that money loose. The question of first responder grants, for me a particular concern in the State of New Jersey was that our State and our neighboring State New York, suffered the most on September 11 directly. We are ranked near the bottom per capita when the money was doled out. Some of that stems from a faulty allocation formula embedded in the USA Patriot Act, but to his credit Secretary Ridge has acknowledged problems with the formula and we still need to fix that. There is another element that concerns me and that is our color-coded threat system. It does not do much, and if we do not scrap it altogether, we need to revamp it considerably. Because to issue threats that have no support or no advice as to what you do, where do you go? I have had these silly calls. I think they are silly because I believe that we are doing largely what is necessary. But when a threat comes out and I get calls in our office, dare we go to New York City now; or dare we go here; or dare I take my kids on vacation, it is not the way to do things. It just alarms everybody without offering any solution. Another problem that I am concerned about is with the air marshals. Now I am concerned that the principal security inspectors are allowing flight attendants to take home study courses as part of their security training, but more concerned about what is happening to our Federal air marshal program. It is up, is it down, with regard to budget cuts and so-called cross-training with Customs agents. I am not quite sure what the intentions are. At one point they said they would get rid of them. Then I saw they were bringing them back. I think we ought to firm up that program. It is a very important protection that we afford the flying public, and we want to make certain that that is manned to the proper degree. Last, the new threats that seem to arise. Whenever you think you are working on the things that really count you find out that there is another leak in the dike, and this one is surface to air missiles. A year ago this month the world saw the SAM attack on the Israeli jet in Mombasa, Kenya. And more recently, a sting operation in the port of New Jersey, port of Newark, we revealed an attempted to smuggle SAMS into the port. They were almost boastful about how they got into it. The prosecution was there and it will be taken care of, but the fellow who they caught with this was determined to create a structure, an organization to bring these things in on a regular basis. How devastating. So these weapons may present the biggest terror threat to commercial airliners and I want to know what the administration is prepared to do to address it. Madam Chairman, I will spare you the time and the Committee. Those are a few of my concerns, raising them, I want to suggest that we have to go further to make our country safer against the scourge of international terrorism. But I think Admiral Loy is equal to the task and I look forward to confirming him as I know others do as well. We wish him well in this very important task. Admiral Loy. Thank you, sir. Chairman Collins. Thank you, Senator. Admiral Loy has filed responses to a biographical and financial questionnaire, answered prehearing questions submitted by the Committee, and had his financial statements reviewed by the Office of Government Ethics. Without objection, this information will be made part of the hearing record with the exception of the financial data which are on file and available for public inspection in the Committee's offices. Admiral our Committee rules require that all witnesses at nomination hearings give their testimony under oath, so if you will please stand and raise your right hand. [Witness sworn.] Admiral Loy, do you have a prepared statement that you would like to give at this time? Admiral Loy. I have a prepared written statement, ma'am. If I could submit it for the record, I would appreciate that, and just provide perhaps a couple moments of oral comments. Chairman Collins. It will be included in full. TESTIMONY OF ADMIRAL JAMES M. LOY,\1\ TO BE DEPUTY SECRETARY OF HOMELAND SECURITY, DEPARTMENT OF HOMELAND SECURITY Admiral Loy. Good afternoon, Senator Collins and Senator Akaka, and all Members of the Committee. Thank you for scheduling this hearing so quickly and giving me the opportunity to appear before you today. I also want to thank Senator Stevens and Senator Inouye for their kindness in sponsoring my nomination today. Both represent to me the epitome of public service and our work together for many years on Coast Guard issues really now represents a foundation of capability our Nation needs to secure our homeland. --------------------------------------------------------------------------- \1\ The prepared statement of Admiral Loy appears in the Appendix on page 00. --------------------------------------------------------------------------- I am honored that President Bush has nominated me to serve alongside my good friend and fellow Pennsylvanian, Secretary Tom Ridge, as the Deputy Secretary of Homeland Security, and if confirmed I will do my utmost to serve the President and the Secretary in protecting our homeland from acts of terrorism, as we also maintain our way of life and all the freedoms that we enjoy as Americans, and to preserve and expand our national economy all at the same time; a difficult set of challenges. I have the singular experience of having led the two largest organizations that comprise the Department of Homeland Security, the Transportation Security Administration and U.S. Coast Guard. Together they include approximately 100,000 dedicated men and women, more than half the DHS workforce. This gives me a unique perspective, I believe, on the challenges we face in molding the Department into a fresh, cohesive agency. If you will, having looked from the bottom up, I will be able to bring those thoughts and lessons learned into the dialogue of the leadership of the Department. I hope that perspective will be valuable as we move forward together. Madam Chairman, with your permission I would like to just mention four quick things that I think are important to the fundamental success of this new Department, this new adventure called the Department of Homeland Security. First, information sharing and analysis. If this Department is to succeed we must build the capability to collect, to share, to analyze and to distribute the intelligence and information sets necessary to secure the homeland. I think this will be very different from anything that we have ever been expected to do in the past. We must design, if you will, a common information picture such that all gathered information is available to analyze, that all analyzed information becomes actionable products, and that all those products gain distribution to those who can best put them to use to secure America. Second, the notion of critical infrastructure must become the product of criticality assessment on one hand, vulnerability assessment on the