    [Senate Hearing 109-]
    [From the U.S. Government Publishing Office]

      DEPARTMENTS OF TRANSPORTATION, TREASURY, THE JUDICIARY, HOUSING AND
    URBAN DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR FISCAL YEAR
                                      2007

                                  ----------

                            THURSDAY, MARCH 16, 2006

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 9:35 a.m., in room SD-138, Dirksen
    Senate Office Building, Hon. Christopher S. Bond (chairman)
    presiding.
        Present: Senators Bond, Bennett, Cochran, Murray, Durbin,
    Dorgan, and Leahy.

                          DEPARTMENT OF TRANSPORTATION

                            Office of the Secretary

    STATEMENT OF HON. NORMAN Y. MINETA, SECRETARY

                OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND

        Senator Bond. Mr. Secretary, if you are ready, we will
    welcome you. I didn't want to start until you got organized,
    but Senator Murray and I have some words, we hope, of wisdom,
    at least of concern, that we would like to share with you to
    begin.
        The Senate Appropriations Subcommittee on Transportation,
    Treasury, the Judiciary, HUD and Related Agencies will come to
    order. It is a pleasure to welcome our good friend, Secretary
    Mineta, and thank him for appearing today to testify on the
    Department's 2007 budget. This is the first of two hearings we
    have scheduled for the review of the budget request, especially
    Amtrak and FAA, both of which are facing significant policy
    decisions over the next several years.
        Our hearing today will focus on the overall budget request
    for the Department of Transportation and then we will have a
    second panel that will take a closer look at the state of
    Amtrak in the 2007 budget. In April, we are planning to have
    our second DOT-related hearing, where we will focus on the FAA
    and labor issues facing FAA.
        Mr. Secretary, we look forward to your comments on the
    overall budget picture for all modes of transportation and we
    will welcome now the second panel on Amtrak, FRA Administrator
    Joe Boardman, David Hughes, President and CEO of Amtrak, Mr.
    David Laney, Chairman of the Board, and Mr. Mark Dayton, Senior
    Economist, Department of Transportation for the OIG.
        The 2007 budget for DOT would provide $65.64 billion in
    gross budgetary resources, basically, a flat budget from last
    year's 2006 $65.51 billion budget. The budget, I regret to tell
    you, is deceiving because not all modes are treated equally.
    There are bright spots in the budget for some modes within the
    Department, like FHWA and the Federal Transit Administration,
    FTA. Unfortunately, there are significant shortfalls for other
    modes, like FAA and Amtrak.
        Since we will be holding a separate hearing on FAA, I am
    not going to focus significantly on the FAA. Our April hearing
    will include issues related to the resolution of a labor
    contract with the air traffic controllers, a significant
    reduction to the Airport Improvement Program, and the proposed
    open skies aviation treaty.
        First, having worked for better than 2\1/2\ years as
    chairman of the Senate Subcommittee on Transportation and
    Infrastructure to pass SAFETEA, I am pleased to see that this
    year, the administration has fully embraced the historic
    funding levels achieved under the law. Although I regret some
    things that those crazy authorizers did, we will now try to
    clean up the mess in our appropriations process.
        This year marks the 50th anniversary of the Dwight D.
    Eisenhower System of Interstate and Defense Highways, a
    landmark commitment to the transportation and commercial needs
    of the Nation. Our interstate highway system has had a profound
    impact on our Nation's economy, keeping communities and
    families connected to one another and serving as the primary
    system for moving goods and products that are the life blood of
    our economy. The 2007 budget would provide $3.4 billion, a
    boost in needed investment funding for our Nation's highways
    and bridges. Over $2 billion of this funding increase was
    called for by SAFETEA.
        An additional $842 million is also made available by the
    Bond-Chafee Revenue Aligned Budget Authority, or RABA, begun
    under TEA21 and continued in SAFETEA. Some people in Washington
    call it the Chafee-Bond proposal, since Senator Chafee was
    chairman of the committee, but I am taking the liberty of
    changing the alignment of names. These additional funds will
    allow an increased investment in key highway and transportation
    projects which will complement and assist the continuing growth
    of the U.S. economy.
        I commend the administration for its commitment to
    increasing important highway spending when receipts into the
    Highway Trust Fund are higher than projected. Unfortunately,
    this is where the good news ends, and permit me to explain our
    subcommittee's unmet budgetary needs in the current budget.
        As I stated in our March 2 hearing on HUD, this year's
    budget request is lacking for many of the programs under our
    jurisdiction. Many widely supported programs within HUD, such
    as CDBG, public housing capital funding, HOPE VI, Section 202
    elderly, Section 811 housing for the disabled have been slashed
    in the 2007 budget. Even more troubling, the 2007 HUD budget
    includes a $2 billion rescission of excess Section 8 funds,
    which I don't think are available. They also assume, without
    any justification whatsoever, a wide range of fees that the
    Congress will not approve and rescissions which Congress will
    not approve. This makes the decisions posed by the 2007 budget
    especially troubling.
        The subcommittee will also have to face substantial
    shortfalls in many other accounts, for example, a shortfall of
    some $400 million in proposed Amtrak funding level for fiscal
    year 2007 and some $1.557 billion for AIP and F&E. The proposed
    Amtrak funding of $900 million is clearly not enough to support
    Amtrak's funding needs, and I am not even sure that flat
    funding will meet the anticipated expenses in 2007.
        Last year, to avoid a veto which the administration
    proposed, we added reform language with necessary funding to
    support Amtrak's need for 2006. Consistent with this reform
    legislation, I expected the administration to have a vision for
    reform and be prepared to implement this vision. That was an
    empty hope. Nothing has happened. Reducing the budget for
    Amtrak makes no sense unless and until the administration is
    prepared to implement a reform strategy which can be supported
    by the budget request.
        Let me be clear. As many people here know, when I was
    Governor of Missouri, I supported and signed into law annually
    millions of dollars in subsidies to keep Amtrak running in our
    State. But let me be equally frank that we cannot continue to
    see costs rising beyond the available revenues with many areas
    of expenditure apparently unjustified. Consequently, Mr.
    Secretary, I expect you and our second panel to justify the
    Amtrak budget and I expect the Amtrak panel to explain where we
    are, where we are going, and what it is going to cost. Anything
    less would be a big disappointment for us and the people who
    depend upon Amtrak.
        In particular, I am troubled that while the administration
    seems to press for Amtrak reforms and accountability in its
    budget submissions, it has yet to exercise the substantial
    authority it has sought and received from Congress to maintain
    greater control over the Federal funds provided to Amtrak.
        Mr. Secretary, we provided you with sole authority to
    approve or disapprove Amtrak's requests for funds to cover
    capital needs and operating losses. To date, I am not aware of
    a single instance in which you have denied funding to Amtrak.
    In particular, DOT and Amtrak must be able to account for its
    expenditures in budget submissions with long-term plans for
    individual capital improvements similar to State TIPS or
    Transportation Improvement Plans. If detailed Transportation
    Improvement Plans were provided by Amtrak, we would be better
    able to understand what unmet needs are out there and we could
    then decide whether or not we agree with providing additional
    funds for passenger rail service.
        I am concerned the budget submission does not include any
    funds for Amtrak for debt service payments. These payments are
    necessary and will have to be paid, whether through a line item
    for debt service added by this subcommittee or through the $500
    million provided in the capital costs budget for Amtrak
    included in your budget submission. One cannot ignore the fact
    that the debt is there and that there is an immediate and legal
    obligation to repay it, even if you do not agree with the
    manner in which the sizeable debt was incurred. Until a reform
    bill is enacted, we would expect the Amtrak Board to step up to
    the plate, make such reforms that are needed and necessary
    consistent with the current budget and the budget request.
        Finally, among other issues, the 2007 budget requests a
    total of $13.8 billion for FAA, a $500 million decrease from
    the current year. While the FAA's operational activities in the
    budget would see a 5 percent increase over the amount provided
    last year, the budget would impose a dramatic cut in airport
    construction and investment.
        This subcommittee is once again left to fill in the gaps of
    underfunded Federal responsibilities for our Nation's airports,
    including a reduction of some $765 million for AIP from what
    was provided for this year. As the administration should know,
    this program is critical to the future of commercial aviation
    in the Nation. Nevertheless, this cut would be used to increase
    funding for salaries and expenses and the hiring of air traffic
    controllers and safety inspectors at the expense of funding
    needed for airport investment improvements under AIP. If the
    administration were to follow the blueprint of Vision 100, the
    authorizing legislation for aviation, in the same manner in
    which they funded needed highway improvements under SAFETEA,
    the AIP number for 2007 would be $3.7 billion rather than the
    $2.7 billion provided.
        Let us be clear. Over the next 15 years, passenger
    boardings on airplanes are expected to grow by some 15 percent
    and include a 30 percent growth in air transport and commercial
    operations. At the 35 busiest airports in the Nation, total
    operations are expected to grow by more than 34 percent by
    2020. While I know the administration is expected to propose
    new ways to fund the Aviation Trust Fund, we cannot afford to
    shortchange our commercial air needs in the meantime.
        We need answers to all these issues, but more importantly,
    we need adequate funding. We need to protect the future of
    commercial aviation, and absent a substantive explanation of
    the budget, I consider the proposed funding level a failure of
    leadership. In other words, we need to understand the
    justification for this funding and how the administration
    intends to maintain a world class, indeed a world first
    commercial aviation industry.

                               PREPARED STATEMENT

        Mr. Secretary, we appreciate your willingness to work with
    us in being here today and it is my pleasure to turn to my
    ranking member and partner on the subcommittee, Senator Murray.
        [The statement follows:]
               Prepared Statement of Senator Christopher S. Bond

        The Senate Appropriations Subcommittee on Transportation, Treasury,
    the Judiciary, HUD and Related Agencies will come to order.
        We welcome Secretary Mineta and thank him for appearing before us
    today to testify on the Department of Transportation's budget
    submission for fiscal year 2007. This is the first of two hearings that
    we have planned to review the fiscal year 2007 DOT budget submission.
        Our hearing today will focus on the overall budget submission for
    the Department of Transportation, followed by a second panel that will
    take a closer look at the state of Amtrak in the fiscal year 2007
    budget. In April, we are planning to have our second DOT related
    hearing where we will focus in on the Federal Aviation Administration
    and labor issues facing the FAA.
        Mr. Secretary, I look forward to your comments on the overall
    budget picture for all of the modes of transportation within the
    Department. I also welcome our second panel witnesses on Amtrak: FRA
    Administrator Joseph Boardman; Mr. David Hughes, President and CEO,
    Amtrak; Mr. David M. Laney, Chairman of the Board of Amtrak and Mr.
    Mark Dayton, Senior Economist, Department of Transportation Office of
    the Inspector General.
        The proposed fiscal year 2007 budget for DOT would give the
    department $65.64 billion in gross budgetary resources. This is
    basically a flat line from last year's fiscal year 2006 $65.51 billion
    appropriation for the Department of Transportation. The fact that this
    is a flat line budget is deceiving because all modes are not treated
    equally. There are bright spots in this budget for some modes within
    the Department, like the Federal Highway Administration (FHWA) and the
    Federal Transit Administration (FTA), and unfortunately there are black
    holes for other modes like the FAA and Amtrak.
        Having worked for over 2\1/2\ years as the Chairman of the Senate
    Subcommittee on Transportation and Infrastructure to pass SAFETEA-LU, I
    am pleased to see that this year the administration has fully embraced
    the historic funding levels achieved under the law. This year marks the
    50th anniversary of the Dwight D. Eisenhower System of Interstate and
    Defense Highway. No one can deny that our interstate system has had a
    profound impact on our Nation's economy, keeping communities and
    families connected to one another and serving as the primary system for
    moving goods and products that are the lifeblood of our economy.
        The fiscal year 2007 budget will provide a $3.4 billion boost in
    needed investment for our Nation's highways and bridges. While over $2
    billion of this funding increase was called for by SAFETEA, an
    additional $842 million is also made available by what I call the Bond-
    Chafee Revenue Aligned Budget Authority (RABA) begun under TEA-21 and
    continued in SAFETEA. I commend the administration for continuing its
    commitment to allowing spending to increase when receipts into the
    highway trust fund are higher than had been projected.
        Unfortunately, this is where my good news report ends, and I begin
    with our subcommittee's unmet budgetary needs provided under the fiscal
    year 2007 budget speech.
        As I stated at our March 2 hearing on HUD, this year's budget
    request for HUD proposes some $33.65 for fiscal year 2007, a decrease
    of some $621 million, or some 2 percent from the fiscal year 2006
    funding level of $34.27 billion.
        This request does not reflect the true extent to which many other
    important housing and community development programs are compromised.
    In particular, because of needed increases to section 8 funding,
    funding for many widely supported programs, such as CDBG, Public
    Housing Capital funding, HOPE VI, Section 202 Elderly and Section 811
    housing for the disabled, has been slashed. The fiscal year 2007 HUD
    budget also includes a $2 billion rescission of excess section 8 funds
    which are unlikely to be available.
        In addition to the very difficult decisions posed by the HUD fiscal
    year 2007 budget, this subcommittee will also have to face substantial
    shortfalls in many other accounts including, for example, a shortfall
    of some $400 million in the proposed Amtrak funding level for fiscal
    year 2007. This proposed level is clearly not enough to support
    Amtrak's funding needs and I am not sure that even flat funding will
    meet Amtrak's anticipated expenses in fiscal year 2007. Why was $900
    million chosen instead of the approximately $1.315 billion provided for
    Amtrak in fiscal year 2006? Is $900 million really sufficient to keep
    Amtrak afloat?
        If the administration wants Congress to be serious in its efforts
    to pass reform legislation, the administration must be more serious in
    its budget submissions. I am troubled that, while the administration
    seems to press for Amtrak reform and accountability in its budget
    submissions, it has yet to exercise the substantial authority that it
    has sought and received from Congress to maintain greater controls over
    the Federal funds provided to Amtrak. The Secretary of Transportation
    now has sole authority to approve or disapprove Amtrak's request for
    funds to cover capital needs and operating losses. To date, I am not
    aware of a single instance in which the Secretary has denied funding to
    Amtrak because Amtrak's grant request would not be the most efficient
    use of Federal funds.
        As we all know, this year's budget proposal of $900 million is
    better than the black hole provided for Amtrak in fiscal year 2006,
    however the $900 million reflected in the budget does not come with
    sufficient budgetary justification to draw any conclusions as to what
    $900 million will get us? I think that Amtrak should have to account
    for its expenditures and budget submissions with long term plans for
    individual capital improvements, similar to state TIPs, or
    transportation improvement plans. If detailed transportation
    improvement plans were provided by Amtrak, we would be better able to
    understand what unmet needs are out there, and we could then decide
    whether or not we agree with providing additional funding for passenger
    rail service.
        I am concerned that the budget submission we have before us for
    Amtrak does not include any funds for debt service payments. These
    payments are necessary and will be paid, whether through a line item
    for debt service added by this subcommittee, or through the $500
    million provided in the capital costs budget for Amtrak provided in
    your budget submission. One can not ignore the fact that the debt is
    there and that there is an immediate and a legal obligation to repay
    it, even if you do not agree with the manner in which this sizeable
    debt was incurred.
        Finally, the budget requests a total of $13.8 billion for FAA, a
    $500 million decrease from fiscal year 2006. While the FAA's
    operational activities under the budget would see a 5 percent increase
    over the amount provided last year, the budget would impose a dramatic
    cut in airport construction investment.
        This subcommittee is left once again to fill in the gaps of under-
    funded Federal responsibilities for our Nation's airports to the tune
    of $765 million for AIP below what was provided in fiscal year 2006.
    This cut would be used to increase funding for salaries and expenses
    and hiring of air traffic controllers and safety inspectors at the
    expense of funding needed airport investment improvements under the AIP
    program. If the administration were to follow the blueprint of VISION-
    100, the authorizing legislation for aviation in the same manner in
    which they funded needed highway improvements under SAFETEA, the AIP
    number for fiscal year 2007 would be $3.7 billion, rather than the
    $2.75 billion provided.
        Mr. Secretary, I appreciate your time today. I now turn to my
    ranking member and partner on this subcommittee, Senator Murray.

                       STATEMENT OF SENATOR PATTY MURRAY

        Senator Murray. Thank you very much, Mr. Chairman.
        Just a few months ago, Congress passed the SAFETEA-LU
    highway, transit and safety authorization bill. That law
    settled many of the major questions about transportation policy
    and funding for the next few years. Normally, this would be a
    relatively quiet period on transportation policy, but instead,
    this year is going to be anything but quiet when it comes to
    the challenges facing us in transportation.
        We already hear voices of concern that the revenues to the
    Highway Trust Fund will not be adequate to actually fund the
    SAFETEA-LU bill through 2009, and we will be presented with
    proposals this year to dramatically restructure the way we
    finance our national aviation enterprise, including the
    operations of the FAA.
        One of the biggest cost drivers in the FAA's budget is the
    need to pay for our hard working and highly capable air traffic
    controllers. Yet there are many rumors floating around that the
    Bush administration would rather let Congress settle the
    contract dispute with air traffic controllers than settle the
    issue at the bargaining table. I hope that is not the case.
    Last night, I received word that the FAA has asked the mediator
    to extend the negotiations in the hope that more progress can
    be made, and I take that as a positive sign. I hope Secretary
    Mineta will instruct his team to get back to the bargaining
    table and stay there until a contract is negotiated. This is
    not something that should be thrown in the laps of Congress.
        Now, as I review the Department of Transportation's budget
    for the coming fiscal year, it is clear that there are three
    huge and controversial funding holes in the President's budget.
    One is the 30 percent funding cut proposed for Amtrak. Another
    is the proposal to cut in half the essential air service
    subsidies necessary to maintain air service to our rural
    communities. The last is the administration's proposal to cut
    more than $750 million from our capital investments in our
    Nation's airports.
        I am pleased that Chairman Bond has agreed to have special
    hearings so we can review those issues in detail. Following our
    discussion with Secretary Mineta this morning, we will have a
    panel that will specifically address Amtrak, and we also have a
    hearing with the FAA Administrator on May 4.
        Another challenge we face is the need to adequately fund
    the transportation needs of the gulf coast recovery. Last year,
    this subcommittee provided $2.75 billion for emergency relief
    for highways. Now, it is becoming clear that several of the
    major highway and bridge replacement projects in Louisiana and
    Mississippi will be more expensive than anticipated. This is an
    issue I hope we address in the supplemental, Mr. Chairman, if
    we are to ensure that the Gulf region has the kind of
    infrastructure that will allow its economy to rebound, and we
    must not ignore the other emergency relief projects from other
    disasters that have been awaiting reimbursement for many months
    or, in some cases, years.
        So, as I said, these will not be quiet times for
    transportation policy and this subcommittee will be right in
    the middle of the debate.
        Other than the three large funding holds that I cited, the
    Department of Transportation is clearly one of the winners in
    the administration's budget proposal. Secretary Mineta, you did
    quite well with funding for the Transportation Department,
    which is rising almost 5 percent, and I am sure that didn't
    come without a fight. And I am sure there will be more funding
    fights as this year continues.
        The budget resolution currently being debated on the floor
    endorses the President's overall funding for discretionary
    spending. While funding for the DOT in the President's budget
    may be increased by 5 percent, funding for the Department of
    Housing and Urban Development is cut by almost 2 percent.
    Funding for the Department of Health and Human Services is down
    2.3 percent. And funding for education is cut almost 4 percent.
    That is the universe in which transportation programs will have
    to do battle this year.
        Since I often spend time during these statements
    complaining about what is not included in the agency's budget,
    I do want to take a minute to commend the Secretary for some
    initiatives that are included in this budget.
        Most notably, within the FAA, $80 million is included for
    the ADS-B program and $24 million is requested for the SWIM
    program. I will spare my colleagues an explanation of those
    acronyms, but those two programs really hold the promise of
    allowing us to break away from an air traffic control system
    that is dependent on dated radar technology. Those are the
    kinds of investments that we should have been making over the
    last several years, and instead, those initiatives were crowded
    out of the budget because the administration had insisted on
    cutting the funding for air traffic control modernization for
    each of the last 2 years. These technologies will allow us to
    get greater productivity out of our limited airspace with an
    even greater margin of safety. So I want to commend Secretary
    Mineta and Administrator Blakey, as well, for insisting that
    these initiatives be funded in the budget this year.
        Our second panel today will be on Amtrak, and we want to
    welcome our new Federal Railroad Administrator, Joe Boardman,
    as a witness today. During the time that Mr. Boardman's
    position was vacant, the DOT General Counsel served as the
    Secretary's lead on passenger rail policy. Those were not the
    responsibilities for which the Senate confirmed the General
    Counsel, so I am glad Mr. Boardman is now prepared to take
    over. We hope and expect that he will shortly be serving as the
    Secretary's designee on the Amtrak Board of Directors.
        During our discussions this morning with Mr. Boardman and
    our witnesses from Amtrak and the Inspector General's office, I
    hope to pursue precisely what choices would face us if we are
    forced to live within the President's proposed 30 percent cut
    in funding. I expect that we will find, as we have in prior
    years, that with Amtrak's existing debt levels and its
    statutory responsibility to its employees, there is no way the
    railroad will be able to shed roughly $400 million in costs
    during the fiscal year starting this coming fall without
    lapsing into bankruptcy.
        That is why I expect the Amtrak Board of Directors has
    submitted a budget to us seeking $1.6 billion for 2007. Despite
    the fact that every member of Amtrak's Board of Directors has
    now been appointed by the Bush administration, that Board is
    seeking an appropriation that is some $700 million more than
    the Bush administration is supporting. Apparently, those Bush
    appointees know something about Amtrak's costs and the national
    rail network that the ideologues at OMB and DOT do not.
        As part of our discussion with the second panel, I want us
    to have an honest dialogue about Amtrak's real costs. For too
    long, the Amtrak trains that serve the vast majority of States
    in this country, the States outside of the Northeast, have been
    castigated as Amtrak's main budget problem while the trains
    operating in the Northeast Corridor are held up as the flagship
    of efficiency.
        When you look into the realities of where Amtrak's annual
    subsidies are going, however, you find that this is far from
    the whole truth. Due to the extraordinary capital needs of the
    Northeast Corridor and the debt service costs associated with
    that corridor, the fact is that a vast amount of Amtrak's
    annual appropriation must go straight into that corridor. Those
    subsidies are needed not just to continue Amtrak's service, but
    also to ensure the continuation of all the community railroads
    that operate over that corridor every day.
        Over the last 4 years, Amtrak's appropriation has increased
    by $244 million, and over the same time, Amtrak's annual
    investment in the Northeast Corridor has increased by roughly
    the same amount. So put another way, the Northeast Corridor has
    absorbed just about every dollar of the increased appropriation
    this subcommittee has provided over the last few years.
        Now, I am not saying that those investments are not
    necessary. In fact, they are long overdue. What I am saying is
    that the service in the Northeast Corridor, including the local
    commuter services that operate on the corridor, are no less
    dependent on annual subsidies from this subcommittee as Amtrak
    services across the rest of the country.
        Amtrak just reached a record number of riders for its third
    consecutive year. It is noteworthy that ridership over the
    Northeast Corridor grew by only 1 percent, while trains around
    the rest of the country grew at faster rates. Let us just look
    at the trains that are serving my State and Chairman Bond's
    State.
        The Empire Builder is a train that provides service between
    Seattle and Spokane in my State, and that train continues on to
    serve the States of several other subcommittee members,
    including Senator Burns, Dorgan, Kohl, and Durbin. Ridership on
    the Empire Builder grew by 9 percent last year. Ridership on
    the Cascades service that runs from Vancouver, B.C. all the way
    to Eugene, Oregon, grew by almost 6 percent. In the chairman's
    State, service between Kansas City and St. Louis grew by almost
    7 percent, while service between St. Louis and Chicago grew by
    almost 14 percent just last year.

