131 was too short. It was not possible to get on the train during the time we wished to travel. That is a substantial opportunity that Amtrak can capitalize on if it is able to obtain the new cars to do it. The plan should also set corporate goals reaching toward self-sufficiency. We think those goals, among other things, should encourage Amtrak to be increasingly entrepreneurial and to look for every advantage that is out there. Under Mr. Claytor's tutelage, Amtrak has done that over the years. We want to encourage them to do even more, not outside Amtrak's traditional markets, but certainly with the resources that Amtrak has as a railroad, to make the maximum entrepreneurial advantage that can be made of those assets. Certainly, we would hope that, over time, Amtrak would become the primary surface common carrier of intercity passengers. Again, that reaches back to those constraints on capacity in other modes. The legislative proposals that we have mentioned focus on opportunities to reduce costs without sacrificing either safety or routes that are performing. A very important one of those has been discussed at some length already this afternoon, and that is the exemption of Amtrak from FELA. That is an experiment that we encourage the committee to undertake. We think it is well-merited. We believe FELA to be an anachronism and we think the 3-year test would demonstrate that. Where FELA is basically a lottery, workers compensation assures equitable compensation regardless of fault. Where FELA tends to put Amtrak at a competitive disadvantage with its competing carriers who are under workers' comp, workers' comp can put Amtrak on a level playing field. Where FELA pays only after fault is established on the part of the carrier and damages established in a judgment or a settlement, workers' comp provides for prompt payment, often in only 30 days. There is an enormous difference there for compensation of the worker. Where FELA discourages early rehabilitation of the worker and an early return to productive work, workers' comp encourages rehabilitation. We view that as very important. It is in the worker's interest and it is in the public interest that people be promptly rehabilitated and returned to work. In a fault system such as FELA, one gets more money by being out of work longer and, from what I understand, counsel has been known to recommend to a client that the client forego rehabilitation for a period of time because of the economic consequences. That incentive should be removed. Where FELA has unjustifiably high administrative costs, State workers' comp has much lower and much more reasonable administrative costs. So we strongly urge that experiment upon you. Then the treatment under the Railroad Unemployment Insurance Act, that Amtrak has requested, we would also encourage upon the committee. Amtrak, we believe, should be treated like the publicly funded commuter carriers. The whole system is moving toward an experience-rated basis. Amtrak, we believe, should be treated as the commuter carriers were, to be put on that experience-rated basis just as early as possible. 132 They do have a much lower loss experience than the freight roads do. It is fair to the public and fair to Amtrak and we believe even fair to the freight railroads to do that. We encourage it. We believe that other users of the Northeast Corridor should pay their full share and that, nationwide, users of sections 403(b) and 403(d) services should be asked to pay the full cost of the services that they receive. With that, Mr. Chairman, we will be happy to answer any questions you may have. [The prepared statement of Mr. Lindsey follows:] PREPARED TESTIMONY OF S. MARK LINDSEY, CHIEF COUNSEL, FEDERAL RAILROAD ADMINISTRATION Mr. Chairman and members of the subcommittee, I appear before you today to outline the administration's position on reauthorization of financial assistance for the National Railroad Passenger Corporation [Amtrak]. Secretary of Transportation Skinner has stated his willingness to work with Congress and with Amtrak management to develop a realistic long-range plan to address Amtrak's operating and capital requirements. Amtrak falls within the residual freeze category, and items within this category are still being negotiated by the administration and the Budget Committees. In building a better America, we should do our utmost to assure that our annual investments in programs such as rail passenger service are made in the context of a long-term investment strategy shaping and sustaining a balanced transportation system for the future. We strongly believe that any long-range plan to address Amtrak's operating and capital needs should build on recent success in exploiting this capacity to increase revenues and control costs to move the company closer to selfsufficiency. First, any such plan must be premised on the idea that Amtrak must operate as a business, not a government agency. Amtrak's improved financial performance is largely due to the fact that it is being run as a business with management focusing on expanding revenues, controlling costs and improving its bottom line. Any departure from this course will undo the dramatic progress the company has made. A plan should also one, include legislation to modify certain Federal laws to eliminate significant extra costs imposed on Amtrak without sound justification; two, identify essential capital needs and funds, both public and private, for addressing those needs; and three, set broad corporate goals which move the company closer to selfsufficiency. Legislative proposals.