second, threat assessment on the third, and then very real, methodical risk management as a fourth dimension of how to grapple with this challenge of identifying and securing the critical infrastructure of our homeland. Third, this Department must become the model Cabinet-level agency for the 21st Century. We have every opportunity to do that. Organizational excellence must become the norm across the board in all our operating agencies as well as in our support structure. We must demonstrate with solid metrics that we are doing our work efficiently, effectively, and with an eye to the good stewardship of the taxpayer's dollar. Fourth, we must accept the challenge offered by the national homeland security strategy and interpreted boldly and widely for the American public, and especially for our workforce at DHS. That means each of us entrusted with positions of leadership must be bold and directive and methodical as we set goals, as we optimize objectives and design systems to accomplish the departmental mission. And second but simultaneously, to build the cultural norms expected in a high-performing organization. I spent all my professional life in one such organization where the core values of honor and respect and devotion to their duty meant something visceral and real to every sailor in that organization. We are working hard now to build that same culture at the Transportation Security Administration, and it must also be done at DHS. I look forward to taking on that challenge with Secretary Ridge. Last, I offer the simple notion that we are all in this together. Our strategies and plans must be open to all of those with good ideas. Our reach must include State, tribal, and local and private sector players. Securing the homeland is an obligation now for every citizen of this great Nation. The events of September 11 show that terrorists draw no distinctions between military targets and civilian office buildings. This is a gravely different security environment that we are living in post-September 11. It calls for creative thinking, diligent research, and a collective commitment to hold the edge and to keep complacency at bay, because indeed I believe to some degree it was complacency that got us into trouble over the decade post-1989 after the fall of the wall and after the dissolution of the Soviet empire took away that single superpower that we were vying with. I am very aware of the seriousness and the importance of the challenge and opportunity that President Bush and Secretary Ridge have entrusted to me, and if confirmed I pledge to bring tirelessly whatever I have learned to the task. Thank you again for your sensitivity to the scheduling of this hearing and I look forward to your questions. Chairman Collins. Thank you, Admiral Loy. I am going to start my questions with three standard questions that are posed of all nominees. First, is there anything you are aware of in your background which might present a conflict of interest with the duties of the office to which you have been nominated? Admiral Loy. No, ma'am. Chairman Collins. Second, do you know of anything personal or otherwise that would in any way prevent you from fully and honorably discharging the responsibilities of the office to which you have been nominated? Admiral Loy. No, ma'am. Chairman Collins. Finally, do you agree without reservation to respond to any reasonable summons to appear and testify before any duly constituted committee of Congress if you are confirmed? Admiral Loy. I do so pledge. Chairman Collins. Thank you. We will now start with the first round of questions limited to 7 minutes each. I would ask my colleagues to help me with the time limit and we will do a second round if needed. Admiral Loy, in my opening statement I raised the issue of border security, which is one of the greatest challenges facing DHS. Each year the United States legally admits millions of non-citizens through our borders. In Maine, some 4.6 million cars and trucks cross over the border from Canada each year. That is a lot of traffic and obviously the Department is very concerned about opportunities for terrorists to exploit weaknesses in border security. But there was a flip side to the coin. For many Maine residents who live less than an hour's drive from the Canadian border, traveling back and forth between Maine and Canada is a way of life. Family members live across the border from one another, businesses in one country depend upon suppliers and customers from the other in order to survive. Sometimes the border in Maine literally runs through a neighborhood, or on one side of the street it is Canada, on the other side it is the United States. Last year, to try to tighten border security, the Department eliminated the Form 1 and the port pass programs which allowed American residents to use unmanned border crossings 24 hours a day. This was very important to a lot of the residents living in remote areas of my State who depended upon those two programs for access to medical and religious services, family events, social activities, the grocery store, the hospital which are on the other side of the border. I would like to give you an example to illustrate the problems that the elimination of those programs have caused in my State. There is a small border community in Quebec called St. Pamphile. On the U.S. side of the border there is no development, only miles and miles of woods that produce timber for processing at the mills in Quebec. But there are some Maine families who live on the U.S. side of the border and they depend upon services in Canada. Everything they need from the grocery store to the hospital to the church is on the Canadian side, including emergency services. The problem is that once that program was eliminated and the gates were locked, the residents on the Maine side of the border are essentially prohibited from crossing the border after 5 o'clock. They cannot go at all on Sunday because the gates are locked. This is a real problem. The residents are very frustrated by this. They are obviously law-abiding American citizens. They would be the first to point out any suspicious character in their midst. This has changed their entire way of life. I think ultimately technology is going to be the answer to this problem where we can have some sort of biometric passcard and perhaps remote cameras to check out who is crossing. But in the meantime this is creating tremendous hardship in this one community for the 50 or so residents who live on the American side. But it is a problem for other remote border communities in Maine too. I would ask that you make a commitment to work with me to try to come up with a solution that meets the need for tighter border security while at the same time acknowledging the fact that these individuals who are law abiding, who have lived here their entire lives in some cases, now find that their movements are greatly restricted. They would have to drive an extraordinarily long distance