                               PREPARED STATEMENT

        My point here is that while there is a growing level of
    pressure on the railroad to eliminate or terminate these
    services, their popularity among the traveling public is
    rising. I, for one, am not going to support a policy where we
    leave thousands of passengers across the entire country without
    rail service solely because the capital needs of the Northeast
    Corridor have gotten too expensive.
        Thank you, Mr. Chairman.
        [The statement follows:]

                   Prepared Statement of Senator Patty Murray

        Thank you, Mr. Chairman.
        Just a few months ago, Congress passed the SAFETEA-LU highway,
    transit and safety authorization bill. That law settled many of the
    major questions about transportation policy and funding for the next
    few years.
        Normally, this would be a relatively quiet period on transportation
    policy. But instead, this year is going to be anything but quiet when
    it comes to the challenges facing us in transportation.
        We already hear voices of concern that the revenues to the Highway
    Trust Fund will not be adequate to actually fund the SAFETEA-LU bill
    through 2009.
        And we will be presented with proposals this year to dramatically
    restructure the way we finance our national aviation enterprise
    including the operations of the FAA.
        One of the biggest cost drivers in the FAA's budget is the need to
    pay for our hard working and highly capable air traffic controllers.
    Yet there are many rumors floating around that the Bush Administration
    would rather let Congress settle the contract dispute with air traffic
    controllers than settle the issue at the bargaining table.

                              THREE FUNDING HOLES

        As I review Department of Transportation's budget for the coming
    fiscal year, it is clear that there are three huge and controversial
    funding holes in the President's budget.
      --One is the 30 percent funding cut proposed for Amtrak.
      --Another is the proposal to cut in half the Essential Air Service
            subsidies necessary to maintain air service to our rural
            communities.
      --The last is the administration's proposal to cut more than $750
            million from our capital investments in our Nation's airports.
        I'm pleased that Chairman Bond has agreed to have special hearings
    so we can review these issues in detail.
        Following our discussion with Secretary Mineta this morning, we
    will have a panel that will specifically address Amtrak. We also have a
    hearing with the FAA Administrator on May 4th.

                                   GULF COAST

        Another challenge we face is the need to adequately fund the
    transportation needs of the Gulf Coast recovery. Last year, this
    subcommittee provided $2.75 billion for Emergency Relief Highways.
        Now it's becoming clear that several of the major highway and
    bridge replacement projects in Louisiana and Mississippi will be more
    expensive than anticipated.
        This is an issue we must address in the Supplemental, Mr. Chairman,
    if we are to ensure that the Gulf region has the kind of infrastructure
    that will allow its economy to rebound.
        And we must not ignore the other emergency relief projects from
    other disasters that have been awaiting reimbursement for many months
    or, in some cases, years.
        So, as I said, these will not be quiet times for transportation
    policy, and this subcommittee will be right in the middle of the
    debate.

                                  DOT'S BUDGET

        Other than the three large funding holes that I cited earlier, the
    Department of Transportation is clearly one of the winners in the
    administration's budget proposal. Secretary Mineta did quite well with
    funding for the Transportation Department rising almost 5 percent. I'm
    sure it did not come without a fight.
        And there will be more funding fights as the year continues. The
    Budget Resolution currently being debated on the Floor endorses the
    President's overall funding for discretionary spending.
        While funding for the DOT in the President's budget may be
    increased by 5 percent--
      --funding for the Department of Housing and Urban Development is cut
            by 2 almost percent;
      --funding for the Department of Health and Human Services is down 2.3
            percent;
      --and funding for Education is cut by almost 4 percent.
        That is the universe in which transportation programs will have to
    do battle this year.

                       AIR TRAFFIC CONTROL MODERNIZATION

        Since I often spend time during these statements complaining about
    what is not included in the agency's budget, I want to take a minute to
    commend the Secretary for some initiatives that are included in the
    budget.
        Most notably, within the FAA, $80 million is included for the ADS-B
    program and the $24 million is requested for the SWIM program. I will
    spare my colleagues an explanation of these acronyms. But these two
    programs hold the promise of allowing us to break away from an air
    traffic control system dependent on dated radar technology.
        These are the kind of investments that we should have been making
    over the last several years. Instead, initiatives like these were
    crowded out of the budget because the administration insisted on
    cutting the funding for air traffic control modernization for each of
    the last 2 years.
        These technologies will allow us to get greater productivity out of
    our limited air space with an even greater margin of safety. So, I want
    to commend Secretary Mineta and Administrator Blakey for insisting that
    these initiatives be funded in the budget this year.

                                     AMTRAK

        Our second panel at today's hearing will be on Amtrak. We welcome
    our new Federal Railroad Administrator, Joe Boardman, as a witness.
        During the time that Mr. Boardman's position was vacant, the DOT
    General Counsel served as the Secretary's lead on passenger rail
    policy.
        Those were not the responsibilities for which the Senate confirmed
    the General Counsel, so I am glad Mr. Boardman is now prepared to take
    over.
        We hope and expect that he will shortly be serving as the
    Secretary's designee on the Amtrak Board of Directors.
        During our discussions this morning with Mr. Boardman and our
    witnesses from Amtrak and the Inspector General's office, I hope to
    pursue precisely what choices Amtrak would face if it is forced to live
    within the President's proposed 30 percent cut in funding.
        I expect that we will find, as we have in prior years, that with
    Amtrak's existing debt levels and its statutory responsibilities to its
    employees, there is no way that the railroad would be able to shed
    roughly $400 million in costs during the fiscal year starting this
    coming fall without lapsing into bankruptcy.
        That is why, I expect, the Amtrak Board of Directors has submitted
    a budget to us seeking $1.6 billion for 2007.
        Despite the fact that every member of Amtrak's Board of Directors
    has been appointed by the Bush Administration, that Board is seeking an
    appropriation that is some $700 million more than the Bush
    Administration is supporting.
        Apparently, these Bush appointees know something about Amtrak's
    costs and the national rail network that the ideologues at OMB and DOT
    do not.

                              AMTRAK'S REAL COSTS

        As part of our discussion with the second panel, I want us to have
    an honest dialogue about Amtrak's real costs.
        For too long, the Amtrak trains that serve the vast majority of
    States in this country--the States outside of the Northeast--have been
    castigated as Amtrak's main budget problem while the trains operating
    in the Northeast Corridor are held up as the flagship of efficiency.
        When you look into the realities of where Amtrak's annual subsidies
    are going, however, you find that this is far from the whole truth.
        Due to the extraordinary capital needs of the Northeast Corridor
    and the debt service costs associated with that corridor, the fact is
    that a vast amount of Amtrak's annual appropriation must go straight
    into that corridor.
        Those subsidies are needed not just to continue Amtrak service, but
    also to ensure the continuation of all the commuter railroads that
    operate over that corridor every day.
        Over the last 4 years, Amtrak's appropriation has increased by $244
    million. And over the same time, Amtrak's annual investment in the
    Northeast Corridor has increased by roughly the same amount.
        Put another way, the Northeast Corridor has absorbed just about
    every dollar of the increased appropriations this subcommittee has
    provided over the last few years. I am not saying that those
    investments are not necessary. In fact, they are long overdue.
        What I am saying is that the service in the Northeast Corridor--
    including the local commuter services that operate on the Corridor--are
    no less dependent on annual subsidies from this subcommittee as
    Amtrak's services across the rest of the country.

                           AMTRAK'S RISING RIDERSHIP

        Amtrak just reached a record number of riders for its third
    consecutive year.
        It is noteworthy that ridership over the Northeast Corridor grew by
    only 1 percent while trains around the rest of the country grew at far
    faster rates.
        Let's just look at the trains serving my State and Chairman Bond's
    State. The Empire Builder is a train that provides service between
    Seattle and Spokane in my State. The train continues on to serve the
    States of several other subcommittee members including Senator Burns,
    Dorgan, Kohl and Durbin.
      --Ridership on the Empire Builder grew by 9 percent last year.
      --Ridership on the Cascades Service that runs from Vancouver, BC all
            the way to Eugene, Oregon grew by almost 6 percent.
        In Chairman Bond's State, service between Kansas City and St. Louis
    grew by almost 7 percent while service between St. Louis and Chicago
    grew by almost 14 percent just last year.
        My point is that, while there is a growing level of pressure on the
    railroad to eliminate or terminate these services, their popularity
    among the traveling public is rising.
        I, for one, am not going to support a policy where we leave
    thousands of passengers across the entire country without rail service
    solely because the capital needs of the Northeast Corridor have gotten
    too expensive.
        Thank you, Mr. Chairman.

                               PREPARED STATEMENT

        Senator Bond. Thank you very much, Senator Murray. Senator
    Leahy has also submitted a statement which will be included in
    the record.
        [The statement follows:]

                 Prepared Statement of Senator Patrick J. Leahy

        Thank you, Mr. Chairman, for holding this important hearing today.
    On the heels of last year's passage of the transportation
    reauthorization bill and significant managerial changes at Amtrak, it
    is very timely to hold this hearing on the budget requests for the
    Department of Transportation and Amtrak.
        I am very concerned that Congress will not be able to fund our
    Nation's multi-faceted transportation system adequately if Congress
    accepts the President's budget request. The President shortchanges
    Amtrak and public transit programs, and he drastically cuts funding for
    the Essential Air Service program that brings air service to small
    communities, like Rutland, Vermont. Without this program, air passenger
    service to dozens of small communities across the country will end.
        I look forward to hearing the testimony from today's witnesses
    about the future direction of the Transportation Department and Amtrak.
    Thank you.

        Senator Bond. Now, Mr. Secretary, your statement, please.

                    STATEMENT OF SECRETARY NORMAN Y. MINETA

        Secretary Mineta. Mr. Chairman and members of the
    subcommittee, thank you again for this opportunity to appear
    before you today to discuss the President's fiscal year 2007
    budget for the Department of Transportation.
        Our transportation network is the backbone of the strongest
    and most dynamic economy in the world, and President Bush is
    proposing a $65.6 billion plan to keep America moving safely,
    reliably, and efficiently.
        I will touch on a few highlights, and at this time, I
    request unanimous consent that my full written statement be
    made a part of the record.
        Senator Bond. Without objection.

                        SURFACE TRANSPORTATION PROGRAMS

        Secretary Mineta. The President's 2007 budget request, Mr.
    Chairman, reflects the funding level authorized in SAFETEA-LU,
    which provides a record investment of $286 billion through
    fiscal year 2009. Now, this investment reflects a strong
    commitment to transportation in what we all recognize is a very
    tight budget environment. However, we have reached a juncture
    where our focus must be on modernizing financing as well as
    infrastructure.
        I know that this committee is aware that the balances in
    the Highway Trust Fund are on a downward slope and there is a
    growing consensus that we will need to look beyond traditional
    gasoline taxes to finance 21st century transportation needs. So
    the President's budget sets aside $100 million for States that
    want to test alternatives to the gasoline fuel tax on a broad
    scale.
        The Open Roads Financing Pilot Program will allow us to see
    how the public accepts fees, tolls, and other approaches and
    how well they raise revenue, and whether they are, indeed, more
    effective in reducing traffic congestion. The lessons that we
    learn through these demonstrations, as well as the work done by
    the congressionally-created Commission on the Future of the
    Highway Trust Fund, will help form future decisions on surface
    transportation policies.

                           FEDERAL AVIATION PROGRAMS

        Aviation financing also is in need of modernization, and
    after consultation with the stakeholder community, we are
    developing a forward-looking plan which we expect to submit
    shortly. In the meantime, the President's 2007 budget provides
    $13.7 billion for the Federal Aviation Administration from a
    combination of trust fund revenues as well as general fund
    revenues. Of the requested amount, $8.4 billion will address
    the FAA's operational needs and support hiring the needed
    safety inspectors and air traffic controllers per the
    Congressional plan.
        An additional $2.75 billion is provided for the Airport
    Improvement Program, otherwise known as AIP. The airport
    construction grant request for 2007 is sufficient to address
    the construction needs for all currently planned runways and to
    meet our goal for improving runway safety.
        Looking to the future, the Department's budget provides
    $122 million for the next generation Air Transportation System
    Initiative. Early progress in this multi-agency effort is
    encouraging and our fiscal year 2007 budget invests in key
    building blocks for transforming the way that America flies,
    including the ADS-B, the Automatic Dependent Surveillance-
    Broadcast program, which ultimately will move us from the
    ground-based to a satellite-based air traffic control system.

                            INTERCITY PASSENGER RAIL

        The budget also promotes continued transformation of
    intercity passenger rail. First, I want to express my
    appreciation to Chairman Bond and Senator Murray and this
    committee for delivering a clear message to Amtrak that it must
    address its money-losing services. We are confident that
    management and the Board are committed to turning the company
    around, and we will use the oversight authority that you gave
    us to ensure that this happens.
        In recognition of the progress to date, and with the
    expectation that we will see much more by the end of fiscal
    year 2006, the President requests $900 million to help Amtrak
    make the transition to a new and better model of intercity
    passenger rail. Five-hundred million dollars of that request is
    for capital needs and maintenance. The remaining $400 million
    would be available as Efficiency Incentive Grants tied directly
    to continued activities that support reformed railroad
    operations.

                               SAFETY INITIATIVES

        Now, over the past 5 years, we have also gained important
    momentum when it comes to safety, and roughly one-fourth of the
    Department's total resources in the 2007 budget will pay for
    safety initiatives. As fiscal year 2007 approaches, we face the
    twin challenges of modernizing our transportation
    infrastructure and bringing financing mechanisms that support
    them into the 21st century.
        I look forward to working closely with all of you and with
    the entire Congress as we make sure that America continues to
    have a transportation system that is the envy of the world.

                               PREPARED STATEMENT

        Thank you again for this opportunity to testify today and I
    will be pleased to respond to any questions that you may have.
        Senator Bond. Thank you very much, Mr. Secretary.
        [The statement follows:]
                     Prepared Statement of Norman Y. Mineta
        Mr. Chairman, members of the subcommittee, thank you for the
    opportunity to appear before you today to discuss the administration's
    fiscal year 2007 budget request for the U.S. Department of
    Transportation. The President's request totals $65.6 billion in
    budgetary resources, which will support major investments in
    transportation nationwide that are vital to the health of our economy
    and the American way of life.
        Nearly $16 billion, or more than 24 percent, of the total request
    for the Department will support transportation safety--my top priority.
    Statistics show our past safety efforts are paying off. Our early
    estimates show in 2005 the highway fatality rate reached an historic
    low of 1.43 fatalities per 100 million vehicle-miles traveled. Still,
    annual highway deaths continue to hover around 43,000--a number that is
    still too high.
        Our transportation network is the backbone of the strongest and
    most dynamic economy in the world. The President's budget request
    continues record investments in our Nation's transportation
    infrastructure, as well as supporting research and technology. At the
    same time, the budget reflects the recognition that our funding
    mechanisms are outdated. There is a growing consensus that traditional
    gasoline taxes and airline ticket taxes are not adequate to the task of
    supporting 21st century transportation needs. We must explore new and
    innovative ways to provide more reliable transportation services while
    focusing on costs. Consequently, the 2007 budget introduces alternative
    financing ideas that may provide possible funding options for our
    resource needs in the future.

                        SURFACE TRANSPORTATION PROGRAMS

        Last summer, the ``Safe, Accountable, Flexible, Efficient
    Transportation Equity Act: A Legacy for Users'' (SAFETEA-LU)
    reauthorized our surface transportation programs through fiscal year
    2009, providing a record $286 billion investment and a continued focus
    on improvements in highway safety. The President's 2007 budget plan for
    the Federal Highway Administration, the Federal Transit Administration,
    the Federal Motor Carrier Safety Administration, and the National
    Highway Traffic Safety Administration reflects the funding envisioned
    in SAFETEA-LU. The budget provides $815 million for the National
    Highway Traffic Safety Administration, along with $521 million for the
    Federal Motor Carrier Safety Administration, to improve safety on our
    Nation's highways. The budget also proposes a record $8.9 billion
    Federal investment in public transportation. This funding for the
    Federal Transit Administration will help achieve common-sense transit
    solutions, especially for the elderly, persons with disabilities, and
    in rural areas where 40 percent of counties have no public
    transportation.
        Even though SAFETEA-LU has just recently passed, we are already
    thinking about new ways to fund surface transportation programs in the
    future. That is why the 2007 budget plan proposes a $100 million pilot
    program to evaluate innovative ways to finance and manage major
    portions of highway systems. Grants under this pilot program will allow
    the Federal Government to partner with up to five States that want to
    test fees, tolls, and other approaches on a broad scale--either
    statewide or across an urban area and its suburbs. We will see how the
    public accepts these approaches, how well they raise revenue, and
    whether they are indeed more effective in reducing traffic congestion.
    The lessons learned from this pilot program, as well as the work done
    by the Congressionally created commissions on the future of the Highway
    Trust Fund, will help inform future decisions on financing surface
    transportation needs. The timing is important. By the end of the 2007
    budget year, only 2 years will remain before SAFETEA-LU expires.

                           FEDERAL AVIATION PROGRAMS

        Approaching even more quickly is reauthorization of the Federal
    Aviation Administration (FAA) and the taxes that finance the Aviation
    Trust Fund, which expire at the end of fiscal year 2007. Currently, our
    primary funding source for the FAA is tied to the price of an airline
    ticket. But there is general consensus that our growing aviation system
    needs a more stable and predictable revenue stream--one that creates a
    more direct relationship between revenues collected and services
    provided. Soon, the Bush Administration will propose a reauthorization
    plan that will include a solid, forward-looking financing proposal for
    the Aviation Trust Fund.
        The President's 2007 budget plan provides $13.7 billion to fund
    aviation. Of this request, $8.4 billion will address the FAA's
    operational needs and support hiring needed safety inspectors and air
    traffic controllers. The President's budget also includes nearly $2.8
    billion for Airport Improvement Program (AIP) grants, which were
    instrumental in helping restore service last year to several Gulf Coast
    airports shut down by Hurricanes Katrina and Rita. The 2007 AIP request
    is sufficient to address construction needs for all currently planned
    runways.
        The demand for air transportation continues to rise, placing more
    burdens on our current systems. To address future needs, the FAA is
    partnering with other Federal agencies in planning for the Next
    Generation Air Transportation System (NGATS). This multi-agency effort
    is exploring new ways to manage air transportation through the use of
    modern technology. As a first step, the 2007 budget provides funding
    for this effort, including $80 million to support FAA's deployment of
    Automatic Dependent Surveillance-Broadcast (ADS-B). ADS-B will replace
    current radar systems and provide more accurate surveillance coverage.
    In addition, the budget provides $24 million for System Wide
    Information Management, which will make a network-enabled air traffic
    system possible, improving safety, efficiency, and security. These are
    the building blocks of the Next Generation initiative, which will
    transform the way that America flies.