-We strongly believe that there are opportunities for reducing operating expenses without sacrificing safety or eliminating performing routes. I will briefly outline those requiring new legislation: Exempt Amtrak from coverage under the existing fault-based Federal Employers Liability Act [FELA] and substitute coverage under State worker's compensation programs. Where FELA is a lottery in which some employees strike it rich while others receive nothing for similar injuries, State worker's compensation assures every person injured in the workplace of equitable compensation regardless of fault. Where FELA puts Amtrak at a competitive disadvantage because of its significantly higher costs, State worker's compensation puts Amtrak on an equal footing with its air and bus competitors. Where FELA provides compensation to injured employees only after fault is established and damages assessed in a judgment or settlement, State worker's compensation normally requires the payment of initial benefits within a reasonably short time, often 30 days. Where FELA provides strong disincentives to early rehabilitation of the injured employee and to speedy return to productive employment, State worker's compensation provides strong incentives to employer and employee alike for prompt rehabilitation and speedy return to work. Where FELA has unjustifiably high administrative costs, some of which, such as attorneys' fees, directly diminish the injured employee's compensation, State worker's compensation minimizes administrative costs to employer and employee alike. Give Amtrak the same special treatment accorded "publicly funded rail carriers" providing commuter service under the Railroad Unemployment Insurance Act [RUIA]. Such treatment would permit Amtrak to repay the RUIA fund only the amount of employment and sickness benefits paid to Amtrak employees. Amtrak now pays a tax based on sickness and unemployment experience throughout the railroad industry which is considerably more than it would be if it were based on Amtrak's own sickness and unemployment record. Congress has addressed this for the long term by providing for RUIA to be converted into an experience-rated program over a 4-year transition period. In the short term, however, Amtrak is stuck with higher costs than its experience justifies while commuter authorities are being required to pay only the actual costs of benefits paid to their employees during the transition period. Authorize Amtrak to charge commuter authorities the full operating and maintenance costs for use of the Northeast Corridor [NEC]. Currently, commuter authorities pay only a portion of the operating and maintenance costs attributable to use of the NEC by their trains. In fiscal year 1985, Congress amended the law to eliminate a similar cross-subsidy for Conrail, while the cross-subsidization of commuter trains by Amtrak continues. Require States to pay 100 percent of losses on section 403(b) intrastate and section 403(d) commuter trains operated by Amtrak at the request of a State and solely for the benefit of its residents. In closing, I reiterate the Department's commitment to work with Congress to develop a plan to address Amtrak's future requirements. We strongly urge this committee to give serious consideration to deficit reduction measures such as exempting Amtrak from FELA; treating Amtrak like commuter authorities under RUIA; and authorizing Amtrak to charge full costs for sections 403(b) and 403(d) services and NEC commuter operations. I will be happy to answer any questions the committee may have. Mr. LUKEN. Personally, I think that the Bush administration's proposal to even think about some funding for Amtrak is a marked and welcome departure from the previous administration. However, I don't really see any significant funding in what you're proposing. What would be the sources of that funding again? Mr. LINDSEY. I didn't specify any source of funding, Mr. Chairman. I believe that is still the source of negotiations between the administration and Congress. I didn't come up authorized, for example, to discuss a specific number because that hasn't been reached in those negotiations. The closest that I have is that Secretary Skinner has said that he believes the administration will support a number somewhere between nothing and the $584 million level for fiscal year 1989. As the negotiations over the flexible freeze proceed, that will be refined. But that is as far as we are just now, sir. Mr. LUKEN. So, to your knowledge, the administration does not have a specific proposal as to a specific amount of funding? Mr. LINDSEY. At this time, that is correct, sir. Mr. LUKEN. Did I understand you to say, however, that the administration would oppose the full authorization which the Senate Commerce Committee recently authorized? Mr. LINDSEY. Yes, sir. That is correct. Mr. LUKEN. Do you have any basis, do you have a comprehensive outline of a funding proposal-if you are somewhere between zero and $600 million, could you come a little closer to where you really are? Mr. LINDSEY. I am not authorized to say where it might be and I don't control that, Mr. Chairman, but I assure you that we have certainly looked at a big array of options: what it would cost to operate the system; what would happen, depending upon the various savings measures that