Page 10 model would not further deepen the huge prospective deficit of the Railroad Retirement Account. This part of the increase is justified. The majority report of the Commission on Railroad Retirement recommends that the "pass through" approach used in 1968 be used in solving the problem of the 20 percent increase. Such an increase would avoid spending money the Railroad Retirement Account does not have. It would give increases to the railroad beneficiaries on their basic OASDI layer and treat all of them fairly. It would keep the door open for remedial action which the Commission on Railroad Retirement has recommended to save this failing system from bankruptcy. I thank you for the opportunity to present these views. > Billions 3 1 CROSS RECEIPTS, GROSS EXPENDITURES, AND STATUS OF THE RAILROAD RETIREMENT Other Central Case Assumptions (Flows at Annual Rates; Fund at End of Year) -21 Source Commission on Ratiroad Retirement Receipts include interest earnings; expenditures includes interest on debt. Taxes collected for transfer to 35 trust fund through financial interchange are excluded from both series, as are all Hospital Insurance transactions. Figures exclude transactions of Railroad Retirement Supplemental Account. PROJECTED ANNUAL CASH-FLOW DEFICITS OF RAILROAD RETIREMENT SYSTEM, 1970-2000 Millions $300 Re-estimated Centrai Case Million $300 Source: Notes: 1980 1985 --1500 -1800 2106 1990 1995 2000 Commission on Reilroad Retirement Deficits include interest costs when Account falls below zero. (Recess.) Senator CRANSTON. The committee will please return to order. We will now hear from Mr. C. L. Dennis, Commission on Railroad Retirement, presenting a minority report. I understand your minority report is with reference to the 20-percent increase, and you concur in the other recommendations generally; is that correct? STATEMENT OF C. L. DENNIS, LABOR MEMBER, COMMISSION ON RAILROAD RETIREMENT, ACCOMPANIED BY JAMES KENNEDY, LEGISLATIVE CHAIRMAN; ED UNGER, ECONOMIST; NED DAVIS, COUNSEL Mr. DENNIS. That is substantially correct. So there will be no misunderstanding, Mr. Chairman, I will ask that these qualifying comments by C. L. Dennis, member of the Commission, be included in the record. Senator CRANSTON. Thank you. It will go in the record along with excerpts from the Commission report and other individual statements, to be set forth at the end of the hearing record. Would you please introduce the people with you? Mr. DENNIS. I am accompanied by James Kennedy, legislative chairman; Ed Unger, economist; and Ned Davis, counsel. I just want to comment that your statement is correct, that mainly I did agree with the Commission's report with respect to the basic matters, with the exception of the 20 percent not being granted and a pass-through arrangement being provided for. I have been in the railroad industry since 1928, and I have quite an equity with the railroad retirement fund, in that $5.5 billion that is in that fund. I went through the depression. I remember when the Railroad Retirement Act was negotiated, and it was commenced through collective bargaining. It was made official by an act of Congress, but all Congress did was put into law what the parties had substantially agreed to. Of course, we felt that it was best to have it covered in that manner, so that nobody could back away from its provisions, and it has worked out very well. The main reason that the act will be in trouble 15, 17 years down the road-it has $5.5 billion now-it keeps going up every year. This year may be the first year in which a slight deficit might be shown. But the main reason is all of the changes that have occurred in the industry dieselization, automation, electronic computers in every general office, consolidation of railroads, intracarrier consolidations and reorganizations. All of these factors have had a drastic effect on the number of people working in the railroad industry. I think that this is the responsibility for the industry to shoulder. I think that they have to take this into consideration, that when they make a merger of two or more railroads and eliminate a lot of jobs, or when they propose to cut the size of traincrews, they have to recognize that they are going to throw a lot of people out on the streets, and require people to take pensions. More people will take pensions, fewer people will be coming in at the base, and whose responsibility is this? This is why I have argued for negotiations. Now, at every one of these 17 meetings of the retirement commission that was held, management representatives sat right across the table from me, and I repeated at every session: When are we going to get into collective bargaining negotiations? We have a big job of work to do here. I have agreed to correct part of your problem by agreeing to go under and take the equivalent of social security benefits for the first-tier level, but now this Commission is saying that the second-tier level has to be negotiated by management and labor. I want to sit down with you, Mr. Management, and start negotiating for the entire industry. Well, until about 2 months ago I just got a stony expression and no response. They were not ready. Now Mr. Menk advised me about 2 months ago that Mr. Dempsey is ready to sit down and meet with us, and conferences have been arranged for September 11, 12, and 13, to start negotiating on this very, very complex matter of the second-tier level of benefits, to cover the benefits that we now have over and above the level of social security benefits. Who is going to pay for these benefits? Who pays for them in the steel industry? Who pays for them in the rubber industry? Who pays for them in the automobile industry? This is covered by their supplemental pension plans which are paid for completely by those industries. So we have a real job of negotiating to do commencing September 11, 12, and 13. It is certainly not for us now to deviate from the 20 percent, the same percent that social security received, when you realize that social security people, the steel workers, autoworkers, paid $33.80 during the year 1971 and the railroad workers paid $64.67. During the year 1972 the railroad went up $10 to $74.62. Social security went up $5 to $39.80. During the year 1973, under the present law, railroad workers will go up to $92.25-that is based on the $10,800 base-and these are maximum amounts of course-and social security will go up to $49. In 1974, January 1, the railroad worker will go up to paying $102.50, and of course management pays the same figure, and the social security worker and social security management pay $55. Prior to the year 1971, and in the early beginning, we paid much more than twice as much in taxes as people under social security. The history of the Retirement Act is a long one, and I do not question the ability or the knowledge of these famous actuaries that Mr. March spoke of, but I certainly know that they have not had the experience with this fund and with the Retirement Act as those of us who have been in the industry since 1928 have had, and those of us who went through the depression. An actuary looks at a thing and he wants to know where the money is going to come from, but the Commission agreed that we should negotiate. Well then, if you are going to say, "But you cannot get that 20 percent that the social security people are getting," that pulls the rug out from under us before we even start negotiating. That is why I differ very strenuously from their recommendation when they recommended that the 20 percent be a pass-through, and we get the same dollar amount of increase as social security, even though we have to pay almost twice as much in the way of taxes. Senator CRANSTON. What does the Commission agree should be negotiated? |