                            INTERCITY PASSENGER RAIL

        The budget also promotes continued transformation of intercity
    passenger rail in America. In last year's budget, the administration
    demanded reform. America needs a sustainable framework for convenient,
    high-quality passenger rail service, and over the past year both Amtrak
    and the Congress have responded. Amtrak developed a strategic reform
    plan that seeks to restructure the company and introduce route
    competition. Through the fiscal year 2006 appropriation, Congress
    included measures to address Amtrak's money-losing sleeper car and food
    and beverage services, among other efficiency measures. Together, these
    reforms will help Amtrak realize meaningful savings this year, and
    therefore reduce its need for Federal subsidies.
        In recognition of this progress--and with the expectation that we
    will see much more by the end of fiscal year 2006--the President's
    fiscal year 2007 budget requests $900 million to help Amtrak make the
    transition to a new and better model of intercity passenger rail. Of
    this amount, $500 million will provide for capital needs and
    maintenance of existing infrastructure, including the Northeast
    Corridor. The remaining $400 million will fund new ``Efficiency
    Incentive Grants'' tied directly to continued progress toward reform.
    In addition, our plan assumes continuation of the legislative
    initiative begun in 2006 that would assess fees for capital investment
    and maintenance costs by transit agencies for their use of the
    Northeast Corridor. We recognize that this budget will require Amtrak
    to accelerate its efforts to address its costs, but we believe the
    recommendations recently made by the Government Accountability Office
    and the Department of Transportation Inspector General, as well as the
    company's own strategic plan, provide a roadmap for success. While much
    work remains to address Amtrak's serious and well-documented problems,
    we believe the fiscal year 2007 budget will encourage progress and
    promote efforts to move to a more sustainable system.

                               MARITIME PROGRAMS

        The President's plan includes $154 million to fully fund the
    Maritime Administration's Maritime Security Program. This fleet of 60
    active, militarily useful vessels manned by U.S. mariners is critical
    to the support of our troops abroad. The President's budget also
    includes $62 million for the U.S. Merchant Marine Academy, of which $15
    million is for capital investment improvements at the Academy.

              RESEARCH, PIPELINES, AND HAZARDOUS MATERIALS SAFETY

        Approximately 15 months ago, Congress enacted the Department of
    Transportation's reorganization proposal to create the Pipeline and
    Hazardous Materials Safety Administration (PHMSA) and the Research and
    Innovative Technology Administration (RITA).
        PHMSA is responsible for the safety of almost one-third of all
    products shipped each year and two-thirds of all energy products
    consumed. This includes the packaging, shipment, and handling of all
    hazardous materials by highway, rail, water, and air, as well as the
    movement of energy products by pipeline. The 2007 budget provides $149
    million for PHMSA's operations, including $75.7 million for pipeline
    safety, $27.2 million for hazardous materials safety, and $28.2 million
    for emergency preparedness grants.
        RITA has brought new energy and a focus on the Department's
    research efforts, and is working to expedite the implementation of
    cross-cutting, innovative transportation technologies. The President's
    2007 budget request includes $8.2 million in direct funding, plus an
    additional $27 million from the Highway Trust Fund for the Bureau of
    Transportation Statistics, to continue these efforts. In addition, RITA
    will undertake over $300 million in transportation-related research,
    education, and technology application on a reimbursable basis.

               DEPARTMENT OF TRANSPORTATION HEADQUARTERS BUILDING

        Finally, I want to highlight the fiscal year 2007 President's
    budget request of $59.4 million for the new Department of
    Transportation headquarters building project. The goal is to complete
    the consolidation of the Department's headquarters' operating
    functions, excluding the FAA, into a facility at the Southeast Federal
    Center in fiscal year 2007. The requested funds will cover DOT's
    tenant-related costs, including security and telecommunications
    equipment and the infrastructure to support it. The end result will be
    a facility that provides modern office technology, enhanced
    communications, a quality work environment, and updated security
    systems for more than 5,000 Federal workers.
        The President's budget request reflects a fiscally responsible plan
    for the Department of Transportation to help America meet its 21st
    century transportation needs. To ensure that the Department is
    exercising sound stewardship over the financial resources entrusted to
    us, we continue to focus on program performance to maximize efficiency
    and create a results-oriented Government. Together with the Congress,
    and with our public- and private-sector partners, we are
    revolutionizing transportation to keep America moving.
        Thank you again for the opportunity to testify today. I look
    forward to working closely with all of you, and with the entire
    Congress, as you consider the fiscal year 2007 President's budget
    request. I will be pleased to respond to any questions you may have.

                             FREIGHT TRANSPORTATION

        Senator Bond. We are going to have to do a quick round and
    move on to the FRA, but one of the first things I have is a
    growing concern about freight transportation capacity. Your
    Bureau of Transportation Statistics estimates freight volumes
    in tons will increase by 70 percent by 2020. We have roughly
    the same highway miles and we have 40 percent fewer rail miles.
    We are watching our inland water infrastructure become
    obsolete, inefficient, and outdated. How much concern do you
    have that in the decades ahead, if we don't plan and do
    something more for transportation, there will be a
    straightjacket on our economy, frustrating competitiveness,
    growth, and job creation?
        Secretary Mineta. There is no question that the increase in
    trade in the next 20 years is going to be a very large impact
    on the transportation system, and that is why the Safe,
    Accountable, Flexible, Efficient, Transportation Equity Act; A
    Legacy for Users (SAFETEA-LU) legislation is so important. It
    brings back what we started in the Intermodal Surface
    Transportation Efficiency Act of 1991 (ISTEA), and that was the
    I, intermodal. Today, we know that given the large inflow of
    transport into the country through maritime trade, loads go
    onto rail and onto the highway. What we are trying to do
    through SAFETEA-LU is make sure that the intermodal freight
    gateway connection is coordinated.
        Given limited financial resources, SAFETEA-LU includes
    financing mechanisms other than the traditional Highway Trust
    Fund that we rely on, such as the Transportation Infrastructure
    and Innovation Act (TIFIA), State Infrastructure Banks (SIBs),
    private activity bonds, and other financing mechanisms where we
    want more people to come to the table with public-private
    partnership programs.
        Senator Bond. As more intermodal freight becomes available
    and increases that burden, you are looking at taking the
    overseas shipments and putting them on rail and highways, which
    are overcrowded. Given the fact that one single medium-size
    barge tow can carry the freight of 870 trucks, shouldn't we be
    looking at the increasingly important option to maintain the
    efficiency, relieve congestion, conserve fuel, and reduce air
    emissions by bringing our inland waterways up to speed?
        Secretary Mineta. Absolutely, and that was one of the first
    things I undertook when I became Secretary of Transportation in
    2001. We already had the Wendell H. Ford Aviation Investment
    and Reform Act (AIR-21) to take care of aviation. We had the
    Transportation Equity Act for the 21st Century (TEA21) as it
    related to surface transportation needs. One of the things we
    proposed was a SEA-21 program to deal with short-sea shipping
    on the east, west, gulf coasts and the inland waterway system.
    That program is now before the Office of Management and Budget
    (OMB) and we are hoping that we will be able to get that out,
    because it is part of our total marine transportation system.

                        INTERCITY PASSENGER RAIL SYSTEM

        Senator Bond. I would hope, Mr. Secretary, with your broad
    understanding of transportation that we can mark you down as a
    supporter of the Water Resources Development Act, which OMB
    treats like an illegitimate child at a family reunion.
        I wish to address one Amtrak question. I would like to know
    how you see your responsibility for Amtrak. I am concerned
    about the debt. I am concerned about reforms that will require
    elimination or cut-back. What do you see as your role and what
    do you expect to achieve in your position as the Secretary of
    Transportation with overall responsibility for the area?
        Secretary Mineta. First of all, there is a need for an
    intercity passenger rail system. What the administration and I
    are trying to do is give a long-term, sustainable future to
    intercity passenger rail. The present model can't do it. You
    recognize that when you see first-class sleeper service being
    subsidized to the extent that it is, and in terms of some
    passenger rail services where the subsidy may be $450 to $500
    per passenger. There are areas like food services, first class
    sleeper services, and other areas where they do need change.
        What we are trying to do is bring reform that will give
    long-term financial sustainability to an intercity passenger
    rail system. Last year, we requested no funding for Amtrak. We
    submitted our reform measure in 2003, 2004, and 2005, but no
    action was taken on the reform measure. So OMB said, okay, let
    us get their attention. We will request zero funding for fiscal
    year 2006 until we get reform. We got Congress' attention.
        We attempted a three-prong approach: the authorizing
    committees; the Appropriations Committee; and the Board of
    Directors. The House authorizing committee provided a $2
    billion a year, 6-year program, but no reforms. In the Senate,
    we got an $8 billion package over 5 years, or $1.6 billion per
    year for 5 years; it had some reforms in it. The proposal went
    on the budget reconciliation bill, but then it got pulled in
    conference and that reform effort failed.
        So then we were dependent on the Appropriations Committees.
    You folks did come back with reforms, plus the actions of the
    Board brought about sufficient reform. OMB recognized this
    effort and we included $900 million in this year's budget. We
    are looking for further reforms, and for that there will be
    additional monies forthcoming.
        Senator Bond. Mr. Secretary, thank you very much. You may
    have had a black and blue spot on your jaw, but we lost a pound
    of flesh in this subcommittee, and so to follow up on these
    questions, I believe that Senator Murray may have some
    questions to ask.
        Senator Murray. I certainly will, and unfortunately, our
    time is limited, but I know well that the Secretary, as a
    former member, knows that the authorization committee has to
    make those rules, not the Appropriations Committee, and I think
    the Secretary has a pretty strong history in the House of
    ensuring that that occurred, so I hope that is where you are
    leaning, Mr. Secretary.
        Secretary Mineta. Well, you are right, absolutely right. We
    will keep trying.

                        FEDERAL AVIATION ADMINISTRATION

        Senator Murray. Let me ask you about the FAA because the
    FAA expects 73 percent of its air traffic controllers to retire
    over the next 10 years, and as part of last year's
    appropriations bill, we fully funded your request to hire an
    additional 595 air traffic controllers and we provided an extra
    $12 million that you did not request to try to fill some of
    those vacancies in the ranks of the aviation safety inspectors.
    These are perhaps the most critical safety positions in the
    entire FAA, and unfortunately, as you know, the across-the-
    board cut was imposed in the defense appropriations bill that
    impacted that funding somewhat.
        But it is now the middle of March. We are almost halfway
    through this fiscal year, and ever since the new year began,
    our subcommittee has been trying to find out how many new air
    traffic controllers and safety inspectors you will actually be
    hiring this year. Your Department has not been able to give us
    a straight answer to address that issue and I can't help but be
    concerned that if your Department doesn't have a plan yet
    halfway through this year for dealing with this critical safety
    question, that we are either endangering safety or you are
    incapable of managing your people.
        So, Mr. Secretary, can you tell this committee precisely
    how many air traffic controllers and how many air safety
    inspectors you will be hiring this year?
        Secretary Mineta. We are adhering to the congressional
    plan. As I recall, the plan was for 1,129 air traffic
    controllers.
        Ms. Scheinberg. I believe it was originally 1,249.
        Secretary Mineta. I am sorry, the plan was originally for
    1,249 air traffic controllers, and there is no plan for
    inspectors. But in any event, we are geared toward the
    congressional plan.
        Senator Murray. Well, how many----
        Secretary Mineta. The 1 percent across-the-board rescission
    has impacted the FAA, plus the fact that we have to absorb pay
    raises from within the budget. In fiscal year 2006, as I
    recall, we have to absorb close to 1 percent of the pay raise.
        Senator Murray. We actually gave you 12----
        Secretary Mineta [continuing]. Two-point-two----
        Senator Murray. We gave you $12 million more than you
    requested----
        Secretary Mineta. It was a 3.1 percent pay raise----
        Senator Murray [continuing]. So even with the across-the-
    board cut and with the other factors that you put in place, we
    should be on a road to do this? I am deeply concerned that we
    have not yet been able to get from your office the workforce
    plan. You have to hire these critical safety inspectors that we
    need on the ground, so when our public flies, they know their
    planes have been inspected, and air traffic controllers, who,
    as you know, are retiring at a much higher rate than you are
    now hiring.
        Secretary Mineta. Well, our plan on air traffic controllers
    was 1,249 and the number of inspection for flight standards and
    aircraft certification personnel Congress funded to be hired is
    238. That is the congressional plan that was----
        Senator Murray. If you could get back to us within the next
    week here how many you have actually hired and exactly, over
    the course of the next few months, how many you are in the
    process of hiring----
        Secretary Mineta. Absolutely.
        Senator Murray [continuing]. I think it is important for us
    to know.
        Secretary Mineta. We will do that for the record.
        [The information follows:]

        With regard to air traffic controllers, in December 2004, the FAA
    published ``A Plan for the Future: The Federal Aviation
    Administration's 10-Year Strategy for the Air Traffic Control
    Workforce.'' This document outlined the agency's plans to hire and
    train controllers based on actual results and changes in traffic
    forecasts since 2004. In the December 2004 report, FAA estimated the
    need to hire 1,249 controllers in fiscal year 2006 with estimated
    losses of 654 controllers for a net gain of 595 controllers. This
    estimate was based on traffic forecasts produced in March of 2004.
    Based on the March 2005 forecasts, FAA reduced the number of planned
    hires in fiscal year 2006 from 1,249 to 1,129. Since that time, in
    March 2006 new aviation forecasts were released resulting in further
    reductions to the number of planned hires in fiscal year 2006 from
    1,129 to 930 controllers with losses of 800 for a net increase of 130
    controllers in fiscal year 2006.
        Unlike the air traffic controllers, there is no FAA staffing plan
    for hiring safety personnel. For fiscal year 2006, FAA requested
    funding for 97 additional safety personnel in flight standards and
    aircraft certification. Congress increased funding for FAA safety
    personnel to a total of 238 in fiscal year 2006, or a net increase of
    141 personnel from the FAA request. As a result of the 1 percent
    rescission and unfunded pay raise in fiscal year 2006 ($13.9 million),
    FAA planned to hire only 87 additional safety personnel. However, in
    keeping with the Congressional desires to increase safety personnel
    above the FAA requested level, the Department submitted a reprogramming
    request to Congress to use lapsed funds in fiscal year 2005, in
    addition to transfers from other lines of business, to fund an
    additional 84 staff in safety surveillance oversight in fiscal year
    2006. FAA anticipates hiring a net increase of 171 safety personnel in
    fiscal year 2006, or 67 less than the level requested by Congress.

                              FAA REAUTHORIZATION

        Senator Murray. All right. The authorization of the
    Aviation Trust Fund, as you know, expires at the end of fiscal
    year 2007 and we have not yet heard the administration's views
    on the future of aviation financing. The Air Transport
    Association supports a plan that would charge a fee to every
    user of the air traffic control system. The general aviation
    community responded quickly opposing user fees. We were told to
    expect the administration's plan to be released sometime this
    month, in March, and as I said, this month is half over. Can
    you tell us when we are going to see the administration's new
    proposal for aviation financing?
        Secretary Mineta. We have submitted it to OMB. I don't
    think it will be out by the end of this month. I would say
    within a month, it will be completed.
        Senator Murray. Well, what is your----
        Secretary Mineta. So I would say by the--I am sorry.
        Senator Murray. Since you have submitted it to OMB, can you
    give us your general response to the proposals that have been
    put forward by the Air Transport Association?
        Secretary Mineta. Until OMB approves the plan, I am not
    able to say where we are going on it.
        Ms. Scheinberg. Senator Murray, our proposal has
    significant changes to the current financing of the FAA, and as
    a result, OMB has put the proposal through interagency
    clearance. There are significant issues that the Department of
    Treasury and other agencies are contemplating. This is not a
    single-agency review; we have been talking with these other
    agencies and trying to iron out the plan.
        Senator Murray. Okay. Well, let me ask you one very
    specific question. The proposal of the Air Transport
    Association appears to eliminate the role of this committee in
    overseeing the FAA as well as directing Federal funds for the
    operation and modernization of the FAA.
        Secretary Mineta. I am sorry, the ATA----
        Senator Murray. The ATA proposal appears to eliminate this
    committee's oversight of the FAA and I want to know whether
    your proposal is going to change the role of this committee.
        Secretary Mineta. No, not at all.
        Senator Bond. Thank you very much, Senator Murray. This
    committee goes by the FIFO rule, but since we have been joined
    by the distinguished chairman of the full committee, I might
    ask, since he has multiple responsibilities, if he would like
    to go next.

                       STATEMENT OF SENATOR THAD COCHRAN

        Senator Cochran. Mr. Chairman, thank you. I appreciate the
    opportunity to join you and the other members of the
    subcommittee in welcoming the distinguished Secretary of
    Transportation and his Chief Financial Officer to our committee
    hearing. We appreciate your good assistance as you carry out
    your duties. Over the last 5 years, you have demonstrated a
    great amount of competence and you have devoted an enormous
    amount of effort to helping to protect and expand our Nation's
    transportation assets. We appreciate your very outstanding
    work.
        Secretary Mineta. Thank you.
        Senator Cochran. I might add, too, we thank you for your
    timely assistance to the airports in the gulf coast region,
    which suffered enormous damages as a result of Hurricanes
    Katrina and Rita. We are recovering. We are rebuilding. But it
    wouldn't be possible without the strong support of you
    personally and the other members of this administration. We
    appreciate that help very much.
        Secretary Mineta. Thank you very much, sir.
        Senator Cochran. Thanks, Mr. Chairman.
        Senator Bond. Thank you very much, Chairman Cochran.
        Senator Bennett.

                     STATEMENT OF SENATOR ROBERT F. BENNETT

        Senator Bennett. Thank you, Mr. Chairman.
        Mr. Secretary, I would be remiss if I did not once again
    thank you and commend your Department for all of the support
    you have given to public transportation in the State of Utah. I
    sit on the Banking Committee, which authorizes public
    transportation and mass transit, and it is always fun, as the
    Senator from a State perceived to be a rural State--actually,
    we are one of the most urbanized States in the Nation--to hear
    Senators on the Banking Committee from Eastern States always
    talk about urban transit and say, why can't we do it as well
    everywhere as we are doing it in Salt Lake City?
        That always makes me feel good and it is because of the
    partnership that has been built with the people in Utah and the
    staff at FTA. I need to continually thank you and them for the
    cooperative way in which we have worked on that. We like being
    the example that people point to.
        My favorite story, Mr. Chairman, there is still a hard-core
    group in Utah that opposes mass transit and they held a rally
    in downtown Salt Lake City, and in the notice for the rally,
    they said, this will take place during rush hour, so if you
    want to be sure to get there on time, take mass transit in
    order to be there.

                            INTERCITY PASSENGER RAIL

        Mr. Secretary, do you really think we have got a shot at
    making Amtrak finally work? It has been around for so long. I
    have heard so many stories over the years about, well, this is
    the year that we are going to get Amtrak under control. This is
    the year that Amtrak is going to finally deal with its debt
    burden. It is going to finally get its service where it ought
    to be. I hear your optimistic statements and I read them. I
    have been reading through the material that is available to us.
    It all sounds good. Just give me your gut reaction as to where
    we are in Amtrak.
        Secretary Mineta. Amtrak reform is not going to be done in
    a short period of time. As an example, in our reform measure we
    asked that the Northeast Corridor assets be turned over to the
    Department of Transportation. We would then take 6 or 7 years
    to bring it up to a good state of affairs. In the meantime, we
    would form a consortium of the Northeast Corridor States to
    which we would then be able to turn back those assets. The
    other part of the program would be 50 percent capital
    partnership with the States on capital improvements.
        It is a journey that starts at some point. That point is
    going to be when we get the reform measures in place on the
    structure of Amtrak, based on the principles in our reform
    measure. It requires those principles to be embraced in
    legislation, or in terms of Board practices, and laid out over
    a number of years to transform Amtrak into a sustainable, well-
    functioning intercity passenger rail system.
        Senator Bennett. I agree absolutely that we have to have a
    functioning intercity rail passenger system in those parts of
    the country where it makes sense. Every year at these hearings,
    I say this, and every year at these hearings, or after these
    hearings, there are nasty letters to the editor about me in the
    Salt Lake papers.
        The Northeast Corridor Amtrak rail passenger service,
    absolutely essential. We could not sustain the impact of
    dumping that many passengers on the highway or trying to cram
    them into airplanes. I think the total number of people who
    debark Amtrak in Salt Lake City is less than a dozen a week.
    Now, I may be off by an order of magnitude. It may be 120 a
    week. But the cost of maintaining that kind of service over
    those kinds of distances simply doesn't make sense to me.
        I see the Senator from Illinois is here. It may make sense
    from New York to Chicago. That is outside of the Northeast
    Corridor. It may make sense from Los Angeles to San Francisco.
    But I hope as we look at the Amtrak long-term, we recognize
    that in order to have, paraphrase it just a little, in order to
    have mass transit make sense, you have to have the mass that
    needs to be transited.
        Given the distances we have in this country, intercity
    passenger service in the Northeast Corridor or perhaps between
    New York and Chicago, you do have the mass that needs to be
    transited, but the mass coming from, let us say, Denver to Salt
    Lake City that is currently handled by train is not enough to
    justify the kinds of expenditure that the taxpayers are being
    called upon to provide.
        Thank you, Mr. Chairman.
        Secretary Mineta. You are absolutely correct, Senator, and
    the No. 1 principle, as I recall, in our reform proposal is to
    make economic sense and congestion sense. Yes, sir.
        Senator Bond. Thank you very much, Senator Bennett.
        Senator Durbin.