Congress may enact, the dollar values that those savings measures may be worth; and things that Amtrak can do by way of efficiency improvements that would save it money I believe firmly that the administration will fairly shortly come forward with such a number. My understanding is that the negotiations are reaching that point, but that Mr. LUKEN. It is our fervent hope. There have been many expressions of that hope before, however, unfulfilled. You heard Mr. Claytor's testimony with regard to the needs for capital improvements at Amtrak. Mr. LINDSEY. Yes, sir. Mr. LUKEN. Would you agree with any of those? Mr. LINDSEY. Generally we do, sir, yes. If Amtrak is to become self-sufficient over the long term, we believe that the company does need a long-term and systematic capital plan. We may differ occasionally on this or that item or the timing of it, but it is certainly the case that the company does have those capital needs and that they are critical to self-sufficiency. Mr. LUKEN. Do you have any specific information or evidence to refute Mr. Claytor's testimony that all other railroad passenger systems in other countries receive significant subsidies? Isn't that true? Mr. LINDSEY. I believe that is true. It may be changing in Japan Mr. LUKEN. Other countries have a more significant funding program for rail passenger service than the level in the United States? Mr. LINDSEY. By and large, yes, sir, that is true, substantially more significant. Let me ask Arrigo to comment, if he would, on the Japanese experience recently. Mr. MONGINI. The Japanese have recently privatized their system and it is my understanding that Mr. LUKEN. The same way they privatized their industry? They don't subsidize it at all? Mr. MONGINI. In Japan, there is a much more intense demand for passenger service. The trains are much more heavily-— Mr. LUKEN. Somehow, I think you just changed the subject. I mean, there is privatizing and there is privatizing, right? Mr. MONGINI. Yes. Mr. LUKEN. But it is true that in the Japanese system, there are subtle ways that the government subsidizes industry. Mr. MONGINI. Perhaps, but in the case of the railroad, the Japanese railways are, in fact, breaking even. Mr. LUKEN. That is true in Japan? Mr. MONGINI. Yes. Mr. LINDSEY. And that is what we would hope would happen for Amtrak in the not terribly distant future. Mr. LUKEN. I suppose when we get the same demand that they have in Japan-but that would be the exception in the world scene? Mr. LINDSEY. I think so. In Europe, I don't believe any of the railroads are anywhere close to breaking even and perhaps Amtrak is even closer than the European railroads. Mr. LUKEN. I understand that in Europe, there is a proposal for a $50 billion improvement over the next 6 years in EC countries. You referred to the highways and other systems, I believe. Are these correct figures? For the next fiscal year, there is over $13 billion in the budget for Federal highways, $3.3 billion for mass tran sit programs, $6 billion for FAA activities and $2 billion for the Coast Guard? Mr. LINDSEY. I don't know exactly, Mr. Chairman, but those sound like they are certainly in the ballpark. Mr. LUKEN. The $3.3 billion for mass transit would seem to be based upon the same rationale as aid for railroads, wouldn't it, for Amtrak? Mr. LINDSEY. I am unsure, Mr. Chairman. Mr. LUKEN. Well, let's reason together, shall we? Mr. LINDSEY. It sounds reasonable, Mr. Chairman, yes, sir. Mr. LUKEN. Thank you. The gentleman from Kansas. Mr. WHITTAKER. Mr. Lindsey, regarding the various cost reduction measures recommended in your statement, can you provide to us, if you don't have it already, the dollar figure of any-of the proposed changes that you would have jurisdiction from the Railroad Administration-one, the exemption of Amtrak from the Federal Employers Liability Act; two, basing Amtrak's unemployment insurance premium on actual experience; three, requiring full-cost payment by commuter railroads for the Northeast Corridor operations; and four, mandating full-cost payment by States for sections 403(b) and 403(d) services? Mr. LINDSEY. We will be happy to do that, Mr. Whittaker, and we do have those numbers. I can either search for them here-I don't have them off the top of my head-or supply them for the record, as you wish. Mr. WHITTAKER. Providing them for the record will be sufficient. Mr. LINDSEY. Very good. [The following material was supplied:] ANNUAL SUBSIDY REDUCTIONS RESULTING FROM ADMINISTRATION LEGISLATIVE RECOMMENDATIONS [Dollars in millions] Exemption from FELA and conversion to State workers compen- Basing Amtrak's premiums under the Railroad Unemployment Requiring computer authorities to pay a fair share of the fully Requring that States pay the long-term avoidable loss of providing sections 403(b) and 403(d) services.... 1 Full potential savings are not assumed to be available in the first year. Fiscal year 1990 savings $16 7 1 13 16 Mr. WHITTAKER. Additionally, Mr. Lindsey, in FRA's recently submitted budget justification, on page 95, Amtrak's current subsidy was put at $30 per passenger. Accepting that that is a correct figure, how does that compare with Federal subsidies for other forms of transportation, such as airlines and highway transportations? Mr. LINDSEY. Some of those are very hard to trace because of the forms in which they come. We believe the subsidy for Amtrak is significantly higher than the others, but I know that is the subject |