to get to the next manned border crossing. We have been working with the Department on this but we have yet to be able to come up with a solution. Admiral Loy. Madam Chairman, I am happy to pledge to work with you in trying to find a better solution to the circumstances you describe. I think this dual goal set that you just described so well of security on one hand but holding onto that way of life that has become so critical to people just a couple hundred yards or just a mile or so away are legitimate challenges that we have to find better ways to deal with. I think the smart border accord that has been a very fundamental exchange between Canada and the United States at the diplomatic level, and Secretary Ridge and Minister Manley have literally, each month since about 18 months ago, looked carefully at a list of about 30 objectives that they have to make such things happen better between the two countries. I even think that further down the road there is a likelihood of a notion referred to as a North American initiative where the real borders we are concerned about are the borders that circumvent the entire continent, let alone those that are binational in nature between Canada and the United States, and between Mexico and the United States on the southwest border as well. I do believe that there are technological possibilities that can help us with this on the other end of the timeframe, and at the same time reinforce the legitimate concerns that we do have for our own borders. Whether there are hours that we can play with here in terms of the openness of those border crossings, I will be happy to take back to the Department and review there the concerns that you have expressed to me and work with you to see if we can find a better answer. Chairman Collins. Thank you. I appreciate that commitment. Earlier this year, the Committee held a hearing that focused on the threat to our Nation's ports which I view as one of our greatest vulnerabilities. I have a series of questions I want to ask you about that but in the interest of time let me cite one particular concern. In June, I wrote to Secretary Ridge to express my concern about the Department's proposal to allocate some of the money that had been designated for port security by Congress for other purposes. I was pleased in response to the concerns that many of us raised that that decision was reversed. As we anticipate a third round of port security grant announcements I am pleased to hear that the TSA is poised to distribute $105 million that is still left over. But once again there are these rumors that the Department only plans to release a portion of the 2004 funding in this round. I would like you to address that. I think it is imperative that we make a real effort to upgrade security at our ports. Admiral Loy. I could not agree with you more, ma'am, as my immediate last 8 months in uniform were all about maritime security design efforts in the wake of September 11. Port security has been something that is of great personal interest to me as well. You are referring, of course, last year to enormous and very consequential budget challenges that we had to fight our way through at the Transportation Security Administration and to whom those dollars for port security grants had been appropriated for distribution. In the spend plans over the course of that year where literally at the 364th day of that fiscal year I as the administrator for TSA, was still looking for an approved spend plan for that fiscal year. That was the nature of the challenges that we had to actually, potentially reprogram funds from purpose A to purpose B just to get through the fiscal year. I think it was all about what has classically been the case historically in our country, in the wake of a tragedy when the Congress passes a piece of legislation and the administration tries to figure out how to execute that piece of legislation, and sticker shock sinks in, and then we literally work a couple budget cycles to find out the true job description and the resource base necessary to do that work. We are still grappling with that at TSA as this year plays out as well. But with respect directly to the port security grants, as you know, all of them were in fact reissued for fiscal year 2003. The $105 million you speak of is actually the monies that were in the supplemental from the previous year that really were round two but are becoming round three. This distinction that you are making between $75 million and all of the $125 million set aside in fiscal 2004, this is the reasoning behind why we are edging it at $75 million at the moment. The application process for the third round of grants was to the point where we had about $1 billion worth of requests coming in. I am very proud of the process that we have designed. There was local review with the harbor safety committees involved in how to make sure that the applications going forward were rated in such a fashion that all of the players in that locale would see the value of that application. Then there was a regional review and finally a leadership review at the top between MARAD, the Coast Guard and TSA. When we categorized them, they fell into logical categories of one, two, and three, and this $75 million worth of the 2004 appropriation will simply enable us to fund all those who we rated in category one. Then the balance of the $50 million will become available to another round of port security grants on into the fiscal year. That is the intention at the moment and no mischief afoot here as it relates to potentially trying to reprogram these dollars. Chairman Collins. Thank you. Senator Akaka. Senator Akaka. Thank you very much, Madam Chairman. Let me begin my round of questioning by affirming that collective bargaining rights are compatible with national security. Providing Federal employees with a meaningful voice in the workplace is a smart business practice that will enable any agency the ability to attract and retain a motivated workforce. The Homeland Security Act requires that the Department must, ``ensure that employees may organize, bargain collectively, and participate through labor organizations of their own choosing in decisions which affect them, subject to any exclusion from coverage or limitation on negotiability established by law.'' Admiral Loy, how will you determine whether DHS employees may bargain collectively? Admiral Loy. Senator, the plan for which this new HR system will be designed has gotten to a point where it is just about to be offered to the Secretary for his decisions. We have been, I believe, extraordinarily inclusive in the process to date in terms of making certain that voices were heard from the workforce through focus groups, town hall meetings that were held around the country, and where in the holding of those meetings it was not a management representative that went out and held a meeting and then brought whatever information back. But rather it was teams composed