                            INTERCITY PASSENGER RAIL

        Senator Durbin. Thank you, Mr. Chairman.
        Secretary Mineta, thank you for being here. You have given
    a lifetime to public service as a mayor and Member of the House
    of Representatives and in the President's Cabinet and I thank
    you for that.
        Secretary Mineta. Thank you.
        Senator Durbin. I am happy to count you as a friend. But I
    want to ask you some questions following up on Senator
    Bennett's questions.
        I can't figure out where this administration is when it
    comes to Amtrak. Last year, you zeroed it. Congress came back
    and said, no. We passed an authorization bill for Amtrak in the
    Senate by a vote of 93 to 6 and an appropriation bill of $1.3
    billion, which we felt might be adequate to keep Amtrak
    functioning.
        Six days after we passed the authorization bill, Mr. Gunn
    was dismissed as the head of Amtrak. I think that was a serious
    mistake. I think he has been one of the most level-headed
    administrators in the history of that operation. He was totally
    apolitical, as I saw it, and maybe that is what cost him his
    job. He has not been replaced, as I understand it, as of today,
    which is a sad commentary on Amtrak's administration and
    management. If the administration is clearly dedicated to
    reforming Amtrak, then you need an engineer in that locomotive
    and you don't have one at this moment.
        Secondly, the budget request this year just leaves me cold.
    It is as if someone is drowning 50 feet offshore and you throw
    them a 25-foot rope. That is what has happened this year with
    this $700 million request. We know, I think reliably so--I am
    sorry, $900 million request. We know, reliably so, that Amtrak
    needs about $1.6 billion to maintain operations and to make
    critical investment, to conform with the Americans with
    Disabilities Act and other legal requirements. Absent that kind
    of basic capital investment, there is no way they can maintain
    schedules and ridership.
        In my State, it is personal. We are deeply committed to
    Amtrak. The State of Illinois has made a commitment of $12
    million-plus to Amtrak on an annual basis because we value it
    so much. So it isn't as if we are begging from the Federal
    Government or asking without coming up with something locally.
    It is essential to us in terms of the passengers that are
    served when we have, I think, 2.5 million passengers in the
    course--yes, 2.5 million passengers ticketed through Chicago on
    Amtrak in the year 2005.
        So my basic question to you, Mr. Secretary, is this. Is it
    the administration's intent before they leave office to let
    Amtrak slowly wither and die on the vine, or are you willing to
    work with people of good faith and good will who are trying to
    make the necessary investments so that Amtrak has a future? I
    can't argue for Senator Bennett's situation in Utah because I
    don't know it, but I do know the situation in Illinois. Amtrak
    is essential to down-State residents as well as those in the
    Chicagoland region, and we are fearful that the
    administration's goal is to close down Amtrak as we see it, or
    to diminish the investment in Amtrak that is necessary for its
    future. I would like to ask you to comment, please.
        Senator Bennett. Senator, I have been trying to give our
    Amtrak dollars to you for years.
        Senator Durbin. We are still willing to take them, too.
        Secretary Mineta. We are very committed to an intercity
    passenger rail system, but the present structure isn't going to
    give us a long-term, viable intercity passenger system that is
    sustainable. That is why people say, ``Mineta, why are you
    trying to kill Amtrak?'' Frankly, if I wanted to kill Amtrak, I
    would do nothing. But we are working to formulate a financial
    and public policy to deal with Amtrak in the long-term.
        I wish we could get over the hump of other people saying we
    are trying to kill Amtrak. Rather, we are trying to build
    Amtrak, or some kind of an intercity passenger rail system, for
    the future. That is why in our proposal, we commit to a 50
    percent capital improvement program partnership with the
    States. As examples, there are Oregon and Washington with
    service to British Columbia, the California system, and the
    Northeast Corridor. There are also the States themselves, as
    former Governor Kit Bond talked about his commitment to rail in
    the State of Missouri.
        Today, there is a Midwest Railroad Initiative made up of
    Michigan, Illinois, Wisconsin, Minnesota, Iowa, Indiana, Ohio,
    Missouri, and Kansas. Those States are putting into their rail
    operation, as I recall, somewhere around $30 million. They are
    doing that totally with State money. We are willing to work
    with the States and come up with a 50-50 partnership for their
    capital programs.
        In our reform package, we are trying to follow the model
    currently used to finance transit, highway and airport capital
    projects. Those are all partnership programs.
        Senator Durbin. Mr. Secretary, if I could just--I know my
    time is up, and I don't want to prevail on the committee any
    longer other than to suggest that Illinois has already invested
    $250 million in upgrading Amtrak. We have made a commitment. We
    are not just there with our hands up to the Federal Government.
    And a $12 million annual commitment to the operating expenses
    of Amtrak in our State. We believe it is essential for our
    economy.
        I don't believe we can have a realistic and cogent energy
    policy in America that does not include mass transit and rail
    transit, including Amtrak, in circumstances like Illinois. To
    put more cars on the road is not going to in any way reduce our
    addiction to oil in this country. So I hope that the
    administration will work with us in Congress to try to find the
    right funding level so that Amtrak doesn't just survive another
    year, but starts to build for a more successful future.
        Secretary Mineta. Well, I think----
        Senator Bond. Thank you very much, Senator Durbin, and
    regrettably, since we do want to get this next panel up and
    have them testify, because our votes are starting, I am going
    to stay here as long as I can, I want to hear what the Amtrak
    panel has and I will submit a whole bunch of questions on AIP,
    why you took the $100 million out of existing funds, what are
    the other options that States may pursue on Amtrak and Open
    Skies.
        But thank you very much, Mr. Secretary, and we will be
    continuing our dialogue with you and now we would like to
    invite the second panel.

                         ADDITIONAL COMMITTEE QUESTIONS

        Secretary Mineta. We will submit for the record responses
    to the questions sent by the members. Thank you very much,
    Chairman Bond and members of the committee.
        [The following questions were not asked at the hearing, but
    were submitted to the Department for response subsequent to the
    hearing:]

            Questions Submitted to the Department of Transportation

               Questions Submitted by Senator Christopher S. Bond

                              TRANSIT SMALL STARTS

        Question. Mr. Secretary, in light of the Advanced Notice of
    Proposed Rulemaking issued by FTA last month regarding Small Starts,
    how will you ensure that the Small Starts program has the right balance
    between oversight and flexibility of funds? This program could be a
    great resource for small transit authorities or those that are lacking
    the financial resources to devote to large scale mass transit projects.
    However, my concern is that if the Department creates too much
    bureaucratic red tape, it may defeat the purpose of providing a grant
    program for smaller transit projects.
        Answer. The Safe, Accountable, Flexible, Efficient Transportation
    Equity Act: A Legacy for Users (SAFETEA-LU) provides Small Starts
    funding to projects with total costs not exceeding $250 million and New
    Starts funding of less than $75 million. Each project must conduct an
    alternatives analysis and be approved to enter project development
    based on requirements in a reduced set of criteria for Small Starts
    project justification compared to traditional New Starts projects.
        The Advanced Notice of Proposed Rule Making (ANPRM) issued January
    30, 2006, addresses both reduced requirements on grantees and the need
    for projects to be well justified. The requirements are scaled to the
    size and complexity of the project so that simple projects at lower
    cost require less effort to demonstrate their worthiness for funding
    while larger projects are required to perform more analysis. To
    highlight these differences in justification the Federal Transit
    Administration (FTA) has proposed a category of projects that are
    justified for funding by virtue of their physical characteristics, cost
    limitations and existing ridership. This category is called ``Very
    Small Starts.'' Projects that qualify for this category also rate well
    for each of the project justification criteria in SAFETEA-LU;
    therefore, no detailed assessment of transportation benefits is
    necessary, saving project sponsors significant time and costs for
    analysis. The specific project characteristics for Very Small Starts
    have been defined in FTA's proposed interim guidance for Small Starts
    that was issued on June 9, 2006.
        Additional reductions in requirements for Small Starts funding are
    for alternatives analysis studies and for effort to produce information
    for evaluation. It is anticipated that alternatives analysis studies
    will be simpler than those for traditional New Starts because areas
    considering smaller projects will have a limited number of alternatives
    that need to be examined and the settings for the projects could
    involve less analysis. The tools needed to forecast transportation
    benefits could also be simpler to develop and apply as described in the
    ANPRM. These efforts are aimed at reducing Federal ``red tape'' while
    ensuring project benefits and financial capacity can be met so that
    only meritorious projects go forward.

                               BUS RAPID TRANSIT

        Question. Mr. Secretary, in terms of providing more cost-effective
    solutions to traffic congestion, Bus Rapid Transit appears to be a
    great alternative to the expensive capital costs associated with
    building or expanding light and heavy rail mass transit systems. Are
    there any new ideas coming from the Department to make Bus Rapid
    Transit more efficient in terms of operating? Is anything being done to
    make BRT more attractive to transit authorities throughout the country?
        Answer. While each transit mode has its place, Bus Rapid Transit
    (BRT) generally offers an attractive solution where there are dedicated
    or segregated travel lanes, well-designed bus stations with level
    boarding, multiple doors for entry and egress onto large platforms, and
    less frequent stops as opposed to minimally equipped and frequent bus
    stops, off-board fare collection, transit signal priority and queue
    jumping at intersections, timely and appropriate customer service
    information, and large comfortable buses that project a unique identity
    of the service.
        The new Small Starts program makes available an additional source
    of funding for BRT projects, both with and without fixed guideways.
    Under the Small Starts category, certain ``corridor-based bus capital
    projects'' are eligible for funding. Projects are limited to those with
    proposed Capital Program funds of less than $75,000,000 and a total
    project cost of less than $250,000,000. The Proposed Interim Guidance
    and Instructions for Small Starts has been released recently for public
    comment. The project justification criteria are simplified, focusing on
    three criteria: cost-effectiveness, public transportation that is
    supportive of land use policies, and the effect on local economic
    development. The criteria for local financial commitment have been
    simplified to focus only on a shorter term financial plan. The project
    development process for Small Starts is a three-step process:
    alternatives analysis, project development, and construction, rather
    than the four steps for the more elaborate New Starts projects.
        In cooperation with the National Bus Rapid Transit Institute, FTA
    has launched several information-gathering and outreach activities to
    promote BRT as a cost-effective alternative. FTA has been conducting
    several public outreach seminars and workshops to inform both transit
    agencies and the public on the attributes and benefits of BRT. FTA has
    also launched a program to update the document ``Characteristics of Bus
    Rapid Transit for Decision Making'' that was released in 2004 to add
    advances made in BRT systems. The update is slated for release in late
    2007. FTA has initiated cooperative working relationships with the U.S.
    Conference of Mayors and several non-profit organizations that are
    promoting BRT to share data and to extend the reach to more
    organizations, thereby resulting in greater interaction with the public
    in finding solutions for congestion mitigation in metropolitan areas.
    fmcsa partnership with the states in implementing safetea-lu provisions
        Question. Mr. Secretary, as you well know, as a result of SAFETEA-
    LU, the modal Administrations in your Department that oversee surface
    transportation have a considerable job to do in implementing many of
    the provisions in that legislation in both a regulatory and grant
    framework.
        In many cases, this requires a close working relationship and
    partnership with existing organizations representing State and local
    governments. It also requires the leveraging of resources and meeting
    venues with these groups. For example, this is accomplished in FHWA
    through its partnership with AASHTO. In public transit, it is FTA's
    partnership with groups such as APTA. In automobile safety, it is
    NHTSA's partnership with groups such as the Governor's Highway Safety
    Association.
        With respect to motor carrier safety, it is my understanding that
    one group that the Federal Motor Carrier Safety Administration (FMCSA)
    should be working closely with is the Commercial Vehicle Safety
    Alliance (CVSA) whose membership consists of State motor carrier safety
    enforcement agencies and those in Canada and Mexico.
        I have learned that FMCSA has chosen not to participate in one of
    the two international meetings that CVSA holds each year and that it
    has decided not to allow States to use MCSAP funds to attend CVSA
    meetings. This is troubling since FMCSA has a huge task in implementing
    SAFETEA-LU State motor carrier safety grant programs as well as the
    constant need to deal with safety and security issues at both our
    Northern and Southern borders. It is critical that FMCSA continue to
    maintain a consistent motor carrier safety and security policy
    throughout North America and involve the States in helping to make
    critical decisions since they are delivering the bulk of the motor
    carrier safety programs.
        In light of this, Mr. Secretary, can you tell me why FMCSA is not
    better leveraging taxpayer dollars and meetings with those of CVSA?
        Answer. The Federal Motor Carrier Safety Administration (FMCSA) and
    the Commercial Vehicle Safety Alliance (CVSA) have always worked
    closely and cooperatively to advance motor carrier safety on the
    Nation's highways. Through its Annual Spring Conference and the Fall
    Workshop, CVSA has provided a regular forum for State and Federal
    enforcement personnel and industry representatives to address critical
    issues confronting motor carrier safety. FMCSA values this relationship
    and will continue to participate in these forums. FMCSA leadership and
    staff will continue to work with State and industry members on CVSA's
    committees and will continue to participate on CVSA's Executive
    Committee at the Associate Administrator level. FMCSA is also meeting
    with CVSA's executive staff monthly to address immediate safety
    concerns and define issues for scheduled CVSA membership meetings.
        Over the past few years, DOT has focused increasingly on being an
    effective steward Federal grant funds. As a result, FMCSA has taken a
    more direct leadership role with its State partners to ensure grant
    funds are being applied with the highest safety benefit. On February 1,
    2006, FMCSA sent a letter to each State outlining the use of Motor
    Carrier Safety Assistance Program (MCSAP) funds for CVSA meetings. The
    letter stated fiscal responsibility dictates that grant funds could be
    used for two national meetings with our State partners each year--a
    CVSA conference and an FMCSA Annual MCSAP Conference. The effective
    date of the new policy was delayed until fiscal year 2007 to provide
    CVSA with an adequate planning period. In May 2006, FMCSA conducted its
    MCSAP Conference. Invitations were issued to the director of each
    State's lead agency in order to build a more effective working
    relationship with policy-level decision-makers. During the 2-day
    meeting, presentations focused on SAFETEA-LU provisions and guidance to
    the States on implementation of the new congressional requirements. The
    feedback received from that meeting indicates an overwhelmingly
    favorable response for continuance which FMCSA intends to do annually.
        Nearly half of FMCSA's budget is dedicated to grant programs to
    fund vital State enforcement and educational efforts. For that reason,
    FMCSA also works with other critical groups such as the American
    Association of Motor Vehicle Administrators (AAMVA), the International
    Association of Chiefs of Police (IACP), and the American Association of
    State Highway and Transportation Officials (AASHTO) to advance
    commercial motor vehicle safety.

                       OPEN ROADS FINANCING PILOT PROGRAM

        Question. I am glad to see the administration's fiscal year 2007
    budget adheres to the guaranteed highway funding levels called for in
    SAFETEA-LU. I feel strongly that we need to adhere to the commitments
    made to our States in that bill.
        Along those lines, I am intrigued by your proposed Open Roads
    Financing Pilot Program. First of all, I am wondering why the
    administration did not suggest this concept while we were in
    negotiations on last year's highway bill. More fundamentally, I am
    concerned that you are in effect proposing to divert $100 million that
    has been dedicated to surface transportation improvements to fund a
    series of initiatives that will not focus on infrastructure. I fully
    agree that we must begin to prepare for the transportation financing
    challenges of the future, and I look forward to seeing what the
    administration proposes in the way of revenue proposals for the
    aviation trust fund sometime this year.
        If the Open Roads Financing Pilot Program is such a priority for
    the administration, then why aren't you proposing an additional $100
    million for this initiative rather than suggesting cuts elsewhere?
        Answer. During the preparation of the fiscal year 2007 budget, the
    concept of the Open Roads Financing Pilot Program was developed to
    allow States to better leverage the resources provided in SAFETEA-LU
    and to inform the next reauthorization debate. The $100 million in
    funding proposed for the program will assist up to five States in
    evaluating innovative ways and to demonstrate the benefits of more
    efficient methods of charging for the use of major portions of their
    highway systems. Successful alternatives will include innovative
    mechanisms that can augment existing sources of State (not Federal)
    highway funding, enhance highway performance, and reduce congestion.
    The administration believes the activities for this program should be
    funded within the guaranteed levels enacted in SAFETEA-LU.

                          AIRPORT IMPROVEMENT PROGRAM

        Question. The administration's budget proposes a $765 million
    reduction in funding for the Airport Improvement Program. I recall that
    you requested a $500 million AIP cut in last year's budget, which this
    subcommittee rejected. While I am concerned that we are going down this
    road again, I have a more substantive question about this proposal.
        You have previously stated that your $2.75 billion AIP
    recommendation would be sufficient to fund all currently planned
    airport construction projects. At the same time, your agency is
    forecasting passenger air travel will increase 45 percent from 738.6
    million enplanements in 2005 to almost 1.1 billion in 2017. Given this
    dramatic growth in estimated travel, doesn't it make sense to begin
    expanding aviation infrastructure capacity right now to prepare for the
    future, rather than simply attempting to cover the minimum amount of
    investment needed today?
        Answer. The decision to request an Airport Improvement Program
    (AIP) funding level of $2.75 billion reflects the tough realities of
    the present budgetary climate. We took a hard look at the level of AIP
    funding that would be needed to meet our highest priorities and to keep
    the national airport system safe, secure and efficient.
        At the proposed $2.75 billion funding level, the Federal Aviation
    Administration (FAA) will be able to fund all high priority safety,
    capacity, and security projects. The FAA will be able to: fund all of
    its current and anticipated letter of intent commitments; improve
    runway safety areas; help airports meet their Part 1542 security
    requirements; and, continue work on phased projects.
        For the longer term, the FAA is reviewing the current and future
    structure and level of AIP in the context of reauthorization. AIP
    provides 20-25 percent of airport capital funding needs nationally.
    Therefore, the FAA is working to develop an AIP funding proposal that
    assures sufficient Federal funds to meet high priority airport capital
    funding needs that cannot be met through other sources.

     RULEMAKING ON SINGLE OCCUPANCY HYBRID ELECTRIC VEHICLE ACCESS TO HOV
                                   FACILITIES

        Question. What is the status of DOT's rulemaking on single
    occupancy hybrid electric vehicle access to HOV facilities? Has DOT
    consulted with EPA to determine vehicle criteria and requirements for
    single occupancy hybrid electric vehicle access on High Occupancy
    Vehicle lanes? Has EPA provided DOT vehicle certification, and
    guidelines and procedures for vehicle comparison and performance
    calculations, as required by the law? How is DOT enforcing State
    compliance with the HOV facility provisions in the new Federal highway
    law? What is DOT advising States like California and New York that have
    established HOV lane single occupancy vehicle exemptions in violation
    with Federal law?
        Answer. Section 1121 of the Safe, Accountable, Flexible, Efficient
    Transportation Equity Act: A Legacy for Users (SAFETEA-LU) adds section
    166 to title 23 of the United States Code. Section 166(e) requires the
    Environmental Protection Agency (EPA) to issue regulations concerning
    the certification and labeling requirements for low emission and
    energy-efficient vehicles and to establish guidelines and procedures
    for making the fuel efficiency comparisons and performance calculations
    described in new section 166(f). Section 166(f) establishes the minimum
    percentage gains in fuel efficiency that vehicles must achieve in order
    for States to be able to allow them to use an HOV facility. EPA
    certifies the percentage gain in fuel economy that qualifies vehicles
    under this subsection. A State may require a higher percentage gain in
    fuel economy than the Federal minimum. The Federal Highway
    Administration (FHWA) is working with EPA on this rulemaking.
        The statute is effective immediately, but the EPA rulemaking is not
    expected to be completed until the end of 2006. Thus, FHWA has granted
    conditional approval to States that demonstrate reasonable compliance
    with the SAFETEA-LU requirements. To date, conditional approvals have
    been provided to New York and California. FHWA recently clarified that
    both California and New York must ensure that more stringent fuel
    economy standards are based on a percentage gain in fuel efficiency and
    that these States must work toward correcting any inconsistencies with
    this requirement. Other States that wish to allow low emission and
    energy-efficient vehicles to use HOV facilities now may request a
    conditional approval on a similar basis. The programs that are
    conditionally approved may have to be changed to comply with the EPA
    final rule when that rule is issued.

