[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.]