of those members of the design team that had been assigned, including their union representation from the three unions that represent Federal workers in the Department of Homeland Security. I was asked to be a member of the senior review committee by Secretary Ridge in my position as the TSA administrator, as were a number of other senior players in the Department: The director of the Secret Service and the Commissioner of BCP. All of us met for several days, listening carefully to the work that the design team had put together, and our colleagues at that table included the presidents of the three respective unions as well. So the voices have been heard very inclusively to this particular point in time. Just 2 weeks ago an opportunity was provided again to the three union presidents to meet personally with Director James at OPM and Secretary Ridge at DHS to have those two people hear what the concerns may be of the respective union representatives having been a part of this process all the way from the beginning. As you know, the legislation restricts us to actually grapple with about four or five key elements of any HR system, those being pay and compensation, performance management, adverse actions and appeals, and labor relations. Those are the areas that the new design effort will be allowed to grapple with, leaving in place all those enormously important things that have become part and parcel of American labor relations over the years, including whistleblower protections and merit foundations, respecting inclusiveness, all those things that we want very much to be part of the system. The next challenge, sir, is to have the Secretary hear out his design team with those areas in mind. We want that to be an inclusive process as well so that workers as well as their representatives from the three unions are part of the team that continues to do the design work once the Secretary has made his judgments about the new system. So I am very pleased with where we are so far, sir, and commit to you and to the Committee that we will meet the specs that have been outlined for us in the law. Senator Akaka. Thank you. I also have a question regarding the DHS Bureau of Immigration and Customs Enforcement known as BICE. In response to questions my staff raised with the director of operations at BICE last summer, I understood that BICE planned to conduct a review of its June 9 reorganization and would brief Congress after 90 days. To date we have not received this briefing. Do you know the status of the review? Admiral Loy. Senator Akaka, as I sit here I do not know the status of the review but I will be happy to take that back as a question from the dais and find out where that review is at the moment and get information back to you quickly. Senator Akaka. Thank you. During testimony before this Committee a couple of months ago, the Office of Domestic Preparedness Director stressed that communities should improve their States' homeland security by working together to combine resources across State lines. However, unlike all States but Alaska, external assistance from the U.S. mainland is not immediately available to Hawaii. As deputy secretary how would you ensure that any regional approach fully addresses Hawaii's homeland security? Admiral Loy. I think we have to understand, Senator Akaka, what is our fundamental goal. Our fundamental goal is to make certain that the people of all 50 States are cared for properly with respect to the design work associated with our homeland security goals. Any kind of regional notion that makes very good sense, for example, in the region of Pennsylvania, New York, and New Jersey where they all come together, there are regional issues there that can be very well served by mutual effort between and among those States. The notion of regionalization, however, must never fail to include the State of Hawaii simply because geographically it is not attached to what would logically be a region. It may be a region of its own. To that end, sir, we will absolutely commit to ensuring that Hawaii as a State and the people of Hawaii are dealt with in the very same supportive fashion, whatever the Federal programs might be, that would get to other States in a regional sense. Senator Akaka. Thank you. My time has expired, Madam Chairman. Chairman Collins. Thank you, Senator. Senator Carper. Senator Carper. Thank you, Madam Chairman. Admiral, I telegraphed earlier the three issues I wanted to explore with you. Before I do that let me just ask on a more personal note to talk about values, the values on which your leadership is founded. You mentioned a couple of those in the course of your earlier remarks--honor, respect, and so forth. When I was privileged to be governor for my State we tried to build an administration based on four or five core values: Figure out the right thing to do; do it. Just be committed to excellence in all things. Golden rule, treat other people the way we want to be treated. Never give up. I believe when things go well to give the credit to other people. When things go badly, accept the blame. I always seek to surround myself with people smarter than me. Admiral Loy. Which is easy for me, sir. Senator Carper. When I was in the National Governors Association--I have actually mentioned this to at least Senator Collins before. The National Governors Association, when you are elected as a new governor you got assigned a mentor, somebody who is already a governor, and usually within the same party. I was assigned Tom Ridge. I had been elected in 1992 Governor of Delaware and in 1994 he was elected Governor of Pennsylvania. He and I were friends and had been friends since our days in the House of Representatives in 1982. But as his mentor I sought to instill in him the kinds of values that I just alluded to earlier. One of those was to always surround himself with people smarter than him. I guess I would just ask at the start, would you characterize yourself as smarter? Admiral Loy. Than Governor Ridge? I would not go there in a heartbeat, sir, but I thank you for the opportunity. [Laughter.] Senator Carper. Talk to us about your core values. Admiral Loy. Yes, sir. All of those that you mentioned are, I think, enormously important. I believe that there must become an ethos in an organization that allows individual accomplishment to feed the well-being of the organization and, therefore, the accomplishment of its mission. I was privileged to be the chief of the personnel shop in the Coast Guard back in the early 1990's and one of the things we initiated was a leadership development program that I believe is now second to none anywhere in the Federal Government. It is housed at the Coast Guard Academy where it recognizes the contribution of not only the senior leaders in terms of officers but breeds in the cadet corps, the future leaders of that organization, the great strengths of the chief petty officers and the young petty officers that make a