                              NPRM AND OPEN SKIES

        Question. Secretary Mineta, one contentious issue that has emerged
    in a number of areas of late is the question of ownership and foreign
    control. Can you please explain for me the relationship between the
    notice of proposed rulemaking (NPRM) on ``actual control'' and the
    status of the Open Skies agreement between the United States and the
    EU?
        Answer. The goal of the NPRM proceeding is to realize the
    commercial and public benefits obtained by providing the airline
    industry with greater access to global capital markets, while ensuring
    that U.S. citizens remain in actual control of U.S. airlines. We are
    proposing to modify our interpretation of ``actual control'' because a
    change in the historic interpretation appears to be long overdue and in
    the best interests of the U.S. airline industry and the American
    public. The European Union has made it clear that it will not move
    forward on the agreement until it has the opportunity to assess the
    final outcome in DOT's ``actual control'' proceeding. However, this
    rulemaking was initiated, and is being pursued, based on its own merit.

                                     AMTRAK

        Question. Why does Amtrak not have a detailed multi-year financial
    plan? Wouldn't this planning document, similar to a TIP, or
    transportation improvement plan, help Amtrak identify year-to-year,
    what priorities for improvements are necessary to be made and help in
    the budget process?
        Answer. Amtrak has regularly developed multi-year investment plans
    in the past. The problem is that these plans have been developed in
    isolation, without involvement from the States, who are key drivers in
    planning for other modes of transportation. In addition, these plans
    have been built on unrealistic assumptions, not the least of which is
    that the Federal Government would fund whatever Amtrak asked for
    regardless of efficiency and/or effectiveness of Amtrak's proposed
    investments. In recognition of the need for meaningful plans, the
    Federal Railroad Administration (FRA) has made as a condition of its
    grant agreement with Amtrak the development of an infrastructure
    investment plan with substantial involvement of the States and other
    users of the infrastructure. FRA has also directed Amtrak to develop
    plans for improving the financial performance of long-distance trains
    and for identifying its equipment needs. If these requirements are
    satisfied, they can become a major part of the foundation for the
    detailed multi-year financial plan that is needed.
        Question. Realizing that Amtrak needs approximately $295 million to
    address its mandatory debt service, and zero is provided in this year's
    budget proposal, how would you propose to address the debt?
        Answer. The Federal Government does not guarantee the repayment of
    any of Amtrak's current debt. In this, Amtrak is the same as any other
    private company. Amtrak needs to look to its own resources, including
    the repayment of mandatory debt service.
                                     ______

                   Questions Submitted by Senator Mike DeWine

                            AIR TRAFFIC CONTROLLERS

        Question. In 1999, the FAA cut the number of Air Traffic Control
    Supervisors by 700 positions. Since this reduction in supervisor
    staffing, the number of operational errors and runway incursions has
    increased, prompting safety concerns documented by the Department of
    Transportation (DOT) Inspector General in reports in 2000 and in 2003.
        Reports accompanying the fiscal year 2004 and fiscal year 2005
    transportation appropriations measures directed the FAA to increase
    supervisory staffing levels by 120 positions per year to a floor of
    1,846 on September 30, 2005. Unfortunately, recent reports indicate
    that the FAA has not hired enough permanent supervisors to meet this
    floor. Finally, and most importantly, there appears to be a strong
    correlation between the number of supervisors and operational errors.
    The FAA's own fact book shows that as the FAA began to hire more
    supervisors in fiscal year 2004 and fiscal year 2005 in response to the
    committee's directions, the increase in the number of errors dropped
    significantly. The FAA Fact Book shows there were only 1,710
    supervisors on April 1, 2005. Moreover, it is my understanding that
    when the FAA made efforts to reach the 1,846 floor by the end of the
    fiscal year 2005, it did so with temporary promotions of controllers
    into supervisory ranks rather than permanent hires.
        Secretary Mineta, I have long been concerned about adequate
    supervisory staff for our air traffic control system, and the impact a
    lack of full-time supervisors has had on the safety of the flying
    public. In the past, this subcommittee has noted that as numbers of
    supervisors decreased serious operational errors and runway incursions
    have increased. We addressed this issue via committee reports in fiscal
    years 2002, 2003, 2004 and 2005. To fix the problem, Congress has
    mandated that the FAA have at least 1,846 supervisors on hand by
    September 30, 2005. What was the exact number of air traffic control
    supervisors on that date? Of this number how many were air traffic
    controllers temporarily appointed to supervisory positions? How many
    supervisors were in place on March 1, 2006? Were any of these
    supervisors temporary appointments? If so, how many?
        Answer. The FAA believes the need to hire supervisors should be
    based on organizational requirements tied to the operation. FAA is
    facing several years of anticipated controller retirements and its
    source of hires for supervisors comes from existing controller ranks.
    FAA calculates the number of controllers it needs based on traffic
    volumes and other criteria. The number of supervisors is tied to the
    number of controllers, and traffic volumes, which have been down for
    the past few years. FAA's Controller to Supervisory Ratio on September
    30, 2005 was 8.07:1 and is consistent with industry best practices.
        On September 30, 2005, the FAA had 1,801 Operations Supervisors on
    board. Of this total, 72 air traffic controllers were temporarily
    appointed to supervisory positions during that month. On March 1, 2006,
    there were 1,749 Operations Supervisors on board. There were 9
    temporary appointments to supervisor position in February 2006. On
    April 25, 2006 the FAA had 1,794 Operations Supervisors, an increase of
    45 over the March 1st total. The controller-to-supervisor ratio on
    April 25th was 8.1:1.
        Question. Secretary Mineta, the Department of Transportation's
    Inspector General Mead has repeatedly said that lack of adequate
    numbers of air traffic control supervisors has resulted in a dangerous
    rate of increase in controller operational errors and runway
    incursions. What is the FAA doing to fix this problem? Has the
    Department instituted a freeze on hiring/promoting new air traffic
    control supervisors, and if so, what has prompted this decision?
        Answer. There has not been any decision to freeze hiring or
    promoting of new air traffic control supervisors. The FAA is continuing
    to monitor all causal effects of operational errors and runway
    incursions in its facilities.
                                     ______

                Questions Submitted by Senator Richard J. Durbin

                    FAA'S TELECOMMUNICATIONS INFRASTRUCTURE

        Question. I understand that the FAA's Telecommunications
    Infrastructure (FTI) management of the Air Traffic Controller
    communications system has been plagued with significant problems. For
    example, there have been three outages at O'Hare on 11
    telecommunications lines between O'Hare and Elgin, two of which
    occurred in March of 2006.
        The DOT Inspector General will soon release a report on the FAA's
    management of the FTI contract. To help put the findings and
    recommendations of that report in the proper context, please answer the
    following questions regarding the Air Traffic Control elements of that
    contract.
        The current ``Leased Interfacility NAS Communication System''
    (LINCS) uses TDM technology. Will FTI create a new network for Air
    Traffic Control to replace LINCS using modern packet-based technology?
    Will the Air Traffic Control part of the FTI system be more reliable
    than the existing LINCS system? If not, why spend more than $300
    million on a new system?
        Answer. FTI implements a multi-services platform that provides a
    wide range of service offerings and enables the FAA to meet a range of
    challenges. FTI uses Time-Division Multiplexing (TDM) technology for
    services supporting critical Air Traffic Control operations. FTI uses
    packet-based technologies for non-critical Air Traffic Management
    applications to support the broad distribution of data required by
    those applications. Packet-based technologies provide a highly cost-
    effective means for enterprise-wide distribution of data because they
    are based on ``postalized'' pricing that is not distance sensitive.
    This type of capability is not available through the LINCS network.
        FAA requirements for the FTI network call for six levels of service
    availability in contrast to the two levels of service availability
    provided by LINCS. The highest service availability level provided by
    the FTI network exceeds the highest specified availability level for
    the LINCS network.
        Finally, it should be noted that the basis for the $300 million
    capital investment is not solely to improve service availability,
    rather, it is to replace services provided by: (1) leased service
    contracts (e.g., LINCS) that are expiring; and (2) FAA-owned networks
    that are reaching the end of their economic lifetimes.
        Question. Does the FTI contractor get paid when it installs FTI
    system elements, or when those elements have been tested and actually
    go into service?
        Answer. The FTI contractor can bill for network infrastructure once
    it has been successfully tested and demonstrated its readiness to
    support the implementation of telecommunications services. There is a
    separate billing for individual services that takes place after they
    have been successfully tested and demonstrated as ready for FAA use. It
    is an FAA responsibility to cutover the service to actual use.
        Question. Are the Department of Defense and Department of Homeland
    Security satisfied that the FTI currently meets the security and
    reliability standards for the DOD and DHS portions of the ATC
    communications network?
        Answer. Yes. The FTI network complies with all current
    certification standards to include the latest versions of Federal
    Information Processing Standards (FIPS) 199 standards and National
    Institute of Standards and Technology (NIST) guidelines. When the FAA
    establishes a memorandum of understanding with other government
    agencies to provide telecommunications services, the specific
    guidelines and standards are identified by name to ensure a common
    security posture on the interfaces with those agencies. The FAA is
    already providing FTI services to DOD facilities and there have not
    been any issues with information security.
        Question. An effective way to measure progress under the contract
    is by the number of LINCS switches and circuits which have been
    disconnected. From the beginning of the contract through February,
    2006, what is the average number of disconnects per month? What is the
    highest number of disconnects in a given month? The FAA is still saying
    that the FTI transition will be completed by December 2007. From March,
    2006 forward, how many disconnects per month need to occur in the LINCS
    system to finish the contract before the FAA's stated completion date?
        Answer. The transition of services did not begin immediately upon
    contract award; rather, it began after the FAA achieved the In-Service
    Decision (ISD) milestone for the program in December 2003. In addition,
    it should be noted that the FAA's transition approach called for the
    program to trial run its procedures at two pathfinder sites. As a
    result, transition activities did not begin in earnest until the first
    quarter of fiscal year 2005. From that point to February 2006, there
    were an average of 78 disconnect orders issued per month. The highest
    number of disconnects in a given month occurred in the most recently
    completed month (March 2006) when 255 disconnect orders were issued.
    The number of disconnect orders per month has increased by more than 60
    per month over the past 3 months. As of the end of March 2006, there
    were a total of approximately 1,550 legacy service disconnect orders
    issued since the FTI transition began.
        While the number of legacy service disconnects is one measure of
    progress, it does not capture the full scope of the work effort. For
    example, while the transition of legacy services has proceeded, the FAA
    has also implemented over 800 new services directly onto the FTI
    network thereby avoiding additional investments in the legacy network
    infrastructure.
        Finally, it should be noted that service disconnects are rate-
    limited by the number of legacy services transitioned to the FTI
    network and the number of service cutovers completed by the FAA. In
    recent months, the FTI contractor (Harris) has increased monthly
    service implementation rates by nearly 250 percent since the start of
    fiscal year 2006. In addition, the FAA has implemented a number of
    process improvements that resulted in an increase of 100 more service
    cutovers for each of the past 3 months.
        As of the beginning of March 2006, there were approximately 13,000
    LINCS circuits remaining in operation. Based on this quantity, an
    average of approximately 590 services would have to be disconnected per
    month over the remaining 22-month period to achieve the planned
    completion of December 2007.
        Question. When will the expected savings from the FTI contract
    recoup all the transition costs and first show net savings? Is that
    date before or after the end of the original 10-year contract in 2012?
    What will be the total net savings, after factoring in all the
    transition costs, over the first 10 years of the FTI contract, through
    mid-2012?
        Answer. To clarify, there has been no change to the duration of the
    FTI contract. When the FAA first released the Screening Information
    Request to initiate the FTI procurement, the contract duration was set
    at 15 years. It has not been changed. With respect to the expected
    savings, the FAA projects that it will recoup all of the transition
    costs and reach the breakeven point by 2012. However, by as early as
    fiscal year 2008, it is projected that the FAA's total
    telecommunications service costs will be less than they would have been
    if the FAA had not implemented the FTI network.
        Because the breakeven point occurs roughly in mid-2012, the total
    net cost savings will essentially be zero at that point. However, it
    should be noted that the FTI business case projects that FAA operating
    costs for telecommunications services will be $129 million less in
    fiscal year 2012 than they would have been if the FAA had not
    implemented the FTI network.
                                     ______

                Questions Submitted by Senator Patrick J. Leahy

                                     AMTRAK

        Question. The most recent grant request from Amtrak indicates that
    the struggling railroad needs $1.5 billion next year for capital and
    operational expenses. The President's budget request, though, only
    seeks $900 million in total funding. Since we have heard the
    administration proclaim that it is dedicated to passenger rail
    nationwide, how does this budget request add up to that commitment?
        Answer. It is important to separate the form of transportation--
    intercity passenger rail--from the provider of that service. The
    administration supports intercity passenger rail service as a component
    of this Nation's transportation system where it has the potential to
    enhance the mobility of our citizens. Unfortunately, the business model
    we use today to provide that service--Amtrak--is so flawed that that
    potential has not been realized. The administration is willing to
    invest in passenger rail service but not in an unreformed Amtrak. The
    $900 million request reflects the administration's view that there has
    been progress in reforming intercity passenger rail service but much
    more progress is needed.
        Question. My small State of Vermont has two State-sponsored
    trains--the Vermonter and the Ethan Allen Express. The State of Vermont
    paid $2.65 million to cover the operating losses this year and is
    slated to pay $4 million next year as Amtrak ramps up the share paid by
    the States. The Department of Transportation and Amtrak have said that
    they intend to develop public-private partnerships for the corridor
    service. How closely are you working with the individual States to
    improve equipment and service on these trains?
        Answer. As part of this year's grant agreement, Amtrak was required
    to initiate a pilot through which a State, or States, could assume the
    responsibility for parts of the service they deem important to help
    assure that such service was provided with the highest quality and in
    the most cost-effective manner as possible. The Federal Railroad
    Administration (FRA) has been in contact with Vermont as it developed
    its response to this request for proposals which will result in
    improved service over the route of the Vermonter. Specifically, FRA
    anticipates that Vermont will soon apply for a loan under the Railroad
    Rehabilitation and Improvement Financing program to acquire new
    equipment that will provide more cost effective and frequent service.
    But this is just a pilot. For the long-term, the U.S. Department of
    Transportation (DOT) believes that a reformed system of intercity
    passenger rail service would work best if it is modeled after the
    successful partnerships between the USDOT and the State DOTs that
    implement the highway and transit programs. In these programs, the
    States assume the lead for the planning and implementation of
    transportation projects they believe are most important. USDOT is a
    partner in these efforts, providing support for capital investments.
        Question. I am also concerned about the lack of presidential
    nominations to the Amtrak Board of Directors. With three open seats on
    the seven-member Board and with the current Board members all holding
    the same party affiliation, what is the status of the President's
    process in filling the empty slots? I do not think any of us want to
    see a repeat of the secretive action that the partisan Board took last
    September to authorize splitting off the Northeast Corridor from the
    rest of Amtrak's operations.
        Answer. The President has attempted to fill the vacant seats on the
    Amtrak Board. However, the Senate has not chosen to act on his
    nominations. In 2004, the President nominated four highly qualified
    persons to the Board including two who do not share his political
    affiliation, yet the Senate chose not to vote on the confirmation of
    any of these four. Currently, the President has nominated four highly
    qualified persons for the five existing vacancies on the Amtrak Board.
    Of these one does not share the President's political affiliation. I
    hope that the Senate will act timely on these nominations.
        Also, to clarify, the Amtrak Board's vote last September did not
    authorize splitting off of the Northeast Corridor (NEC) from the rest
    of Amtrak's operations. Rather, the Board authorized an evaluation of
    structural options to segment the finances of the NEC so that Amtrak
    could better understand the revenues and expenses associated with those
    operations, which are significantly different than the rest of Amtrak's
    operations.

                             ESSENTIAL AIR SERVICE

        Question. The President's budget requests only $50 million for the
    Essential Air Service program--less than half of the $110 million that
    was appropriated to the program by Congress last year. Since over 60 of
    the communities currently receiving EAS funding would be dropped from
    the program under the administration's proposal, the $50 million
    funding level is clearly insufficient to meet EAS communities' needs.
    How do you believe that the Essential Air Service program can survive
    with only $50 million in direct funding? How do you expect small
    communities around the country, like Rutland, Vermont, to be able to
    meet the 10-15 percent match you envision?
        Answer. We are proposing a fundamental change in the way the
    government supports transportation services to rural America. The EAS
    program subsidizes scheduled air service to communities that received
    scheduled service at the time of deregulation in 1978. There have been
    tremendous changes in the industry since then, but the program has
    remained static. Many communities benefiting from this program have
    done little to help make the service successful. Requiring a modest
    contribution from these communities may energize civic officials and
    business leaders at the local and State levels to encourage use of the
    service.
        For the most isolated communities, those more than 210 driving
    miles from the nearest large or medium hub airport, we propose to
    continue to subsidize air service to the extent of 90 percent of the
    total subsidy required. The least isolated communities, quantified as
    those that are within: (a) 100 driving miles of a large or medium hub
    airport; (b) 75 miles of a small hub; or (c) 50 miles of a non-hub with
    jet service would not qualify for subsidy for air service; however,
    they would qualify for a Federal subsidy of 50 percent of the total
    cost for surface transportation. At all other subsidized EAS
    communities, we would offer an array of options, including paying for
    75 percent of the cost of the traditional EAS-type scheduled service.
        In addition, we would work with the communities and State
    transportation departments to procure charter service, single-engine,
    single-pilot service, regionalized service, or ground transportation in
    cases where those options seem to be more responsive to communities'
    needs. Finally, our experience with the Small Community Air Service
    Development Program has been that small communities have been able to
    raise matching funds. In that regard, we note that the funds do not
    have to come from the city budget. Rather, the funds can come from the
    chamber of commerce, individual businesses, or even from the State.
    With these reforms, the Department's $50 million budget request would
    keep the most isolated communities connected to the national air
    transportation system.
                                     ______

     Questions Submitted to the Office of Inspector General, Department of
                                 Transportation

               Questions Submitted by Senator Christopher S. Bond

        Question. Why does Amtrak not have a detailed multi-year financial
    plan now? Wouldn't this planning document, similar to a TIP, or
    transportation improvement plan, help Amtrak identify year-to-year,
    what priorities for improvement are necessary to be made and help in
    the budget process?
        Answer. We have previously indicated that Amtrak needs to do a
    better job setting priorities for its capital dollars. For example, in
    our Assessment of Amtrak's 2003 and 2004 Financial Performance and
    Requirements, issued November 18, 2004, we made this point and stated
    further, ``For instance, programming millions of scarce capital dollars
    for fixing long-distance sleeper cars when bridges that Amtrak owns are
    beyond their functional and economic lives and must be refurbished or
    replaced is unacceptable.''
        Amtrak does produce lists of planned capital projects both for the
    upcoming year and for a 5-year period. The relative priorities among
    the projects on the lists are not clearly and explicitly stated. We
    believe it would be beneficial for Amtrak to publicly release a
    prioritized list of its capital projects, similar to a TIP, and,
    thereby, explicitly consider the tradeoffs among and competing demands
    for its limited capital resources.
        Question. Realizing that Amtrak needs approximately $295 million to
    address its mandatory debt service, and zero is provided in this year's
    budget proposal, how do you propose to address the debt?
        Answer. The Department of Transportation is best able to provide
    the rationale underlying its budget proposal.
        Question. What are you doing in terms of renegotiating your debt
    service rates?
        Answer. Amtrak is best able to describe its activities in this
    area.
        Question. The Inspector General's Office within the Department of
    Transportation has indicated that Amtrak's operating subsidy baseline
    is $586 million. Amtrak's fiscal year 2006 operating appropriation is
    $490 million. What specific savings has Amtrak identified to live
    within this amount?
        Answer. Our third quarterly assessment of Amtrak's savings from
    operational reforms, dated July 13, 2006, provides a detailed
    description of Amtrak's planned operational reforms, their progress to
    date in implementing those reforms, and their progress to date in
    closing the gap between Amtrak's operating subsidy baseline and its
    fiscal year 2006 appropriation. (A copy of that report is enclosed.)
        Amtrak has identified 15 operational reforms aimed at reducing its
    long-term operating losses. Amtrak has begun to implement five of these
    15 reforms in the areas of food and beverage service, train operations,
    corporate overhead, long-distance train service and Northeast Corridor
    operations. Amtrak has saved $46.3 million from these reforms through
    May 2006.
        Amtrak has realized another $52.7 million in savings from revenue
    increases, lower labor costs and other expense reductions.
        Question. What options, if any, are available for Amtrak to
    outsource its first class services? Under what scenario would Amtrak
    consider outsourcing its first class service on its long-distance
    routes?
        Answer. In our July 2005 report, ``Analysis of Cost Savings on
    Amtrak's Long-Distance Services'', we identified the cost of providing
    food service as a major driver of Amtrak's losses on its long-distance
    service, including first class sleeper service. Under current law and
    its existing labor contracts, Amtrak can outsource food and beverage
    services. Employee protections written into law limit the practicality
    of outsourcing other services associated with long-distance trains. We
    would encourage Amtrak to evaluate and pursue options for outsourcing
    its food and beverage service as a possible means of reducing costs on
    long-distance trains. Outsourcing these services could reduce the cost
    of both coach and first class sleeper service on long-distance trains.
        Question. Amtrak has indicated that it will update labor contracts
    to enhance customer service and provide greater efficiencies. I
    understand that currently, more than 80 percent of Amtrak's passenger
    revenues are consumed by labor and benefit costs alone. What are
    Amtrak's specific goals as it looks to update its labor contracts?
        Answer. Amtrak is best able to describe its goals in its labor
    negotiations.
                                     ______

                Questions Submitted by Senator Patrick J. Leahy

        Question. The most recent grant request from Amtrak indicates that
    the struggling railroad needs $1.5 billion next year for capital and
    operating expenses. The President's budget request, though, only seeks
    $900 million in total funding. Since we have heard the administration
    proclaim that it is dedicated to passenger rail nationwide, how does
    this budget request add up to that commitment?
        Answer. The Department of Transportation is best able to provide
    the rationale underlying its budget proposal.
        Question. My small State of Vermont has two State-sponsored
    trains--the Vermonter and the Ethan Allen Express. The State of Vermont
    paid $2.65 million to cover the operating losses this year and is
    slated to pay $4 million next year as Amtrak ramps up the share paid by
    the States. The Department of Transportation and Amtrak have said that
    they intend to develop public-private partnerships for the corridor
    service. How close are you working with the individual States to
    improve equipment and service on these trains?
        Answer. The Department of Transportation and Amtrak are best able
    to describe their activities in this area.

