Continuing Resolution was approved in mid-October, we had already begun FY 1985. Therefore, there was no opportunity for

the Commission to properly plan and implement spending

reductions of $6 million and at the same time maintain a

staffing level anywhere near what was authorized under the Continuing Resolution.

Because of the long lead time required to effect reductions in force and the extremely high costs of the leave, severance, and unemployment compensation payments associated with separating a highly tenured workforce, significant savings in personnel compensation cannot be quickly achieved. At the request of the Commission, our Managing Director explored every possible reduction alternative short of totally closing down

the agency.

His study revealed that, if the supplemental

request before you is not approved, the agency either would have had to reduce the workforce to less than 700 positions by separating almost 400 employees or furlough every employee for up to 30 workdays.

In either event, the effect upon the

personnel and the work of the Commission for this fiscal year would be devastating. After considering various options, the Commission voted unanimously, on October 25, 1984, to request restoration of the funds necessary to conduct operations at the minimum level in this supplemental request and to adopt an action plan to cut spending to that level or below, if possible.

The action plan placed a freeze on hiring, as well as severe restrictions on all non-personnel expenditures. Το date, the action plan has been very successful in reducing expenses. We currently estimate that if the plan must remain in effect for the balance of this fiscal year, it will result in a cost reduction of $2.7 million compared to the spending

rate at the beginning of the fiscal year.

Despite this success, the cost reduction falls far short of the $6 million cut from the budget request. In addition, the continuation of these actions will have a significant adverse effect on operations, since key personnel cannot be replaced, program travel is severely restricted, and certain basic expenditures for such things as training, incentive awards, equipment, and supplies have either been cancelled or deferred.

The Commission also instructed the Managing Director to develop an emergency plan which would cut staff-years and spending to the Conference Report levels in case the supplemental request were denied or only partially granted. January 18, 1985, we voted to have the Managing Director prepare a plan under which, in the event no funds or insufficient funds are forthcoming in the supplemental, every employee will be furloughed without pay one day per week

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On

commencing April 1, 1985 for approximately 26 work days, or until our spending level falls within the Continuing Resolution appropriation for the fiscal year. This is an extremely painful choice, but in our view, it is the only reasonable one available to us under the circumstances. The furlough plan has been negotiated with the unions, pursuant to our

labor/management agreements, and the formal 30-day notices to the employees went out on March 1, 1985. The Managing Director will provide the Commission very soon with an update on all the personnel actions and the results of our efforts to reduce discretionary spending in the non-personnel areas. At such time, he will request our final approval to implement the furlough plan. The furloughing will place tremendous burdens on our managers and the rank and file employees.

So far, we have lost 75 employees through attrition in

This

FY 1985. We separated another 38 employees during January and February (the earliest possible time for such steps) just to get us to the staff-year level sought in our supplemental request. We have elected, if necessary, to furlough all employees in the absence of supplemental funding. alternative will allow us to maintain a rational organizational structure so that we will have the capability of carrying out our responsibilities in FY 1986. However, under this alternative, the workload in every office is likely to fall behind schedule, serious productivity losses will result, and we could miss statutory deadlines in some cases. Our employees will be forced to take a 20% cut in pay for a period of up to 6 months, which will encourage many talented employees to leave the agency.

What we have proposed instead, for a relatively smalladditional investment of resources, is a controlled, gradual, and smooth transition during FY 1985 and 1986 to a lean, but effective, regulatory agency prepared to deal with both its current and future regulatory responsibilities.

We have a number of very important regulatory responsibilities related to the railroads, and it looks like these responsibilities will need to be met for a long time to come. Moreover, our responsibilities will continue in the bus area, and, until further deregulatory proposals are enacted, we will continue to have regulatory functions in the trucking area as well. With this in mind, our budget proposal for FY 1985 is designed to enable the Commission to carry out its statutory responsibilities and ensure a reasonable transition toward any further reduced regulatory roles. We think this posture will promote the most effective use of our resources and provide the greatest public benefit.

Justification

action.