Sessions Details Case Against OMB Nominee Shaun Donovan

WASHINGTON—U.S. Sen. Jeff Sessions (R-AL), Ranking Member of the Senate Budget Committee, delivered the following prepared remarks on the Senate floor today ahead of the vote on HUD Secretary Shaun Donovan to be Director of the Office of Management and Budget:

“Mr. President, I rise today to discuss the nomination of Shaun Donovan to be Director of the Office of Management and Budget. I voted against Mr. Donovan in the Budget Committee, and would like to take this opportunity to share with my colleagues my concerns about his nomination.

My concerns are not related to Mr. Donovan’s character, but to his experience and qualifications to serve as our nation’s chief financial manager.

Alexander Hamilton explained in Federalist Number 76 why the Senate was assigned a role in the confirmation process:

It would be an excellent check upon a spirit of favoritism in the President, and would tend greatly to prevent the appointment of unfit characters from State prejudice, from family connection, from personal attachment, or from a view to popularity. In addition to this, it would be an efficacious source of stability in the administration.         

The President has the right to nominate, and his nominations should be given deference, but as Hamilton made clear, when his nominee does not have the fitness necessary for a critical position, the Senate should not provide its consent.

The Director of the Office of Management and Budget is one of the most important positions in the entire government, entrusted to oversee our massive federal bureaucracy and budget during a time when the nation is facing a tremendous amount of financial danger.

Only weeks ago, the Director of the Congressional Budget Office reaffirmed in testimony before Congress that our debt is on an “unsustainable path” and that America faces the “risk of a fiscal crisis.”

Whoever holds the job of budget director must be one of the toughest, strongest, most able, and disciplined managers we have in America.

Sadly, what has become clear is that the President did not choose Mr. Donovan because he met these criteria. That was not what he was looking for.

Instead, it would seem that Mr. Donovan, like the President’s past budget directors, was chosen because he has a good personality, people skills, and is politically loyal and would defend administration goals and priorities even when the result would be unfavorable to the country’s fiscal health.

We have seen this time and again in the President’s budget office. His past budget directors have done more to conceal our nation’s financial condition than to illuminate it—repeatedly missing deadlines, being unresponsive to congressional inquiry, making false statements about their budget plans, trying to break the spending caps agreed to by law, and refusing to comply with the legal requirement to submit a plan to prevent Medicare’s insolvency.

OMB should be one of the least political departments of government. Instead, the President has made it one of the most political. Shouldn’t the American people be able to look to their budget director with confidence, knowing that their tax dollars have been entrusted to someone with great wisdom, experience, and independence?

Consider: the President had the ability to scour the country for the most skilled, talented, disciplined, and gifted manager he could find for his budget office. A renowned manager of great financial acumen and recognized independence. Someone with a track record of saving taxpayer dollars, developing new efficiencies, and taking on entrenched interests in service of the public good.

But instead, Mr. Donovan’s resume fails to impress on every major count. While I don’t doubt Mr. Donovan is an intelligent and well-meaning man, there is nothing in his background to suggest that he is up to the task this urgent hour requires. More troublingly, Mr. Donovan has a poor record of financial management at HUD—receiving stark and repeated criticism from his agency’s own Inspector General. His skill relates to spending taxpayer dollars rather than saving them. His record at HUD shows he spent money illegally, violating the Anti-Deficiency Act.

On the great financial issue of our time—our nation’s crippling debt burden—I asked Mr. Donovan about what he would propose. He offered no serious ideas to get our debt under control. Clearly, he has no intention of providing the leadership needed to reverse our disastrous debt course 

For instance, the President’s most recent 10-year budget proposal would break the in-law spending limits and increase our nation’s total debt by an average of $800 billion per year. So I asked Mr. Donovan about this plan and he replied: “The President’s… budget includes fully-paid for, fiscally-responsible investments that will create jobs, grow the economy, and expand opportunity for all Americans.” This is a response that is out of touch with reality.

When Mr. Donovan was forced to admit in follow-up questions that the President’s budget plan would add $6 trillion to the public debt, he called the increase “nominal.” It is precisely this cavalier attitude from government elites that are leading our nation to financial catastrophe. CBO says these deficits put us on a path to a “fiscal crisis.”

I would also share that, in talking to my colleagues about Mr. Donovan, they expressed concern that when he met with them individually, he lacked basic knowledge about the fundamentals of the federal budget. Consider the written testimony that he later provided to the Committee about his specific plans for entitlement reform: “I have not… written any papers or given any talks or lectures that specifically lay out a comprehensive plan for Medicare or Social Security.” Really, it appears he has never expressed a serious thought on these critical issues.