                                     AMTRAK

        Senator Bond. My apologies to the witnesses. I would ask
    that you all make your statements very briefly. We will accept
    the full statements for the record. Senator Murray and I will
    have a couple of questions before we have to race for a vote
    that should be starting now.
        Mr. Laney, welcome.
    STATEMENT OF DAVID M. LANEY, CHAIRMAN, AMTRAK BOARD OF
                DIRECTORS
        Mr. Laney. Thank you, Mr. Chairman and members of the
    subcommittee. I appreciate the opportunity to appear before you
    today to discuss Amtrak fiscal year 2007 funding needs and I
    will make it very brief.
        First of all, before I summarize the 2007 request, I would
    ask that the grant and legislative request to Congress and the
    full statement be included in the record of this hearing.
        Senator Bond. Without objection.
        Mr. Laney. Thank you. In short, I will make it very brief.
    Amtrak's Board and management are aggressively ushering in
    significant change at Amtrak. Every organization likes to
    consider itself an agent of change and progress, and I know you
    have heard it before from earlier incarnations of Amtrak, that
    there would be a new and improved railroad at hand. There have
    even been past projections or predictions of profitability.
        What I want to outline today is a step in the direction of
    material, tangible progress at Amtrak, and I will be the first
    to say that the jury is still out, but I have very good and
    reliable reasons to be optimistic. The indications are very
    encouraging and early results are already reflected in our
    operating budget.
        For Amtrak, change, as far as the Board is concerned,
    cannot come quickly enough. This year and next year are
    absolutely pivotal years for Amtrak in its implementation of
    strategic reform, but to continue and ultimately finish the job
    we started, we will need your continued support, especially in
    2007.
        The 2007 grant request is essentially a first installment
    on our promise to deliver on these goals. We have made progress
    in simplifying and reducing the cost of food and beverage
    service. We are pursuing efficiencies in our mechanical
    operations, as well as our stations and call center functions
    that could include the closing or consolidation of some
    facilities. We are reevaluating our fleet management practices.
    We are aggressively pursuing revenue growth through a top-to-
    bottom focus on improving customer service. We will look at
    ways to improve our service reliability where we can control
    the infrastructure and work with our railroad partners to the
    extent possible where we don't control it.
        We have also begun a long overdue and comprehensive review
    of our long-distance trains that includes establishing a set of
    metrics to measure, rank, and improve performance. This year,
    we will also reevaluate our entire long-distance route network
    with an eye to possible restructuring and reconfiguration.
        And ultimately, we have to reach agreement with our labor
    unions, some of which have been without new contracts for 6
    years. The key to that success is changes in work rules, some
    of which date to the steam engine era.
        As we said in our grant and legislative request, Amtrak has
    never in its history instituted so pervasive a reform effort so
    aggressively. The strategic reform initiatives are detailed in
    the legislative request and we will continue to update you on
    our progress, but let me make a couple of statements about the
    levels without going into detail as to capital, operating and
    debt service. To the extent you have questions, either I will
    answer them here or will be glad to respond to questions.
        As a point of reference, our fiscal year 2006 appropriation
    is about $1.3 billion. Amtrak's fiscal year 2007 grant request
    is $1.598, or rounded to 6. This amount would fund basic
    capital, operating and debt service needs. Our 2007 request for
    operating support is essentially flat to the 2006 appropriation
    and over $40 million less than last year's request. Our 2007
    capital request has increased, however, principally because of
    investments we consider essential to our strategic reform
    program, large and critical infrastructure projects, legal
    mandates, and compliance, a first installment, in effect, with
    ADA requirements.
        We have also requested minimal working capital for critical
    liquidity needs throughout the year, and without these large
    capital projects, or strategic reform funding requests, or
    working capital requests, our fiscal year 2007 grant request
    would be essentially flat to our 2006 appropriation. And again,
    I won't go into detail with respect to the various elements.
        What I would say, though, that what shapes the urgency and
    the direction of our reform efforts is our strategic plan, not
    the budget, not reports from the GAO or DOT or DOT IG, and I
    should say that I think for the first time since I have been on
    the Board, we have the most constructive, complementary
    partnership with the DOT, the FRA, and the DOT IG office that I
    think we have ever had.
        But to concentrate our energy and resources on the reform
    efforts, adequate funding will be essential so that we are not
    fighting a rear guard action to fend off liquidity crises or
    even insolvency.

                               PREPARED STATEMENT

        So in closing, let me just say that adequate funding for
    2007 is critical in terms of our continuing to be effective at
    implementing our strategic reform initiatives, and I would add
    how important it is, and I think you have heard it from
    Secretary Mineta, how important it is for Congress to pass a
    reauthorization for Amtrak that contains a capital match
    program which will bring States to the table with financial
    support for passenger rail, and I am sure it will.
        Thank you, Mr. Chairman.
        Senator Bond. Thank you very much, Mr. Laney. We look
    forward to seeing your strategic plan.
        [The statement follows:]

                      Prepared Statement of David M. Laney

        Mr. Chairman and members of the subcommittee, I appreciate the
    opportunity to appear before you today to discuss both the current and
    future state of Amtrak and our fiscal year 2007 funding needs.
        While I will briefly summarize our fiscal year 2007 request in a
    few moments, I would ask that our Grant and Legislative Request to
    Congress be included in the record of this hearing.
        In short, Amtrak's Board and management are aggressively ushering
    in change at Amtrak. Every organization, of course, likes to consider
    itself an agent of change and progress. I know you have even heard it
    before from earlier incarnations of Amtrak that a ``new and improved''
    railroad would soon become more efficient, that service would improve,
    and that expenses would fall. Someone in the not too distant past, I
    believe, even predicted profitability. What I briefly want to outline
    for you today is a step in the direction of material, tangible progress
    at Amtrak. I'll be the first to tell you that the jury is out; and
    until the results are in I am not about to assume a successful outcome.
    But I am optimistic. The indications are very encouraging--early
    results are already reflected in our operating budget.
        In its long history, the railroad industry has developed its own
    culture, uniquely resistant to change in many ways. As a result,
    changing settled practices is neither simple nor quick. But change has
    to come, and for Amtrak it cannot come quickly enough to satisfy our
    Board. You may recall in 2002 Amtrak survived its closest brush with
    insolvency. Since then the company has reorganized, begun to rebuild
    the plant and equipment and stabilized to a point where I believe we
    can now begin to address fundamental change aggressively in a number of
    areas. This year and next are truly pivotal years for Amtrak in its
    implementation of strategic reform.
        The fiscal year 2007 Grant Request is essentially the first
    installment on our promise to deliver on these goals.
      --We have made progress in simplifying and reducing the costs of the
            delivery of food and beverage service on our trains.
      --We are now exploring outsourcing options and looking at the
            delivery of food and beverage from every angle.
      --We are also pursuing efficiencies in our mechanical, stations and
            call center functions through a number of initiatives that
            could include the closing and consolidation of some facilities
            and outsourcing functions similar to what is being done in the
            industry.
      --We have begun the reevaluation of our fleet management practices
            and fleet utilization efficiencies; I expect significant
            improvement in that area.
      --We are aggressively pursuing ridership and revenue growth through a
            top-to-bottom focus on improving customer service.
      --We will look at ways to improve our service reliability where we
            control the infrastructure, and work with our railroad partners
            where we don't.
      --We have also begun a long overdue, comprehensive review of our
            long-distance trains, establishing a set of metrics by which we
            will measure, rank and improve performance, and a reevaluation
            of our entire long distance route network, with an eye to
            possible restructuring and reconfiguration.
      --Finally, we hope to reach agreement with our labor unions, some of
            which have been without new contracts for almost 6 years. Key
            to the success of our labor negotiations must be changes to
            work rules, some of which date to the steam engine era.
        Let me emphasize that our goal is to improve our customer service,
    to become more efficient at what we do, to reduce our unit operating
    costs while growing revenue, and to prepare ourselves for what we hope
    is a more competitive future environment for passenger rail.
        The initiatives I have described are discussed in more detail in
    the Grant and Legislative Request. Through our regular reports to
    Congress, the Federal Railroad Administration, the Department of
    Transportation's Inspector General and the Government Accounting
    Office, we will continue to update you on the progress we are making on
    each of these initiatives. It is the Board's intention to help lead and
    guide management in this process and to make certain that we do not
    slacken the pace of reform.
        One final comment, Mr. Chairman before I move to the grant request.
    Some of the challenges confronting Amtrak and passenger rail ultimately
    may be more in your court than ours. We are basically hemmed in on
    three sides: (1) I have mentioned labor--our current cost structure
    will impede the development of a competitive passenger rail industry
    and forestall any prospects for growth; (2) without a Federal capital
    matching grant program, States will remain very reluctant to invest in
    passenger rail--with such a program States will invest in passenger
    rail in areas where it is most needed; and finally, (3) capacity:
    outside the NEC we operate on the increasingly limited capacity of
    private freight lines--port and highway efficiency is dependent on
    adequate freight rail capacity; so is Amtrak.
        Now, let me turn to our grant request. As a point of reference, our
    fiscal year 2006 appropriation is about $1.3 billion. Our fiscal year
    2007 Grant Request for operating support is essentially flat to the
    fiscal year 2006 appropriation, and over $40 million less than last
    year's request. Our fiscal year 2007 capital request has increased,
    however, principally because of investments we consider essential to
    our strategic reform program, large and critical infrastructure
    projects, legal mandates, and compliance with Americans with
    Disabilities Act requirements. We have also requested minimal working
    capital support for critical liquidity needs throughout the year.
    Without such capital projects or working capital requirements, our
    fiscal year 2007 Grant Request would be essentially flat to our fiscal
    year 2006 appropriation.
        This year, Amtrak's Grant Request is $1.598 billion. This amount
    would fund basic capital, operating, and debt service needs as well as
    minimal working capital. As I mentioned, also included in this amount
    are the capital investment funds needed to accelerate implementation of
    our reform initiatives.
        In addition, the grant request includes a discussion on other
    investment options that would bring benefits well beyond Amtrak--
    options related to station accessibility issues mandated by the
    American's with Disabilities Act, network reliability improvements, the
    beginning of a modest Federal-State corridor development matching fund,
    and initial restructuring of Amtrak's debt. The inclusion of these
    items highlights the urgent need for Congress to complete work on an
    Amtrak reauthorization, which expired 3\1/2\ years ago.

                                CAPITAL PROGRAM

        The fiscal year 2007 capital grant request of $730 million
    continues Amtrak's investment in rolling stock and infrastructure,
    along with high-return strategic business initiative investments. While
    this request represents an increase in funding from the current fiscal
    year 2006 level of $495 million, it includes investment in our reform
    initiatives--all with near-term payoffs in operating efficiency--as
    well as investment in long deferred and now critical infrastructure
    projects. For example, the fiscal year 2007 request includes, in
    addition to ongoing state-of-good-repair needs, funding for the
    replacement of the nearly 100-year-old Thames River Bridge lift span
    and the upgrade of traffic control and signal systems.
    Infrastructure
        Amtrak owns or maintains 730 route miles of passenger rail right of
    way nationwide, including 400 miles of high-speed main line between
    Boston and Washington. Critical areas that must continue to be
    addressed include:
      --Wood ties on main tracks and through switches and interlockings are
            costly to maintain in a high-traffic environment and must be
            replaced with more durable concrete ties;
      --The catenary system dating from the early part of the last century
            must be fully rehabilitated or replaced; and
      --Major portions of the power supply systems are reaching the end of
            their useful lives and must be replaced to avoid outages and
            address increased power demand.

    Rolling Stock
        Amtrak's passenger fleet ranges in age from 5 to over 50 years old.
    Because of financial constraints in the late 1990's through 2002,
    investment in major overhaul work on much of Amtrak's 1,700 car
    passenger fleet was deferred. Predictably, the reliability of Amtrak
    services declined as en-route failures mounted due to deferred
    investment.
        While much work has been done to improve fleet reliability,
    Amtrak's goal for fiscal year 2007 is to continue the major fleet
    overhauls that we initiated in 2003 to improve train comfort and
    reliability.

                                OPERATING BUDGET

        Amtrak's request for operating support in fiscal year 2007 is $498
    million, which represents less than one-fifth of our total operating
    budget. By achieving efficiencies and increasing revenues we have first
    contained, then reduced our operating loss. It is important to note
    that Amtrak's operating requests have decreased over the past 3 years
    from $768 million in fiscal year 2004, to $570 million in fiscal year
    2005, to a projected $540 million in fiscal year 2006.
        The fiscal year 2007 estimated operating budget will embody the
    first full year of benefits of revenue enhancement and cost reduction
    associated with a variety of the strategic initiatives. In total, these
    initiatives are expected to reduce total annual operating needs by over
    $40 million next year, and increasing amounts in subsequent years.
        This request of $498 million is an aggressive goal for us, leaves
    little room for error and heightens the acute importance of our working
    capital request. However, we are mindful that one measure of success in
    our reform efforts is a continued reduction of the need for Federal
    operating support.

                                WORKING CAPITAL

        Included in our grant request is $75 million for working capital,
    which amounts to about 2.5 percent of the company's annual operating
    budget. Seventy-five million dollars also represents about 7 days of
    cash requirements. No company the size or complexity of Amtrak would
    responsibly allow its cash balances to decline below that level without
    assured prospects of new funding. As I am sure you recognize, too
    little liquidity poses high-risks for all Amtrak stakeholders. Last
    year's operating problem with the Acela braking system, for instance,
    jeopardized the company's cash position, and we certainly know from
    that and other experiences that Amtrak should have at least a minimal
    level of working capital for unanticipated business risks. Amtrak's
    need for cash reserves is in part dictated by the fact that the company
    has no access to a working line of credit to cover unexpected short
    term costs.

                                  DEBT SERVICE

        The amount requested for debt service, $295 million, is needed for
    fiscal year 2007 debt service payments, including some contractually
    required lease buyouts. In addition, we have proposed an optional
    restructuring program for certain long-term equipment leases which, if
    you choose to fund it, would reduce future debt payments. While we
    carry a sizeable amount of debt, it is worth noting that we have
    reduced it by about $300 million during the last 3 years, and since
    2002 there has been no new borrowing.
        That, in summary, is our Grant and Legislative Request. In closing,
    let me say that all of us at Amtrak believe that the service we provide
    is increasingly valuable to the many regions and communities we serve.
    Our job is to continue to build Amtrak's credibility from your
    standpoint and Amtrak's attractiveness as a transportation option from
    our passengers' perspective. We will continue to press forward with our
    strategic initiatives, but we will absolutely need your continued
    support to finish the job.
        Finally, I cannot emphasize enough how important it is for Congress
    to pass a reauthorization for Amtrak this year that contains a capital
    match program which brings States to the table with financial support
    for passenger rail.

                          DEPARTMENT OF TRANSPORTATION

                        Federal Railroad Administration

    STATEMENT OF JOSEPH H. BOARDMAN, ADMINISTRATOR
        Senator Bond. Now, Mr. Boardman, the FRA Administrator.
        Mr. Boardman. Mr. Chairman, Ranking Member Murray, Senator
    Bennett, I won't repeat the numbers that the Secretary put on
    the table, but the Department has been and continues to be
    consistent in believing that Amtrak's business model is flawed
    and must be reformed.
        Amtrak does not yet have effective budget discipline. They
    are not subject to the rigors of the need to turn a profit and
    they do not prepare a public budget in the tradition of a city,
    a county, or even a transportation authority. By falling into a
    unique in-between category of existence, Amtrak has managed to
    avoid discipline that normally governs either public or private
    corporations.
        While the present Board of Directors--and I like David--has
    made the first tentative steps in developing discipline, much
    more needs to be done. Improvements to date have only occurred
    because the demand for reform by this administration and
    support for that reform by this committee. We need to be
    steadfast in fiscal year 2007 and following years if a true
    change in the Amtrak culture is to be achieved. There have been
    too many false starts and empty promises. Amtrak must do better
    and we should be partners in making sure that they do.
        This committee embraced the spirit of that reform last year
    with its provision that the Secretary shall determine and
    assess fees on commuter railroads operating in the Northeast
    Corridor. They would cover the capital and maintenance costs
    attributable to those same commuter railroads. This idea would
    promote fair and equitable access for all operators. The
    committee's leadership in reforming this aspect of a very
    complex Amtrak picture has been accepted and embraced by the
    administration as a significant opportunity to develop a key
    principle of the administration's approach to reforming
    intercity passenger rail service.
        With the assessment of the commuter fees, the States should
    have a strong incentive to partner with the Federal Government
    in establishing both policy standards and service warrants,
    along with investment policies, that would maintain the
    infrastructure at a maintenance level that meets the needs of
    business travelers, commuters, tourists, and freight operators.
    This kind of policy-level attention will help to strengthen and
    extend the economic opportunities provided by the mobility and
    reliability of rail service in the Northeast Corridor and
    continue to enhance the region's globally competitive
    advantages in the financial, insurance, and real estate
    industry.
        By combining those levies with the Department's proposed
    $500 million capital budget for Amtrak and including State and
    Federal policy and planning goals for infrastructure investment
    in the Northeast Corridor, this new partnership will benefit
    intercity passenger rail for all interested stakeholders. This
    then opens up opportunities, as have been expressed by
    Secretary Mineta, that with the right Amtrak reforms, this
    administration will not only support infrastructure
    improvements in the Northeast Corridor, but could assist State
    partners that are ready to improve intercity passenger rail
    services in other areas.
        We are at a point in this administration, together with
    Congress, that we can demonstrate both a significant progress
    in reforming Amtrak and a major progress in advancing goals for
    improved intercity passenger rail, even in Utah.
        Amtrak must find new ways to operate competitively. Even
    from the earliest times of discussion and debate over several
    administrations and several congressional periods, there have
    been both general and specific suggestions made to improve
    Amtrak's operational performance. Amtrak's core business is to
    provide a safe, clean, efficient transportation service that is
    on time and placed in the appropriate market at the right time
    to provide a connected and reliable service to fair-paying
    customers.
        With that clear focus, Amtrak can be successful and
    competitive. Amtrak's internal reform must progress quickly to
    allow a clear operating focus with effective financial
    discipline. The Department and the States must progress quickly
    to find success in forming a partnership in the Northeast
    Corridor infrastructure and operation and this committee has
    opened that opportunity for us to do that.