difference in the bowels of any organization; those kids on the hangar deck, those kids that are taking that 47-footer out in that terrible storm to pull off that rescue. I believe there are fundamentals to all of us, whether that is a Western ethic or whether it is one fundamentally just based on those things that, in my case, I was so fortunate to be brought up to value by my parents, and by scoutmasters and people who cared for my well-being as a young person and did whatever was necessary to make sure I did not fail to learn those lessons. This is not something that is rhetoric for me. This is something that I believe in very deeply and try hard to instill, just in a couple phrases, what might be of value to the rest of the organization. At TSA our values are not honor, respect, and devotion to duty, which are the values of the Coast Guard. And you may know what they may be for the Navy, or you know what they may be for the Marine Corps. But at TSA I felt it was incredibly important for us to have integrity, innovation and teamwork as our values because what we were doing for the Nation became an opportunity to breathe life into those words so every screener at every airport, every supervisor looking out for the well-being of those screeners took seriously the ethic associated with a couple of simple words that could become so meaningful if allowed to be broadcast widely to the organization at large. I look forward to an opportunity to find that cultural foundation in DHS and broadcast it widely. Senator Carper. I think you are going to have that opportunity. Let us talk about rail security for a bit, if we could. We are mindful every time we go through an airport or ride on an airplane of the work that TSA has done under your leadership with respect to making air travel safer. We are aware at the Port of Wilmington, and other ports, of the work that has been done to make our ports and the shipping of goods in and out of those ports less hazardous. I understand that the Department of Homeland Security is working on, I think it is called the national transportation security plan. I think it is going to be released sometime maybe the middle of next year. Any idea how this plan will address freight rail as well as passenger rail security? Admiral Loy. Yes, sir. We are working hard at TSA to build a national transportation system security plan, recognizing that it is a puzzle piece that has to first and foremost fit into the larger puzzle that the Secretary is responsible for in the other 12 economic sectors and four asset categories that are outlined in the national homeland security strategy. So as that big puzzle goes together I am obligated as the TSA administrator to make certain that the transportation piece fits well there, because there are intersector challenges. I have been to, I do not know how many tabletop exercises over the last 2 years where the focus may be on a chemical plant security scenario, or a nuclear scenario, or a scenario even dealing with something like banking, or food and agriculture kinds of challenges. What is invariably the case is that the transportation sector gets involved in that tabletop exercise because whatever might be accomplished to either respond to or restore the well-being of the Nation in that process requires transportation in order to get that done. So there is an intersector kind of connectivity there that the Secretary has to be aware of as he composes that bigger puzzle. My piece, however it is shaped to fit into the Secretary's bigger puzzle, is also a complex one made up of aviation, maritime, rail, highway, transit systems, pipelines, those elements of the transportation sector that have to also fit together. There are intermodal challenges there. That container that comes from sea and gets on a train and eventually on a truck to go to Iowa City has to be recognized as an intermodal challenge with respect to the security of whatever is in that container. So the national transportation system security plan will be the opportunity to talk about standard-setting, vulnerability assessments, mitigation strategies, and compliance means by which we can comfortably fit the transportation puzzle together such that it fits well into Secretary Ridge's greater challenge. As to rail, sir, it is not a matter of waiting for the next 6 months or whatever. We have been doing a lot of very good and worthwhile outreach to the rail industry already. There have been critical asset inventories taken of rail infrastructure across the country. Amtrak, and the American Association of Railroads, and the Federal Rail Administration, and DOT and TSA have worked together on those projects. Amtrak and class one rails, the bigger rail services, have developed an information sharing center, ISAC, Information Sharing and Analysis Center that affords a chance to send information to them for distribution to the industry, and gather information from the industry through the ISAC back into the TSA so we can share it with the intelligence and information aggregation process that I think is so critical to what we are doing in this new Department. So whether it is the notion of learning from the rail industry that it is not about prevention exclusively, but it is perhaps also about restoration. I took a train ride to Wilmington from Washington. Senator Carper. Great ride, is it not? Admiral Loy. Yes, sir, it is. But I was given the chance to sit up there in the front cab with this wonderful, crotchety old guy who had been driving that route for years, and he helped me understand that it was not necessarily about prevention in the rail business. Yes, prevention at the terminals and those things are needed. But he asked me things like, Admiral, have you seen a police officer? Have you seen a fence? Have you seen a camera? Have you seen any of those kinds of things along this--he was talking about 50 miles out of Washington, but referring to thousands of miles of rail line across the country, railbed across the country. He made it clear to me that restoration is the fundamental reality in the rail business that is different than other elements of the transportation sector. So it literally reshaped my thinking in putting a strategic plan together for the transportation sector. So we have done some very good things. AAR, American Association of Railroads, is a marvelously impacting trade association for that industry and have been terrific in coming to the plate and helping us figure those things out. Senator Carper. Good. My time has expired. If I could just add a closing statement, Madam Chairman. Chairman Collins. Certainly. Senator Carper. Just keep in mind, Admiral, as you and your team work on this transportation system security plan, keep in mind that more people take the train today between Washington and New York than will fly on all the airlines combined, that during the course of this day hundreds of thousands of people will be in those tunnels underneath some of the