In response to one question about Medicare data, Mr. Donovan told me the data did not exist. The data does in fact exist, and Mr. Donovan’s response cited the very report in which the data could be found. At his hearing, Mr. Donovan could not answer fundamental questions from Senator Johnson about the Social Security Trust Fund. With only two years left in President Obama’s presidency, the nation must have someone at OMB who can hit the ground running.

This lack of basic knowledge and professionalism is also evident in the IG reports about his HUD tenure that I mentioned earlier. Here, for instance, is a representative example from an IG report issued on February 19, 2014, about HUD’s Multifamily Project Refinances:

HUD did not have adequate controls to ensure that all Section 202 refinancing resulted in economical and efficient outcomes. Specifically, (1) 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, (2) consistent accountability for the debt service savings was not always maintained, and (3) some refinancing were processed for projects that had negative debt service savings, 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 refinancing 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 for debt service.

This is hardly the kind of glowing review one would hope to accompany a nominee to an office that oversees the entire federal budget.

But the problems at HUD only get worse. Every year the HUD Inspector General conducts an audit to determine if HUD’s financial statements are in order. When an agency’s financial statements are in order, that agency is awarded an unqualified or clean audit, meaning there are no material defects in the way the agency is managing its books. For the years 2012 and 2013—under Secretary Donovan’s watch—HUD received failing grades or a qualified audit, which means material problems were found with HUD’s financial statements. Twenty-four agencies undergo the audit process every year, only two failed in 2013: HUD and DOD. Whereas DOD has historically had problems with financial statements, HUD had been receiving clean reports until Mr. Donovan arrived.

The Inspector General in failing Mr. Donovan noted that HUD had improper budgetary accounting and lacked proper accounting for cash management.

HUD, under Mr. Donovan’s watch, was also recently charged with an Antideficiency Act violation by the Inspector General. The Antideficiency Act essentially prohibits government employees or agencies from spending money they are not authorized to spend. According to information received from the HUD Inspector General, HUD, under Mr. Donovan’s leadership, has at least 7 instances of violating that Act. These violations include, over obligation of personnel or payroll funds, making student loans payments in excess of the funds allowed for that purpose, and obligating funds that were no longer available.

In one of the more recent violations, HUD paid more than $620,000 to a senior advisor to Secretary Donovan, out of Public and Indian Housing funds, even though Mr. Donovan’s advisor was not employed in the Public and Indian Housing section and was required to be compensated from funds in the Office of the Secretary. The Inspector General found that HUD had ignored the advice of its own legal counsel and disregarded concerns previously expressed by the House Appropriations Committee on Antideficiency matters.

Congress had specifically addressed HUD’s salary funding for its Secretary’s senior advisors and previous ADA violations. According to a July 26, 2010, House of Representatives report, “...all senior advisors to the Secretary should be funded directly through the Office of the Secretary.” In addition, a HUD appropriations attorney wrote in a January 13, 2011, email that a special advisor to the Office of the Secretary would need to be paid by that office and not another office within HUD. Despite the direction in the House report and guidance from its own appropriations attorney, HUD reimbursed Community Builders, Inc., for the senior advisor’s services from PIH and Office of Housing funds. Subsequently, in June 2012, Congress admonished HUD for the lack of staffing data it provided and had available internally. Congress wrote that “this lack of essential information led to multiple Anti-Deficiency Act violations in fiscal year 2011, in which HUD hired more people than it had resources to pay. To date, 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.”

This is not the kind of activity that warrants a promotion.

Finally, I would be remiss if I did not note for the record Mr. Donovan’s membership in the Owl Club at Harvard—an item many of my Democrat colleagues have cited in their opposition to Justice Alito. This is a club that the late Senator Ted Kennedy resigned from, because it did not admit female members. Indeed, Harvard kicked the club off campus in 1984, the very year that Mr. Donovan became a member and remained so until 1987. I’ve heard no complaints from the other side of the aisle about Mr. Donovan’s membership.

So I would ask my colleagues: does this sound like the background of someone who is the right man for this job at this time? That is my fundamental concern. The President has surrounded himself with a small group of political loyalists—Secretary Lew, Secretary Johnson, Secretary Perez—do we need him to insulate himself even further? Do the American people not need someone in this administration who will act independently on their behalf, respect the jurisdiction of Congress, follow the law, and tell the White House “no” if asked to do something that’s improper for the financial future of America?

Mr. President, I wish I could support Mr. Donovan, but he is the wrong man for the job, chosen for the wrong reasons. I will oppose this nomination.”