                               PREPARED STATEMENT

        The public demands real accomplishment in this partnership,
    not only in the Northeast, but in the South, Midwest, and far
    West. Intercity passenger rail, when delivered in partnership
    and focused on being effective and seamless, has the potential
    to improve our environment and strengthen our economy. As
    Federal Railroad Administrator, I will work with this
    committee, other committees, Amtrak, the States, and
    stakeholders to make that happen. Thank you very much.
        Senator Bond. Thank you very much, Mr. Boardman.
        [The statement follows:]

                    Prepared Statement of Joseph H. Boardman

        Chairman Bond, Ranking Member Murray and other members of the
    subcommittee, it is my pleasure today to represent Secretary of
    Transportation Norman Y. Mineta to discuss the Bush Administration's
    budget request for fiscal year 2007 as it relates to subsidies for the
    National Railroad Passenger Corporation, better known as Amtrak.
        As Secretary Mineta has already stated, the budget promotes
    continued transformation of intercity passenger rail. The President
    requests $900 million to help Amtrak make the transition to a new and
    better model of intercity passenger rail. Five hundred million dollars
    of that request is for capital needs and maintenance. The remaining
    $400 million would be available as Efficiency Incentives tied directly
    to continued reform.
        The Department has been and continues to be consistent in believing
    that Amtrak's business model is flawed and must be reformed. Amtrak
    does not yet have effective budget discipline. They are not subject to
    the rigors of the need to turn a profit, and they do not prepare a
    public budget in the tradition of a city or a county, or even a
    transportation authority. By falling into a unique in-between category
    of existence, Amtrak has managed to avoid the discipline that normally
    governs either private or public corporations. While the present Board
    of Directors has made the first tentative steps in developing
    discipline, much more must be done. Improvements to date have only
    occurred because of the demand for reform by this administration and
    support for that reform by this committee. We need to be steadfast in
    fiscal year 2007 and following years if a true change in the Amtrak
    culture is to be achieved. There have been too many false starts and
    empty promises. Amtrak must do better, and we should be partners in
    making sure that they do.
        This committee embraced the spirit of that reform last year, with
    its provision that the Secretary shall determine and assess fees on
    commuter railroads operating on the Northeast Corridor (NEC) that would
    cover the capital and maintenance costs attributable to those same
    commuter railroads. This idea would promote fair and equitable access
    for all operators. The committee's leadership in reforming this aspect
    of the very complex Amtrak picture has been accepted and embraced by
    the administration as a significant opportunity to develop a key
    principle of the administration's proposed approach to reform of
    intercity passenger rail service.
        With the assessment of the commuter fees, the States should have a
    strong incentive to partner with the Federal Government in establishing
    both policy standards and service warrants, along with investment
    policies that would maintain the infrastructure at a maintenance level
    that meets the needs of business travelers; commuters; tourists; and
    freight operators. This kind of policy level attention will help to
    strengthen and extend the economic opportunities provided by the
    mobility and reliability of rail service on the NEC, and continue to
    enhance the region's globally competitive advantages in the financial,
    insurance and real estate industry. By combining those levies with the
    Department's proposed $500 million capital budget for Amtrak, and
    including State and Federal policy and planning goals for
    infrastructure investment on the NEC this new partnership will benefit
    intercity passenger rail for all interested stakeholders. This then
    opens up opportunities as have been expressed by Secretary Mineta that
    with the right Amtrak reforms, this administration will not only
    support infrastructure improvement on the NEC, but could assist State
    partners that are ready to improve intercity passenger rail services.
        We are at a point where this administration, together with Congress
    can demonstrate both significant progress in reforming Amtrak, and
    major progress in advancing goals for improved intercity passenger
    rail. Amtrak must find new ways to operate competitively. Even from the
    earliest times of discussion and debate over several administrations,
    and several Congressional periods, there have been both general and
    specific suggestions made to improve upon Amtrak's operational
    performance. Amtrak's core business is to provide a safe, clean,
    efficient transportation service that is on-time and placed in the
    appropriate market at the right time to provide a connected and
    reliable service to fare paying customers. With that clear focus Amtrak
    can be successful and competitive.
        Amtrak's internal reform must progress quickly to allow a clear
    operating focus with effective financial discipline. The Department and
    the States must progress quickly to find success in forming a
    partnership on the NEC infrastructure and operation this committee has
    opened an opportunity for us to do that. The public demands real
    accomplishment in this partnership, not only in the Northeast, but in
    the South, and Midwest and far West. Intercity passenger rail--when
    delivered in partnership and focused on being effective and seamless--
    has the potential to improve our environment and strengthen our
    economy. As Federal Railroad Administrator I will work with this
    committee; other committees; Amtrak; States; and Stakeholders to make
    that happen.
        Mr. Chairman, thank you for this opportunity. I would be happy to
    answer any questions at this time.

                          Office of Inspector General

    STATEMENT OF MARK R. DAYTON, SENIOR ECONOMIST
        Senator Bond. Mr. Dayton, we are going to call on you for
    the rest of the story and then we will have opportunities for
    one question each. I turn to my colleague, Senator Murray, for
    the first one after Mr. Dayton.
        Mr. Dayton. Thank you, Mr. Chairman and members of the
    subcommittee.
        Senator Murray. They have called, so we are in a very short
    time frame here.
        Mr. Dayton. Once again, as with last year, the work of this
    subcommittee and your colleagues in the House will be the key
    to maintaining fiscal discipline at Amtrak. In fact, the
    provisions established by this committee this year are having
    an impact. Amtrak's Board and management seem committed to
    reform and Amtrak is beginning to realize some reductions in
    the need for operating subsidies.
        But the heavy lifting has just begun. Commitment to these
    reforms will need to be sustained for many years. Indeed, it
    will be several years before we see most of the financial
    benefits from current initiatives.
        Without a fundamental restructuring of the company through
    reauthorization, the Appropriations Committees will need to
    continue to pressure Amtrak for reform, specifically by
    limiting the funds made available to subsidize its operating
    losses, and by making Federal support contingent upon further
    restructuring.
        The bottom line is this. Just to maintain the system as it
    is currently configured, in a steady state of repair, and
    assuming that current reform efforts will begin to pay off,
    Amtrak would need an appropriation in fiscal year 2007 of about
    $1.4 billion. This would include $485 million for operating
    losses, $600 million for capital spending, and $295 million for
    debt service. These amounts would continue the pressure for
    reform but would not yield any significant improvement in the
    overall state of good repair.
        This 2007 appropriation would be nearly 7 percent over what
    was enacted last year, but would be a very tight budget that
    leaves little or no margin for error in either operations or
    investment. If an operating problem were to arise that affected
    revenue or expenses--like the Acela brake problem; or an
    unexpected capital expense--like a bridge failure on the
    Northeast Corridor, Amtrak could face insolvency.
        Private companies of Amtrak's size generally have access to
    lines of credit or maintain sufficient cash reserves to reduce
    the risk associated with such events. Amtrak has no such safety
    net.
        A separate working capital appropriation of $125 million
    would help address these risks, but if Congress were to provide
    such support, the funds should be subject to controls that
    prevent Amtrak from using them for ordinary business
    activities. One approach would be to use a constraint similar
    to that in this year's Efficiency Incentive Grants that would
    require approval by the Secretary before the year-end level of
    working capital could fall below $125 million.
        This 2007 funding picture depicts the fundamental
    dysfunction we face with Amtrak: just to maintain the current
    state of repair, without addressing the backlog of
    infrastructure needs, without investing in short-distance
    corridors that have been discussed today, and without
    recapitalizing the equipment fleet, would require nearly a $100
    million increase in Amtrak funding in fiscal year 2007. And to
    avoid an increased risk of insolvency would require more than a
    $200 million increase in that funding.
        So what are the solutions? As we have testified before, the
    current system needs to be fundamentally restructured. This
    will require new authorizing language for Amtrak programs. We
    see three key goals for successful reform of intercity
    passenger rail. First, continuous improvements in the cost
    effectiveness of services provided. Second, devolution of the
    power to determine those services to the States. And third,
    adequate and stable sources of Federal and State funding.
        Absent reauthorization, the appropriations process can
    provide necessary fiscal discipline over Amtrak's operating
    losses. In 2006, the Appropriations Committee established a
    process to achieve operational reforms. We believe this process
    is of considerable value and strongly encourage you to continue
    it in 2007.
        Specifically, the 2006 bill directed Amtrak to achieve
    savings through operating efficiencies, including changes to
    its food and beverage service. The bill also reduced Amtrak's
    operating subsidy, applying further pressure to cut its costs.
    The committee also required our office to report quarterly on
    Amtrak's progress to this end.
        As part of our oversight effort, we have seen that Amtrak
    is beginning to show improvement. For example, the company has
    made strides in reforming its food and beverage service, which
    could become a break-even or even marginally profitable in the
    next 5 to 6 years.
        Much work remains, however, to eliminate the losses on
    first class sleeper service. I would emphasize, we continue to
    find any Federal subsidy for first class passengers
    unacceptable and have yet to see plans for even pilot programs
    aimed at restructuring these services. Outsourcing of
    reservation and maintenance services has become widespread in
    the transportation sector and Amtrak has only begun to scratch
    the surface on assessing their potential.

                               PREPARED STATEMENT

        Congress should mandate accelerated efforts in these areas
    as a condition to taxpayer support in any fiscal year 2007
    appropriation, particularly if the funding approaches this $1.5
    billion level. Such a requirement----
        Senator Bond. Thank you, Mr. Dayton.
        Mr. Dayton. Okay.
        Senator Bond. Your statements will be included in full in
    the record.
        [The statement follows:]

                      Prepared Statement of Mark R. Dayton

        Mr. Chairman and members of the subcommittee, we appreciate the
    opportunity to present the views of the Office of Inspector General on
    Federal funding for Amtrak in fiscal year 2007.
        Once again, as with last year, the key to maintaining fiscal
    discipline at Amtrak will be the work of this subcommittee and your
    colleagues in the House. We can report today that the provisions the
    committee put in place for this fiscal year are having an impact: the
    Amtrak Board of Directors and current management seem committed to
    reform, efficiency improvements are beginning to be implemented, and
    some reductions in required operating subsidies are being realized. But
    the heavy lifting has just begun and current reform efforts will
    require many years of sustained commitment. Indeed, much of the
    financial benefits in the form of significant operating loss savings
    will not occur for several years.
        Absent a fundamental restructuring of the company through
    reauthorization, it will fall to the Appropriations Committees to
    continue the pressure for reform, specifically by limiting the funds
    made available to subsidize operating losses and by making Federal
    support conditional upon further operational restructuring.
        The Bottom Line.--To maintain the currently configured system in a
    steady state of repair and after accounting for the reform efforts
    already underway, the fiscal year 2007 appropriation for Amtrak would
    need to be about $1.4 billion. This includes $485 million for cash
    operating losses, $600 million for capital spending, and $295 million
    for debt service. The operating subsidy amount would continue the
    pressure on Amtrak for reform put in place by Congress last year, the
    capital amount would simply keep the system from falling into further
    disrepair, and the debt service amount is Amtrak's fixed costs for
    repayment of principal and interest.
        Despite this being almost a 7 percent increase over the fiscal year
    2006 enacted level, it is a tight budget that would leave little or no
    margin for error in neither operations nor investment. If an operating
    problem arose that affected revenue or expenses, such as the Acela
    brake problem, or if an unexpected capital expense arose, such as a
    bridge failure on the Northeast Corridor (NEC), Amtrak could face
    insolvency, particularly if the problem were to occur late in the
    fiscal year after the majority of funds had been spent or committed.
    Private companies of Amtrak's size often have access to lines of credit
    to reduce the risk associated with these unforeseeable events or
    maintain cash reserves in an order of magnitude larger than that
    typically held by Amtrak.
        Working capital of $125 million would help address the risks Amtrak
    faces from these unforeseeable events. To ensure these funds are used
    to cover fluctuations in operations and not for ordinary course
    expenditures, appropriate controls should be established. One approach
    for dealing with this problem is to impose the same constraints on use
    of these funds as those in this year's Efficiency Incentive Grants
    whereby approval of the Secretary would be required before the year-end
    level of working capital could fall below $125 million. Alternatively,
    a unanimous vote of the Board of Directors could be required in the
    same event. In either case, if Congress were to provide these funds,
    additional funds would not be needed for this purpose in future years.
        These funding requirements illustrate the fundamental dysfunction
    that we face with Amtrak: just to maintain the current state of
    repair--not to address the backlog of infrastructure needs, not to
    invest in short-distance corridors around the country, not to
    recapitalize the equipment fleet--requires an $86 million increase in
    Amtrak funding in fiscal year 2007 and an increase of over $200 million
    to avoid increased risks of insolvency, should Congress decide to
    provide $125 million for working capital.
        How Did We Get Here?.--Amtrak's funding requirements actually have
    not changed appreciably over the past 9 years--only the source of those
    funds has changed. External funding to Amtrak (in addition to revenue
    and State support) totaled $11.6 billion from 1998 through 2006 or
    almost $1.3 billion per year.\1\ Therefore, the current $1.4 billion
    estimate of requirements is in line with past years. It differs,
    however, in that now all of it must come from direct appropriations,
    whereas in past years some came from borrowing and some from the
    Taxpayer Relief Act of 1997. Because debt service increased
    significantly during this same time period, the $1.4 billion actually
    provides less funding for operations and investment than prior year
    average subsidies.
    ---------------------------------------------------------------------------
        \1\ This consists of $7.7 billion in Federal appropriations; $2.2
    billion in capital funds from the Taxpayer Relief Act of 1997; and $1.7
    billion in net, non-defeased (that is, not pre-funded) borrowing.
    ---------------------------------------------------------------------------
        What Are the Solutions?.--As we testified previously, the current
    system needs to be fundamentally restructured. Such a restructuring
    requires new authorizing language for Amtrak programs and funding
    support. We have enumerated three key goals for successful reform of
    intercity passenger rail service: (1) continuous improvements in the
    cost-effectiveness of services provided, (2) devolution of the power to
    determine those services to the States, and (3) adequate and stable
    sources of Federal and State funding.
        These goals can be achieved through six programmatic changes:
    formula grants to States for capital and operating costs of intercity
    passenger services, restoration of the forward-going system to a state
    of good repair, capital matching grants to States for corridor
    development, establishment of adequate Federal and State funding,
    resolution of the legacy debt issues, and resolution of NEC ownership
    and control.
        Until a reauthorization is forthcoming, there is much that Amtrak
    management and its Board can do to achieve these goals and program
    changes, assisted by this committee. The company has made strides in
    reforming its food service provision and may have in place process that
    will achieve break-even or marginally profitable provision of food
    service on its trains in the next 4 to 5 years, if it follows through
    on these initial steps.
        Much work remains, however, to eliminate the losses on first class
    sleeper service. We continue to find unacceptable any Federal subsidy
    for first class passengers and have yet to see plans for pilot programs
    to restructure these services. Outsourcing of reservation and
    maintenance services has become widespread in the transportation
    sector, but Amtrak has only begun to scratch the surface on assessing
    its potential. As a condition to taxpayer support in any fiscal year
    2007 appropriation, particularly at levels approaching $1.5 billion,
    accelerated efforts in these areas should be mandated. Such
    requirements for fiscal discipline from this committee and the Congress
    will keep Amtrak moving in the right direction so that when a
    reauthorization is finally enacted, the company will be poised to
    provide better, more efficient services for the country.
        I will now discuss these issues in greater detail.

      AMTRAK'S FINANCIAL CONDITION REMAINS PRECARIOUS BECAUSE IT HAS NOT
               STRUCTURED ITS SERVICES TO MATCH AVAILABLE FUNDING

        The current model for providing intercity passenger service
    continues to produce financial instability and poor service quality.
    Despite multiple efforts over the years to change Amtrak's structure
    and funding, we have a system that limps along, is never in a state-of-
    good-repair, awash in debt, and perpetually on the edge of collapse. In
    the end, Amtrak has been tasked to be all things to all people, but the
    model under which it operates leaves many unsatisfied.
        Operating Losses.--Amtrak continues to incur substantial operating
    losses. It ended fiscal year 2005 with an operating loss of $1.235
    billion. On the positive side, during the first 4 months of fiscal year
    2006, Amtrak's net operating loss was $49 million less than last year
    and its cash operating loss, excluding interest and depreciation, was
    $74 million less than the same period last year. It remains to be seen
    if these improved financial results can be sustained for all of fiscal
    year 2006. In fact, Amtrak has indicated that operating within the $485
    million operating subsidy for this year will likely require some one-
    time actions in spite of its performance to date.
        Putting these results in perspective, the system continues to
    suffer operating losses on all but a handful of routes. Operating
    losses on long-distance trains, excluding interest and depreciation,
    were $529 million in fiscal year 2005. Losses on some long-distance
    trains (excluding depreciation and interest) exceed $400 per passenger.
    For the last 5 years, annual cash losses have exceeded $600 million,
    though their persistence at this level primarily is attributable to
    increased interest expense. Amtrak has made some progress in
    controlling its cash operating loss, excluding interest.

        Debt Burden.--Amtrak is carrying a large debt burden. Its total
    debt peaked at $4.8 billion in fiscal year 2002 and has declined only
    slightly in the past 2 years. For the foreseeable future, Amtrak's
    annual debt service will approach $300 million.

        Revenue and Ridership.--While ridership increased to 25.4 million
    in fiscal year 2005, passenger revenues declined to $1.292 billion, and
    remain below the $1.340 billion achieved in 2002. For the first 4
    months of fiscal year 2006, passenger revenues were $31 million higher
    than the same period in fiscal year 2005, mainly due to fare increases.
    Ridership growth during this period was less than 1 percent.

        On-Time Performance.--On-time performance fell from 74 percent in
    fiscal year 2003 to 70 percent in fiscal year 2005, with even Amtrak's
    premier service--Acela Express--achieving on-time performance of only
    76 percent. On-time performance for long-distance trains averaged 41.4
    percent last year, with the poorest performing train, the Sunset
    Limited, having an on-time performance of only 7 percent. Systemwide
    on-time performance through January 2006 was 66 percent, compared to 72
    percent for the first 4 months of fiscal year 2005.

     ABSENT REAUTHORIZATION, THE APPROPRIATIONS PROCESS CAN PROVIDE NEEDED
                FISCAL DISCIPLINE OVER AMTRAK'S OPERATING LOSSES

        The system needs to be fundamentally restructured through a
    reauthorization. In the absence of a reauthorization last year, the
    Appropriations Committee established a process in fiscal year 2006 to
    achieve meaningful, but incremental, operational reforms. We believe
    this process is not a substitute for reauthorization, but it is of
    considerable value nonetheless; and we strongly encourage Congress to
    continue it in fiscal year 2007.
        The fiscal year 2006 Appropriations bill specifically directs
    Amtrak to achieve savings through operating efficiencies, including,
    but not limited to, modifications to food and beverage service and
    first-class service. The bill also exerts pressure on Amtrak to reform
    by reducing Amtrak's operating subsidy from the fiscal year 2005 level
    of $570 million to $495 million. (A 1 percent rescission, $4.95
    million, and a designation of $5 million for the development of a
    managerial cost accounting system, combined to reduce the funds
    available to subsidize ongoing operations to $485 million.) In
    addition, $31.7 million was made available for an efficiency grant
    program aimed at providing additional capital investments if Amtrak
    reduces operating costs to live within its fiscal year 2006 Federal
    operating subsidy.
        The fiscal year 2006 Appropriation bill also requires our office to
    report quarterly to this committee and its counterpart in the House on
    whether or not and to what extent Amtrak has achieved savings as a
    result of operational reforms. We must certify whether or not Amtrak
    has achieved such savings by July 1, 2006 if Amtrak is to continue its
    use of fiscal year 2006 appropriated funds to subsidize the net losses
    from food, beverage, and sleeper car service on any Amtrak route.
        In our January 5, 2006 report to this committee, we set Amtrak's
    overall operating subsidy baseline at $586 million. This baseline
    represents Amtrak's fiscal year 2006 projected operating loss after
    accounting for anticipated costs and revenue adjustments. It also
    reflects the savings resulting from initiatives implemented in fiscal
    year 2005 and fiscal year 2006 prior to our issuing the report.
        This fiscal year, Amtrak will need to achieve $101 million in
    savings from the $586 million operating loss baseline to operate within
    its Federal subsidy. In addition to sustainable operational reforms,
    Amtrak plans to rely on one-time actions, and revenue increases to meet
    its end of year budget goals. One-time actions will not be considered
    as part of our July certification process. It is our opinion that
    Congress intended us to consider only those savings from sustainable,
    structural reforms when we decide in July whether or not Amtrak has
    achieved enough savings from operational reforms to warrant
    certification.