waterways that we were talking about earlier going in and out of New York, and that at any one time during the day there are more people in those tunnels than in, I think, seven 747 aircraft. Senator Collins and I have worked trying to come up with a funding formula for first responder legislation. I will not get into that any more. We have discussed that and we welcome your input. Last, just keep in mind, please, going forward the people who work in our ports, and sometimes in hard labor positions, a lot of physical labor positions, people who have made mistakes in their past, who have a criminal record, who have gone on and made something out of their lives. So make sure that as we attempt to provide for better security at our ports and introducing this identification card program that we do not needlessly put at risk their livelihood and their ability to make a way for themselves and their families. Admiral Loy. Absolutely, sir. Senator Carper. Thank you. Thank you, Madam Chairman. Chairman Collins. Thank you. Admiral, another challenge facing the Department is striking the right balance between privacy concerns and security. Recently, the Department's chief privacy officer began an investigation of the role, if any, the TSA personnel may have played in assisting an Army contractor, Torch Concepts, in obtaining personal data from passenger records on over one million customers of Jet Blue Airways. I am sure you are familiar with that case. Admiral Loy. Yes, ma'am. Chairman Collins. First, do you know yet whether any TSA personnel were involved in encouraging Jet Blue to provide this private data on its customers to the DOD for the research project or to the contractor? Admiral Loy. Madam Chairman, my understanding is that if there was TSA involvement, it was the bringing of the two together, not with respect to what might actually occur once they got together. But it was almost an invitation kind of thing, and an association kind of thing where Jet Blue and the contractor were introduced, if you will, to each other by TSA but without any value judgments on the part of the TSA personnel. We are looking at that very carefully and I would probably be remiss in trying to speculate what might end up at the other end of the investigation that is underway, but the important thing here to me is to have it become that lesson that reinforces, as Jet Blue found out in this instance, that having violated their own privacy gameplan and rules and regulations that they had in place in the company, they got burned at the other of the day. And properly so, I might add. At the other end of our day at the Federal level, for example, in our Computer Assisted Passenger Pre-screening System, CAPPS-II, the privacy implications of that system must be inviolate at the other end of the day with respect to our concerns for probably six or seven areas that are properly challenging us to make sure we got it right before there is any switch turned on, so to speak, with this new system. This new system is going to be probably one of the most important projects we finish and put on the line for our country with respect to the security of the aviation system. Having said that, we should never turn that switch on until those privacy concerns about effectiveness, about redress opportunities, about appeal rights, about mission creep, about all those issues that are enormously important to the privacy community are properly dealt with. The Congress has made that quite clear. In our appropriation bill this year there are eight areas that we are obliged to work with GAO on and return by February 15 in order to continue the testing of the system that will prove its effectiveness after February 15. We are on track to do that and I hold that as one of our most important chores. Chairman Collins. I appreciate that update and your assurance that before the CAPPS-II system goes into effect that there will be a lot of thought given to the appropriate safeguards that need to be included. I think it is also important that those safeguards be in effect during the testing of the system because it is going to be difficult to test the system without access to the same kind of real world passenger data, that got Jet Blue in trouble. I would also ask you to keep that in mind as you proceed. Admiral Loy. Yes, ma'am. It is not only the domestic side of the house, but there are very real issues associated with international PNR data, passenger name record data that are challenges to us at the moment that we have to get through before we can make the system viable. Chairman Collins. I would like to turn just quickly to an issue that both Senator Stevens and I raised, and that is the role of the Coast Guard. As you know, Senator Stevens and I worked hard to get language in the authorization for the Department of Homeland Security to ensure that the traditional mission of the Coast Guard would not be jeopardized as it took on new and expanded responsibilities for homeland security. Just last month Maine suffered the loss of four more fishermen at sea who were on the Candy B II. That has been a real tragedy for our State and the Coast Guard's search and rescue mission. The search and recovery mission in some cases is just so critical to my State. Could you give us an update of your assessment on how well the Coast Guard is doing in this new post-September 11 environment, whether it does have sufficient resources to take on these new responsibilities without compromising its vital traditional missions? Admiral Loy. As you might imagine, I am very personally invested in what I know to be perhaps the greatest attribute that organization brings to our country, and that is the flexibility to go from almost crisis to crisis on any given day, but to go from where the Nation needs it best on day two to where the Nation needs it best on day three. For example, on September 10, 2001 we were spending in the Coast Guard somewhere around 3 or 4 percent of our appropriated capability operationally on what I would call classic homeland security activity. Two days later we were spending about 53 percent of our appropriated capability on what became the crisis of the moment for our Nation. I think that is the good news and the bad news. The good news is that it is yet again a demonstration of the flexibility of that organization to go where the Nation needs it. The challenge is how quickly can you return to whatever you perceive normalcy to be the day before the tragedy. I think with this particular tragedy, that old normalcy we will never see again. So our challenge is to provide the resources necessary to this service to find that new normalcy where heightened address of homeland security realities are there as well as the continued service in fisheries and counternarcotics and all the other missions that are operationally dependent--or the Coast Guard is the provider of those services for our country. One of the most important projects in that regard