[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.]