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My name is Burton N. Behling. I am a Transportation Consultant
and a former Vice President of the Association of American Railroads.
I am appearing here on behalf of the railroads in regard to the
bills presently before you
H. R. 15922 and S. 3852, which I understand
is identical to H.R. 15927.
We support H. R. 15922, which provides for certain technical amend
ments developed by the Railroad Retirement Board to simplify its adminis
tration of the Railroad Retirement Act, with attendant economies and
efficiencies in the prompt handling of applications for annuities to certain
classes of beneficiaries. From our examination of these technical amend
ments we believe that they are necessary steps to reduce complexities and
avoid delays in the award of annuities and we are assured that they will not
result in significant increases or decreases in the amounts of benefits.
Turning now to S. 3852 (H. R. 15927), we strongly object to its
That bill would, on a temporary basis extending to June 30,
1973, increase benefits under the Railroad Retirement Act by 20 percent,
the same percentage by which social security benefits were increased by
P. L. 92-336 (H. R. 15390), signed July 1, 1972. Superficially, it might
appear that, as a matter of course, all railroad retirement benefits should
now be increased the same percentage by which social security benefits
were recently increased to become effective September 1, 1972.
compelling reasons, however, why such a conclusion should be rejected,
for the circumstances are vastly different.
The Congress in 1970, in P. L. 91-377, responding to warnings that
the railroad retirement system was heading toward serious financial
difficulties, established a special Commission on Railroad Retirement to
conduct a study of that system and its financing. The Commission is about
to report its findings and recommendations for the consideration of the
parties directly involved and of the Congress.
Those findings and recom
mendations will confirm and, indeed, intensify the earlier concerns
regarding the financial condition and outlook of the railroad retirement
In short, the Commission's report will show that the railroad
retirement system is heading rapidly toward a financial crisis and, even
without further increases in benefits, will probably be bankrupt in about
16 years unless necessary corrective steps are taken.
When allowance is made for more recent developments, that
conclusion is consistent with the testimony in 1970 of then Chairman Howard
Habermeyer of the Railroad Retirement Board that the railroad retirement
account would be exhausted in 20 to 25 years if the 15 percent benefit
increase enacted in 1970 were to become permanent. Pending the study and
report of its special Commission, the Congress made temporary that
increase and also the further 10 percent increase of 1971.
Now it is proposed in S. 3852 (H. R. 15927) to provide still another
large percentage increase in railroad retirement benefits.
A 20 percent
increase at this time would mean that the level of railroad retirement
benefits would have been increased by more than 50 percent compounded
since 1969 (15 percent on January 1, 1970, 10 percent on January 1, 1971,
and 20 percent on September 1, 1972. )
These are very large increases when applied percentagewise to
railroad retirement benefit levels, which are much higher than social
security benefit levels. S. 3852 (H. R. 15927) proposes to make the further
20 percent increase temporary, with an expiration date of June 30, 1973.
However, as to this temporary feature, it must be observed that increases
once provided are, to say the least, difficult to withdraw or modify later on.
In these circumstances, we believe it would be most imprudent to enact the
bill at this time, before there has been opportunity to consider deliberately
the soon-to-be released report and findings of the Commission which
Congress saw the need to establish.
There is no urgency or crisis that would justify hasty action at this
time to further increase railroad retirement benefits by 20 percent. Existing
railroad retirement levels already compare favorably with those received
by most other groups under social security and other pension programs.
As the forthcoming report of the Commission on Railroad Retirement points
Only about half of the workers in private employment in
benefits of an unmarried retired railroad worker were higher
Some private pension plans in heavy industries, notably
Moreover, increases in benefits should not be made without adequate
provision for their financing. This has not been done with respect to either
the current proposal in S. 3852 or the temporary increases in railroad
retirement benefits provided in 1970 and 1971. If all of these increases
were to become permanent, the resulting actuarial deficit without any
further changes in the future would be nearly $400 million a year.
Those increases, especially if they were to become permanent in
whole or in part, will require substantial increases in taxes on employers
and employees to support them, for otherwise the financial solvency of
the railroad retirement system would be further impaired.
Taxes for support of the railroad retirement program already
impose very heavy burdens on both the industry and its employees. Further
substantial increases in taxes necessary to support ever-rising levels of
benefits could take them beyond endurance by both sides
employees. It is axiomatic that a financially sound railroad retirement
system requires benefit levels and tax support to be considered side by
side and with due regard for long-term rather than merely short-term
We urge you to take into account the very limited ability of the
railroad industry to assume added cost burdens in support of the railroad
retirement system, which already is in serious financial trouble.
Committee and the Congress are well aware, I am sure, of the deep-seated
financial problems of the railroad industry and there is no need for me to
recite them at length here.
But let me point out by way of summary that,
whereas in 1955 net income from operations of all Class I line-haul
railroads amounted to $1. 1 billion and in 1966 to $1. 0 billion, last year
(1971) operating earnings were only $0.7 billion. Furthermore, this net
operating income is before interest charges which in 1971 amounted to over
At this time, six major railroad companies
fifth of the industry in terms of revenues -- are in reorganization
proceedings under the Bankruptcy Act, and another dozen which failed to
earn their fixed charges in 1971 are in perilous financial condition.
For all of these reasons, the railroad industry strongly recommends
against enactment of the 20 percent increase in railroad retirement benefits
as provided in S. 3852 (H. R. 15927).
In taking this position we are not
unmindful that railroad people along with others are feeling the effects of
inflationary increases in their cost of living. But such considerations do
not warrant a general 20 percent increase in railroad retirement benefit
levels at this time.