is the Integrated Deepwater System project which offers the modernization of that service's offshore capability. That modernization will provide the Coast Guard the wherewithal to do better search and rescue, to do better national defense, to do better homeland security, to do better fisheries, to do better everything that it does in that environment 50 miles or more offshore, and be interconnected with the coastal realities that are so much a part of our homeland security missions today. I spoke with Admiral Collins just last week for the first formal time in getting ready--that rookie that took over after I left my job. He is doing a marvelous job with the organization and has been in fact supported by the Congress very well, I believe, in the last two budget cycles to provide him the tools to do this new homeland security job while he continues to provide those services that America has come to count on the Coast Guard to provide. Chairman Collins. Before I yield to my colleague I just want to indicate to you that Senator Lieberman and I recently wrote to the OMB Director suggesting that the deep water project be accelerated and funded over 10 years rather than 20 years. It actually saves money in the long term and you get the capability. But I will not put you on the spot by asking you whether you would support that change. Senator Akaka. But you could, Senator. [Laughter.] Thank you very much, Madam Chairman. I would like to ask about FEMA. The Department of Homeland Security now includes FEMA, which among its many responsibilities administers natural disaster mitigation grants. This multitasking has raised concerns that FEMA's emphasis on terrorism may result in a lower priority for natural disaster mitigation. My question is, will you work to ensure that natural disaster mitigation grants, which Hawaii and so many other States rely upon, are not shortchanged as the result of FEMA's move to the Department of Homeland Security? Admiral Loy. Indeed, I will, sir. One of the chores the Secretary had asked of me about 6 or 7 months ago was to take on the responsibility to design the new national response plan and the national incident management system for our country. It is an all-hazards plan. So the notion of whether it is a tsunami on its way to, God forbid, some island in Hawaii, or fires in the west of our country, or hurricanes as they go by, those natural disasters of the past are every bit spoken for in the design work of this new national response plan and national incident management system. Furthermore, I think we are enormously proud of what FEMA has been able to do in just this past year in the new Department in responding to the fires in California, as well as the hurricanes that have gone by. In California, I know that Mike Brown was out there personally day in and day out, and within 24 hours of the State being recognized for relief was actually writing checks to California State individuals for the challenges that they had undertaken through the course of the fires. So I feel very good about demonstrated behavior already and the planned inclusion of all hazards, including those that you described, sir, is very much a part of the Secretary's intention. Senator Akaka. The General Accounting Office added the consolidation of the Department of Homeland Security to its high risk list this year, partially as a result of the existing management challenges of entities included in the Department. At the same time, the Department is subject to the President's management agenda which includes competitive sourcing as one of its five components. My question is, given the challenges of consolidation do you believe that contracting out goals are appropriate for the Department? If so, why? Admiral Loy. I certainly believe that the notion that there are skills and competencies that have been honed to a higher level in the private sector compared to the Federal sector is a legitimate thing for us to address and sort our way through. On those occasions where the American public can be served better by outsourced functionality we should be about the business of doing that. That is, as you say, sir, very much a part of the President's management agenda which has four or five other aspects to it which we are equally zealous about taking on. So the idea of making certain as we contemplate where some function is accomplished for the American public and being very methodical about the checks necessary to make those decisions methodically as well is part and parcel of the review process that gets us the answers to those on a one-at-a-time basis. It is not a blanket that is going to be strewn across the whole array of functions of the Federal Government. But where those things can be done better, I believe we serve the American public better by outsourcing them appropriately. Senator Akaka. I want to thank you very much for your responses, and I feel that we are so fortunate to have you in this position. You know that the government is setting new milestones and seeking flexibilities in governance in light of challenges that we never faced before. So it is going to be tough going and as far as I am concerned you are the man for it. Admiral Loy. Thank you, sir. Senator Akaka. Thank you very much, Madam Chairman. Chairman Collins. Thank, you, Senator. Admiral I am just going to ask you one more question and then submit some additional questions on port security and other issues for the record. My final question for you has to do with the allocation of homeland security grant funds to first responders and to States and communities. As I mentioned, this Committee has unanimously reported legislation that would make changes in the funding formula, but we would continue to provide a stream of money to each and every State because every State has homeland security concerns and vulnerabilities. I feel strongly we need to bring every State up to a minimum level before we could ever discontinue that funding stream. I often remind people that when you think of the State of Maine you think what a safe State it is, but in fact two of the hijackers on September 11 started in Portland, Maine. We are a State with an extensive coastline. We are a border State. That is why it is important that we provide some funding to every State and then look at specific threats, not just allocate on the basis of population which may not have a correlation to the vulnerabilities and threats. Do you agree with that general approach? I am not asking you to endorse specific funding levels or percentages, but that each State should receive a certain amount of funding? Admiral Loy. Indeed I do. I think so, for the moment at least, until we can be much more sophisticated in how we would develop an algorithm that would take into account each and every State's requirements. When I got into this TSA position someone told me that when you have been to one airport, you have been to one airport. So the notion that the 450 airports