        AMTRAK NEEDS TO RESPOND AGGRESSIVELY TO THE APPROPRIATIONS BILL
          REQUIREMENTS AND SEE THESE INITIATIVES THROUGH TO COMPLETION

        To address needed savings from operational reform, Amtrak has
    developed an implementation plan for 15 new initiatives. These include
    a plan for restructuring its food and beverage service and dining and
    lounge car operations over several years; adopting a reliability-
    centered maintenance approach to increase fleet maintenance
    efficiencies; consolidating maintenance facilities and reducing
    maintenance overtime; outsourcing and reducing staff at stations;
    improving fuel efficiency; renegotiating labor agreements to eliminate
    outsourcing and work rule restrictions; and reducing outside legal
    fees. Other initiatives such as restructuring long-distance train
    services, improving financial management systems, and improving service
    reliability on the Northeast Corridor are only in the beginning
    planning stage. Our Quarterly Reports will examine Amtrak's reform
    efforts to determine whether Amtrak is fully addressing potential
    reform opportunities and whether planned initiatives are meeting their
    stated goals and are sustainable over the long-term.
        The initial focus of Amtrak's reform efforts is its food and
    beverage service. The company has made strides in reforming its food
    service provision and may have in place a process that will achieve
    break-even or marginally profitable provision of food service on its
    trains. Amtrak plans to implement its strategic initiatives, including
    food and beverage service, over a 6-year period, with some not fully
    implemented until fiscal year 2012. Once fully implemented, Amtrak
    projects savings of $190 million a year from these initiatives.
        Our preliminary analysis of Amtrak's operating savings for the
    first 4 months of fiscal year 2006 indicate that only about $20 million
    in such savings can be expected this fiscal year. These savings amount
    to only 20 percent of the savings Amtrak must achieve to live within
    its fiscal year 2006 Federal operating subsidy. Amtrak plans to close
    the remaining gap with one-time actions and budget adjustments,
    spending the remaining fiscal year 2005 year-end cash reserves, and
    better-than-projected revenue performance.
        These short-term gap-closing actions will not reduce Amtrak's need
    for subsidies in fiscal year 2007 or beyond. In addition, Amtrak
    initially planned to rely on the $31.7 million Efficiency Incentive
    Grant to make ends meet in fiscal year 2006 and reduce the need for
    further operational savings. As we stated in our January Quarterly
    Report, we do not believe it would be appropriate to anticipatorily
    count these discretionary grants toward achieving the required savings.
    Congress should require a business plan from Amtrak that does not rely
    on these savings and specifically identifies all the savings required
    to operate within its fiscal year 2006 resources. Congress should also
    continue the pressure on Amtrak to be expansive and aggressive in the
    scope and pace of implementing long-term, structural operating reforms.
        As mentioned earlier, Amtrak needs to address the cost of providing
    long-distance service, and, in particular, first-class sleeper service.
    In July 2005, we reported that Amtrak could save between $75 million
    and $158 million in annual operating costs by eliminating sleeper car
    service, outsourcing food and beverage service, and eliminating other
    amenities on long-distance trains. The plan Amtrak is preparing on how
    to improve the operational and financial performance of these trains
    needs to fully address these areas for potential significant savings.

     REAUTHORIZATION IS A BETTER COURSE FOR REFORMING INTERCITY PASSENGER
                                  RAIL SERVICE

        Incremental operating savings over the next 5 or 6 years will not
    be sufficient to fund the significant increases in capital investment
    required to return the system to a state-of-good-repair and promote
    corridor development. This mismatch of funding sources and needs
    requires a long-term solution that can be achieved only by changing the
    model for intercity passenger rail.
        To create a new model for intercity passenger rail, a comprehensive
    reauthorization that provides new direction and adequate funding is
    needed. The problem with the current model extends beyond funding--
    there are inadequate incentives for Amtrak to provide cost-effective
    service; state-of-good-repair needs are not being adequately addressed;
    and States have insufficient leverage in determining service delivery
    options, in part because Amtrak receives Federal rail funds, not the
    States.
        Reauthorization should establish meaningful reforms that ensure
    greater cost-effectiveness, responsiveness, and reliability in the
    delivery of passenger rail transportation. Three central themes will
    drive successful reform.
      --Improvements in Cost-Effectiveness.--Amtrak, as the sole provider
            of intercity passenger rail service has few incentives, other
            than the threat of budget cuts or elimination, for cost control
            or delivery of services in a cost-effective way. Amtrak has not
            achieved significant costs savings since its last
            reauthorization.
      --States Need a Larger Voice in Determining Service Requirements..--
            The current model for providing intercity passenger service
            does not put States in a position to decide upon the best mix
            of service for their needs--what cities are served, schedules
            and frequency of service, and what amenities should be
            provided. Those decisions are made by Amtrak, and they are not
            always in the best interests of the States served. Intercity
            passenger rail would be better served with State-led
            initiatives as to where and how intercity passenger rail
            service is developed. States are best able to determine the
            level of passenger rail service required to meet their
            strategic transportation needs and State sponsorship will
            become increasingly important as they will be asked to provide
            increased operating and investment support. Capital funding
            decisions, as with mass transit, should ultimately reside with
            the Department of Transportation, based on congressional
            direction and in partnership with the States.
      --Adequate and Stable Federal Funding is Essential.--None of the
            corridors around the country, including the Northeast Corridor,
            can provide the type of mobility needed without significant
            capital investment. In the NEC, this means bringing the
            existing facilities to a state-of-good-repair with no match
            requirement. In other corridors around the country, it means
            creating the infrastructure for high-frequency services in
            partnership with freight railroads and commuter authorities. A
            robust Federal program of capital matching grants will be
            essential if these corridors are to be developed. In addition,
            long-distance services that provide connections between
            corridors require recapitalization if they are to be run
            efficiently and are to provide the high quality services their
            passengers deserve. None of this, however, implies giving more
            money directly to Amtrak, especially under the current model.
        In our view, a framework for reauthorization requires the
    incorporation of six core elements.
        Formula Grants to States for Capital and Operating Costs.--This
    program would address the needs of areas served by long-distance routes
    that have little corridor development potential, while simultaneously
    creating incentives for States to encourage operating efficiencies from
    the service operator. Formula funds can be used for operating expenses,
    capital maintenance, and/or capital improvements at the discretion of
    the States and have no match requirement.
        Restoration of the Forward-Going System to a State-of-Good-
    Repair.--This program would provide Federal funds, with no match
    required, to address the accumulated backlog of deferred investment and
    maintenance on the NEC and in fleet and facilities outside the NEC.
    After a state-of-good-repair has been achieved, capital funds with a
    reasonable State match would be available for capital maintenance.
        Capital Matching Grants to States for Development of Corridor
    Services.--This program would give States the ability to improve and
    expand routes and service on their supported corridor routes through a
    Federal capital funding program with a reasonable State match
    requirement.
        Setting Federal and State Funding of These Programs at Adequate
    Levels.--Federal funding levels, along with State contributions have
    not been sufficient to subsidize operations, address deferred capital
    needs, and significantly improve service along the existing rail
    network. It will require minimum Federal funding of $2.0 billion a year
    to restore the system to a state-of-good-repair and provide funding for
    new corridor development.
        Resolution of the Legacy Debt Issue.--This element would give the
    Secretary the authority to evaluate Amtrak's debt and to take action in
    the best interest of intercity passenger rail that is economically
    advantageous to the United States Government.
        Resolution of Northeast Corridor Ownership.--The NEC is of
    considerable interest in reauthorization. Unlike the rest of the
    passenger rail system, Amtrak owns the infrastructure between Boston
    and Washington, DC. The Federal Government may decide to take on the
    responsibility of restoring the NEC to a state-of-good-repair, and its
    debt--if it is determined to be in the public's interest to do so. Once
    the NEC is returned to a state-of-good-repair, the States can take a
    larger responsibility in directing and managing ongoing operations and
    maintenance. In return for fully funding the corridor, the Federal
    Government may decide to take title to Amtrak's assets. Although Amtrak
    may very likely remain the operator for NEC, we will be in a better
    position to decide what is the best use and ownership structure of NEC
    assets by the end of the reauthorization period.
        This framework would require cost efficiencies as Federal funds
    available to cover operating losses would decline over the 5-year
    reauthorization period. Specifically, it would give States greater
    responsibility for passenger rail investments with oversight of capital
    investment vested in the Department. Additionally, it would focus
    Federal funding on stable and robust capital investment programs that
    would bring the system to a state-of-good-repair, maintain it in that
    condition, and provide for the development of corridors throughout the
    country.
        Mr. Chairman, that concludes my statement. I would be happy to
    answer any questions at this time.

        Senator Bond. My sincere apologies, but this is the way the
    Senate functions. I turn to Senator Murray for her questions.
        Senator Murray. I would just say that this presents us a
    great dilemma because Mr. Laney has said we need a $300 million
    increase in order to enact reforms. Mr. Boardman has said we
    need to cut it by $400 million to make reforms happen. And Mr.
    Dayton says that we are in a tight budget with no margin for
    error at $1.4 billion. So in writing, I would like back from
    each one of you how you explain your thesis on this, because we
    need to understand that and it is clear it is very
    controversial.
        But I would like to ask the one question I have for Mr.
    Dayton. Your testimony appears to be advocating different
    treatments for States depending on whether those States are in
    the Northeast Corridor or in other regions of the country. The
    taxpayers of my State provide a lot of revenue to maintain the
    Cascadia service, and in fact, on a per passenger basis,
    provide the highest State subsidies of any in the country.
    There are plans to improve the rail corridor between Vancouver
    and Eugene that will even add to that.
        You say that capital contributions from the Federal
    Government to improve rail corridors should require a State
    match, but your testimony says that billions of dollars are
    needed to bring the investment in the Northeast Corridor up to
    a good state of repair, but the States along the Northeast
    Corridor should not be required to put up a match. Well, the
    people I represent are asking why we should be required to have
    a Federal match and the Northeast Corridor should not. I would
    like a short answer from you and a longer one in writing on
    whether or not the States in the Northeast Corridor should be
    required to make some kind of contribution, considering the
    fact that 46 percent of the train miles used on that corridor
    are used by commuter rail agencies of the States and not by
    Amtrak.
        Mr. Dayton. Clearly, all States should be contributing to
    the capital portion of their services. I would say that the
    Northeast Corridor actually does produce an operating profit
    and that profit does go to cover some of the losses on the
    short-distance corridors around the country and the long-
    distance corridors. And so to the extent that Amtrak reduces or
    eliminates those losses through, as we have said, eliminating
    sleeper service and reforming food and beverage service. The
    reason that we advocate those is to free up funds that can be
    put into capital.
        Senator Murray. I am sorry, you say they have an operating
    profit, but I know that they have millions of dollars in
    capital costs and that they are in deficit. So how do you say
    that?
        Mr. Dayton. There is an operating profit in terms of just
    the cost of operations, but you are right, the capital
    investment in the Northeast Corridor is greater than that
    operating profit. That is true. If that operating profit were
    not covering losses elsewhere, it could be reinvested in the
    corridor itself, so that the passengers in those States that
    are using the corridor would, in fact, be supporting the
    capital investment.
        Senator Murray. I know my time is short. That wouldn't even
    come close to dealing with the dilemma that I think we need to
    understand, and I would appreciate a long answer from you since
    we are unfortunately short on time.
        Mr. Dayton. We will provide it.
        Senator Bond. Thank you very much, Senator Murray.
        I understand that the IG in November 2005 reported that the
    Amtrak Board of Directors indicated in writing that they would
    be launching a number of pilot projects, including reforms to
    first class service on its long-distance routes that would
    enable Amtrak to achieve savings. I gather that has not been--
    no pilot projects have come forward. I would like to ask Amtrak
    where those pilot projects are. What do you contemplate in this
    area?
        Mr. Laney. Senator, we have pilot projects in the works, I
    think, on a State basis and I believe they are scheduled for
    presentation to the Board in our April Board meeting, which is
    the first week of April, unrelated to the first class service.
        First class service is a little more difficult. It is an
    essential piece of the puzzle for overnight travelers, and a
    lot of our trains are overnight trains. But we, at least I
    share with the IG the concern about any Federal dollars
    subsidizing first class passengers, because there are losses,
    significant losses, involved in that. We have looked at some
    opportunities and been a little frustrated by some labor cost
    structure difficulties in bringing in alternatives to Amtrak's
    providing that service. But we have got a ways to go and we
    have not wrestled that to the ground.
        Senator Bond. Mr. Laney, Mr. Boardman, Mr. Hughes, Mr.
    Dayton, our sincere apologies. We would invite your further
    comments in writing. We will look forward to continuing these
    discussions. I may even have some options that, while they may
    be distasteful, they may be effective and I would like to
    discuss those with you.
        We thank our witnesses.

                         ADDITIONAL COMMITTEE QUESTIONS

        Senator Leahy. I just wanted to submit a couple of
    questions for the record.
        Senator Bond. Senator Leahy will be submitting questions
    for the record, and obviously, we would like you to take those
    questions, as well. Thank you very much.
        [The following questions were not asked at the hearing, but
    were submitted to Amtrak for response subsequent to the
    hearing:]

                         Questions Submitted to Amtrak
               Questions Submitted by Senator Christopher S. Bond

        Question. Why does Amtrak not have a detailed multi-year financial
    plan now? Wouldn't this planning document, similar to a TIP, or
    transportation improvement plan, help Amtrak identify year-to-year,
    what priorities for improvements are necessary to be made and help in
    the budget process?
        Answer. Amtrak has a multi-year plan for capital improvements and
    also a multi-year projection of funds required for debt service. In
    connection with the company's ``Strategic Reform Initiatives and Fiscal
    Year 2006 Grant'' request, the company also provided its first 5-year
    projection of operating funds required. This document did describe the
    yearly priorities for improvement, as well as the legislative changes
    required, to achieve the target numbers.
        Question. Realizing that Amtrak needs approximately $295 million to
    address its mandatory debt service, and zero is provided in this year's
    budget proposal, how would you propose to address the debt?
        Answer. Debt service must be honored each year to avoid default.
    Accordingly, the company would have to curtail its capital expenditures
    and/or reduce its net operating loss by $295 million. To reduce capital
    expenditures by this magnitude will jeopardize the system state of good
    repair: to reduce the net operating loss by this magnitude will likely
    require significant curtailment of existing services.
        Question. What are you doing in terms of renegotiating your debt
    service rates?
        Answer. Some small debt obligations have provisions for early
    repayment and, if the penalties are not onerous, the company is
    exercising these early payment options (when cash is available).
    However, there is no opportunity to renegotiate the interest rates on
    existing debt without (1) a ``stick'' that threatens the lenders unless
    they co-operate and reduce rates or (2) a ``carrot'' that gives lenders
    some incentive to reduce rates. We have been unsuccessful in urging
    Congress to selectively grant Amtrak debt a ``full faith and credit''
    guarantee (a meaningful carrot) in return for financial concessions
    from lenders.
        Question. The Inspector General's Office within the Department of
    Transportation has indicated that Amtrak's operating subsidy baseline
    is $586 million. Amtrak's fiscal year 2006 operating subsidy baseline
    is $586. Amtrak's fiscal year 2006 operating appropriation is $490
    million. What specific savings has Amtrak identified to live within
    this amount?
        Answer. We believe we will be able to fully fund operations with
    the $490 million appropriation because of: (1) better than expected
    ridership that is the result of increases in automobile gasoline
    prices, (2) lower wages, salaries and benefits expense that is the
    result of slower rates of hiring for replacements (i.e. working with
    higher vacancy rates and lower actual headcount), (3) realized
    improvements in the financial results of our food and beverage business
    activity, (4) lower than expected professional fees and (4) lower FELA
    and liability claims costs.
        Question. What options, if any, are available for Amtrak to
    outsource its first class services? Under what scenario would Amtrak
    consider outsourcing its first class services on its long-distance
    routes?
        Answer. Under current law, Amtrak may outsource food and beverage
    services. Outsourcing of other services, such as sleeping car services
    on long-distance trains, requires negotiations with Amtrak's labor
    unions under the Railway Labor Act if the outsourcing would result in
    the layoff of Amtrak employees. See Public Law No. 105-134, sec. 121.
        Subject to applicable law, Amtrak will consider outsourcing
    services if it appears that outsourcing will reduce the cost and/or
    improve the quality of the services without adversely impacting safety
    or customer service.
        Question. Amtrak has indicated that it will update labor contracts
    to enhance customer service and provide greater efficiencies. I
    understand that currently, more than 80 percent of Amtrak's passenger
    revenues are consumed by labor and benefit costs alone.
        What are Amtrak's specific goals as it looks to update it labor
    contracts?
        Answer. Amtrak's specific goals with every union that has not had
    an agreement through December 31, 2004 are to achieve health care cost
    containment and premium contribution, work rule changes to improve
    productivity and lower costs and, in return, a fair increase if the
    those goals are met. Three unions representing approximately 35 percent
    of the employees represented at Amtrak have entered such agreements
    with the company.
                                     ______

                  Questions Submitted by Senator Conrad Burns

        Question. Mr. Laney, a lot of attention has been focused recently
    on the improvements and upgrades to long-distance trains, in order to
    increase ridership. We have seen the benefits of those commitments on
    the Empire Builder, and I wonder if you could discuss what steps you
    plan to take to continue this process.
        Answer. In August 2005, the Empire Builder was relaunched with
    upgraded equipment, enhanced on board amenities, improved customer
    service and a renewed marketing focus. The improvements have been well
    received by passengers, who are paying the planned higher fares for a
    perceived better valued product. As a result, ticket revenues (October
    through May) are up 18 percent versus last year, and sleeping car
    revenues are up 28 percent. Year-to-date ticket revenues are favorable
    to the budget by $1.8 million. With just 10 months' experience, the
    project is on track to improve the train's bottom line by about $4.8
    million by the end of fiscal year 2007. In conjunction with the
    restructuring of its long-distance services, Amtrak is looking for
    additional opportunities to provide enhanced services on other long-
    distance routes where there is the potential for a positive financial
    contribution.
        Question. As you know, I was very disappointed in the decision to
    fire David Gunn. I am sure the Board had its reasons, but I am
    concerned that part of the impetus to push him out the door was his
    understanding that long-distance trains are an essential part of the
    Amtrak network. Can you give me a sense of the Board's commitment to
    preserving long-distance trains, especially in communities where public
    transportation options are so limited?
        Answer. The Board has stated publicly its commitment to a
    responsible and systematic evaluation of Amtrak's long-distance
    network, focusing on all facets of long-distance service, including
    service quality, function, optimal network configuration and economics.
    The fact that long-distance train operations are valued by many
    communities in which transportation options are more limited will
    invariably be factored into the Board's evaluation process. Mr. Gunn's
    departure was unrelated to his positions regarding long-distance
    trains.
        Question. You mention in your testimony a concern about freight
    rail capacity issues. I share those concerns. Do you believe that
    capacity issues require more rail to be laid down, or can improved
    technology and better management accomplish those goals?
        Answer. Increased rail line capacity can come from many sources
    other than laying more rail. Some examples:
      --Additional locomotives;
      --Additional crews;
      --Additional yard capacity to keep trains from backing up on main
            lines;
      --Signal and operating rule changes allowing running both directions
            on existing multiple track lines, allowing trains to operate
            closer together (shortening signal spacing), or allowing
            greater dispatcher control (Centralized Traffic Control);
      --Improved dispatching systems, possibly broken into regions rather
            than large centralized systems;
      --Changed dispatching practices, including less turnover among
            dispatchers and more dispatcher training trips to create
            familiarity with physical territory;
      --Positive train control systems;
      --Directional running on parallel lines;
      --More frequent crossovers or sidings, or reconfigured crossovers and
            signals allowing movements at higher speeds;
      --Better maintenance of existing lines reducing slow orders;
      --Better maintenance of existing signal systems reducing signal
            failure delays;
      --Better maintenance of locomotives and cars to avoid failures;
      --Better train handling practices to avoid failures; and,
      --Realignment of existing lines or curvature elevation to increase
            speeds or make speeds more uniform.
        Generally, a railroad will choose adding more rail lines as the
    least desirable, last resort to add capacity, since new rail lines are
    expensive and cannot be easily redeployed if traffic patterns shift.
                                     ______

                Questions Submitted by Senator Patrick J. Leahy

        Question. The most recent grant request from Amtrak indicates that
    the struggling railroad needs $1.5 billion next year for capital and
    operational expenses. The President's budget request, though, only
    seeks $900 million in total funding. Since we have heard the
    administration proclaim that it is dedicated to passenger rail
    nationwide, how does this budget request add up to that commitment?
        Answer. If the actual grant to Amtrak were reduced to $900 million,
    it would inevitably require a reduction in capital expenditures, a
    curtailment of existing services or both. From any appropriation,
    Amtrak's first legal obligation is to make debt service (principal and
    interest) payments amounting to almost $300 million. If only $600
    million in Federal funds remained, they would be insufficient to fund
    the necessary capital maintenance program and support the existing
    level of services: each of these activities will require almost $500
    million during the current fiscal year.
        Question. My small State of Vermont has two State-sponsored
    trains--the Vermonter and the Ethan Allen Express. The State of Vermont
    paid $2.65 million to cover the operating losses this year and is
    slated to pay $4 million next year as Amtrak ramps up the share paid by
    the States. The Department of Transportation and Amtrak have said that
    they intend to develop public-private partnerships for the corridor
    service. How closely are you working with the individual States to
    improve equipment and service on these trains?
        Answer. Amtrak works closely with the 13 States that provide
    funding for State-supported services operated by Amtrak. For example,
    Amtrak is currently working with Vermont on an initiative to improve
    food service quality and reduce food service costs borne by the State.
        In May, Amtrak solicited proposals from States that fund Amtrak
    services for a pilot trial of State and/or private participation in the
    provision of some of the services required for the operation of their
    State-supported services. Federal funding in the amount of $2.48
    million is available for a pilot project that can be demonstrated to
    reduce the cost of providing the services at issue. Amtrak received
    responsive proposals from a number of States that fund State-supported
    services, including Vermont. Amtrak expects to make selection(s) from
    among these proposals for the pilot project by the end of July.

                              SUBCOMMITTEE RECESS

        Senator Bond. The hearing is recessed.
        [Whereupon, at 10:54 a.m., Thursday, March 16, the subcom-
    mittee was recessed, to reconvene subject to the call of the
    Chair.]