that I would have to grapple with, each of them has a unique set of challenges. I believe our 50 States are like that in a way. When you have been to one State, you have been to one State. The point there is that I do believe until we can reach a more sophisticated algorithm that would take that into consideration our default position for the moment must be a threshold level of funding for all States. Then it is an already sophisticated notion as to how you then distribute the rest. In my opening comments I tried to articulate criticality assessments, vulnerability assessments, and then this challenge of truly understanding what is being threatened, by whom and how, and what is the risk management that you are going to use to deal with that. With respect to the balance of the distribution, I believe it should probably be around population density in some fashion because that represents a targeting value to the bad guys. We know that is the case. But I also believe that the inventory of critical infrastructure, however that is deemed in that State, should be part and parcel of the thinking in that algorithm. Then just what do we know from the intelligence going by that suggests that critical infrastructure, that population density is on the bad guys' targeting list for this year's grants as they go by. So criticality, vulnerability, the real sense of the threat, and then the judgment about how to manage the risk associated with that package, that becomes the means by which we distribute the balance of the funds. I think in there somewhere is both support for your notion at the moment and a challenge to us to think our way through a better algorithm, if it is out there, for the distribution in the future. Chairman Collins. I want to thank you for your testimony today, and I want to join Senator Akaka and my colleagues in thanking you for your willingness to serve in this extraordinarily vital post. You are taking on a huge responsibility and we are very grateful that you are willing to step forward. With your background not only in the Coast Guard but as head of TSA, I really cannot think of a better candidate for this position, so we very much appreciate your willingness to serve. It is my hope that the Committee will be able to act expeditiously on your nomination and that we can have the full Senate move to confirm you before we adjourn for the year, which I hope will be sooner rather that later. Without objection, the hearing will be kept open until 10 a.m. tomorrow morning for the submission of any additional written questions or statements for the record. This hearing is now adjourned. [Whereupon at 4 p.m., the Committee was adjourned.] A P P E N D I X ---------- PREPARED OPENING STATEMENT OF SENATOR DURBIN Madam Chairman, I am pleased that the Committee is considering the nomination of James M. Loy to be the Deputy Secretary of the Department of Homeland Security. Admiral Loy has devoted his entire career--spanning nearly four decades--in service to our country. I commend his willingness to accept yet another challenge. James Loy brings a refreshing sense of enthusiasm to the task ahead, along with expertise as a tested manager. The breadth and depth of his working knowledge of Departmental programs, as well as the challenges it faces, will serve him well. The American public will be ably served with his leadership and vision at the helm, working side- by-side with Secretary Ridge. I know from our conversation last week the tremendous respect that Admiral Loy has for the dedicated efforts of the 170,000 Homeland Security Department employees who vigilantly protect our citizens, gird our borders and domestic infrastructure, and thwart terrorism on American soil. I certainly share those sentiments, and trust that, in assuming this new post, he will routinely engage that workforce as an essential partner in accomplishing the Department's mission. I enjoyed the opportunity to meet with Admiral Loy last week to discuss several issues facing Illinois communities relating to transportation security, specifically passenger screening delays facing the Central Illinois Regional Airport and Chicago Midway Airport. I appreciated his interest and his offer to respond to those concerns, and look forward to their prompt resolution. I wish Admiral Loy fair winds and calm seas in this new assignment, and pledge my support for his expeditious confirmation. Thank you, Madam Chairman. __________ OPENING PREPARED STATEMENT OF SENATOR INOUYE I am pleased to be here today to introduce Admiral James Loy, who has been nominated to be Deputy Secretary of the Department of Homeland Security. His long career in public service has prepared him well for this new challenge. Admiral Loy wore the uniform of our Nation for more than 40 years as a commissioned officer serving in the United States Coast Guard. Admiral Loy began his career at the U.S. Coast Guard Academy, where every cadet learns the creed, ``Who lives here reveres honor, honors duty.'' Admiral Loy not only learned the creed, but has also lived by that creed throughout his career. Admiral Loy's long and distinguished tenure with the Coast Guard culminated with four years of service as Commandant. He led the Coast Guard through one of the most significant periods of transformation in the history of that venerable service, improving its readiness for the operations of today, and preparing for those of the future. After years of less than optimal recruitment levels, he rebuilt the Coast Guard's workforce to authorized levels and improved retention. Then, to ensure that these personnel were properly supported with the finest equipment possible, he oversaw the initial phase of the Integrated Deepwater System acquisition project, a systematic modernization of U.S. Coast Guard ships, aircraft, and sensors. This reinvigorated Coast Guard stands ready to fulfill its mission of protecting our marine environment and those that operate within it. Admiral Loy's administrative experience will serve our Nation well in the Department of Homeland Security. As Chief of Staff to the Coast Guard, Admiral Loy redesigned the headquarters management structure. He also worked to focus the Coast Guard's planning and budgeting process on performance and results. His administrative skills were put to good use when he took over at the newly created Transportation Security Administration (TSA). Under his leadership, the TSA met every major deadline required to increase the safety and security of the American public traveling our Nation's airways. This expertise will be a valuable addition to the Department which has been working to integrate many different agencies to serve our homeland defense. I am confident Admiral Loy will continue to serve our Nation in the same exemplary manner he always has. I support his nomination to be Deputy Undersecretary of the Department of Homeland Security fully and without reservation. 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