APPENDIX IV

PROJECTION OF STEP 3 AND STEP 4 BENEFITS

a

The Federal Black Lung Program pays benefits which vary as function of the number of dependants the claimant has at any point in time. The model correctly projects the step 1 and step 2 benefits payable to single miners, married miners and widows. The program further assumes that certain percentages of the single, married and widow population will have additional dependants. The benefit flows based upon the single, married and widow populations are then increased adjust for the step 3 and step 4 benefits payable to additional dependants. While some added precision could obtained in the model by calculating the additional dependant populations explicitly, instead of applying a factor to the benefit flows, we would agree that the complexity of the computer code needed to do so is probably not worth the added precision which would be achieved in the calculation.

to the

be

We do not agree, however, that the loading for these dependants be continued throughout the projection. In fact, the majority of the additional dependants will be minor children whose benefit will end at age 18 or 24 depending on the educational pursuits of the child.

Based upon our Federal Black Lung data base, the average age of these minor dependants is approximately 14 years in 1985 and the average age of male claimants with children under 18 is 50. If we assume that there will be relatively few new children from the current Trust Fund population, then the added benefits should reduce to a very small number over the next 5 years or so.

We recommend that the step 3 and step 4 benefits, currently being applied to the current model for the full term of the projection, be graduated downward to a very small additional loading after 1990 or so. This will produce a significant reduction in the projected benefits after the point at which the loading is reduced.

ACTUARIAL RISK SERVICES, INC.

APPENDIX V

MORTALITY

The issue of the correct mortality tables to be used

in

the Trust Fund model has been discussed for the last five years or more. (See our previous reports to the Department of Labor on the previous model.) In summary, we have provided the Department of Labor a set of male and female mortality tables (1971 Group Annuity Mortality Tables), which have been used by the Department of Labor in the current model, that our firm has found to be the best representation of mortality experience for male responsible operator claimants. We have not had the data, or the opportunity as yet, to study the mortality experience of the female survivors of Black Lung claimants, and have not studied at all the mortality of the Trust Fund population. We know that the Trust Fund population is older, and generally represents a previous generation of coal miners as compared to the responsible operator claimants. Their mortality may well be different than that of the R/O population. recommended, for than three years, that a specific mortality study be done on the Trust Fund population, and we continue to do so. If the mortality experience of the older portion of the Trust Fund population ultimately proves to be different than that of the R/O population, we would expect the life expectancies to be somewhat shorter, and the current model, therefore, would overstate the benefit flows. We suspect that the most uncertain aspect of the mortality is that of the female dependants, which have not been studied by anyone to date.

more

We

have

The size of the Trust Fund population is such that a fully credible mortality study is possible given sufficiently accurate and timely death reporting.

ACTUARIAL RISK SERVICES, INC.

STATEMENT OF Carl E. Bagge, President, NATIONAL COAL ASSOCIATION

SUMMARY

Mr. Chairman, my name is Carl E. Bagge. I am president of the National Coal Association. NCA represents coal producers, coal sellers, and other organizations associated with America's coal industry. I am submitting this statement on inland waterway user fees and lock improvement projects for the record of a hearing on June 19, 1985 on user fees, revenue proposals contained in President Reagan's 1986 budget, and other revenue issues.

Efficient, competitive inland transportation is vital for full utilization of America's coal by utilities and industries in the U.S. and in export markets for America's coal in other countries. The inland waterways system now carries about one out of every five tons of coal shipped to utility and industrial plants and to ports for transshipment by water carriers engaged in world trade. Inland water carriers furnish efficient coal transportation services and essential linkage, as well as competition, with rail carriers, a circumstance which is important in holding down the price of coal transportation and thus making the delivered price of America's coal reasonable and competitive in domestic and world markets for energy.

With this in mind, and recognizing that coal represents an economic fuel for generating electricity and an important commodity for enhancing America's balance of payments in international trade, NCA has a strong, continuing interest in preserving a sound system of inland and intercoastal waterways needed for maintaining reasonable coal transport rates in the years ahead as coal production grows on the order of two to three percent annually into the next decade. A serious problem exists in that several critical locks on the inland waterways system are obsolete and now require replacement to handle today's traffic efficiently as well as increased traffic demand projected for the 1980's and 1990's. In summary, NCA urges the Congress to consider three points in the course of deliberations on inland waterway user fees and financing of critical lock improvement projects.

First, NCA believes that user charges, in principle, are an appropriate method for commercial waterway traffic to share in the costs of navigation on the inland waterways system, given that the Nation benefits from a sound waterways system with regard to its security and the value of efficient water transportation to the general economy of the Nation, therefore the public through the federal government, should bear a portion of waterways costs. Further, we believe that revenues deposited in the Inland Waterways Trust Fund, now amounting to about $200 million and growing yearly at about $50 million to $75 million, should be appropriated without delay to enable construction of critical lock replacement projects.

Second, NCA urges the Congress to authorize and approriate funds drawn from the trust fund to finance six lock improvement projects which are particularly critical for movement of coal, namely: replacement of Gallipolis Locks on the Ohio River in Ohio and West Virginia; replacement of Lock No. 7 (Gary's Landing) and Lock No. 8 (Point Marion) on the Monongahela River in Pennsylvania; replacement of the William Bacon Oliver Lock on the Black Warrior River in Alabama; replacement of the Winfield Lock on the Kanawha River in West Virginia; and addition of a second lock chamber at Lock No. 26 on the Mississippi River in Illinois and Missouri.

Third, NCA holds the view that a fuel tax is the proper mechanism for user cost recovery in sharing costs for preserving efficient navigation on the inland waterways. In our view, charges should be applied on a systemwide basis recognizing that it is important to have a sound system of interconnected freight transportation nationwide, and revenues generated by the fuel tax which is now eight cents per gallon rising to ten cents per gallon in October, must be utilized on a priority-based schedule that is sensitive both to traffic demands and to existing capacity at critical locks.

RECOMMENDATIONS ON SPECIFIC USER FEE PROPOSALS BEFORE THE CONGRESS

With regard to cost sharing of lock construction projects, NCA supports the approach taken in H.R. 6, a water resources authorization bill pending further consideration in the U.S. House of Representatives. The legislation would finance construction of the six lock construction projects referred to earlier in my statement, and in addition the replacement of the Bonneville Locks on the Columbia River in Oregon, by utilizing revenues in the trust fund to cover one-third of the project costs, with the remaining two-thirds of the costs paid from general revenues. Todate none of the user revenues have been employed for the construction purposes provided under the Inland Waterways Revenue Act of 1978 which created the trust

fund. This is unconscionable in view of the urgent need to replace obsolete locks at several locations mentioned earlier. We believe that whereas no new projects have been authorized for almost 15 years, and waterway users who have contributed revenues to the trust fund since 1980 with no resultant benefits due to governmental inaction, construction work should commence with no further delay, and the onethird trust fund revenues and two-thirds general revenues sharing of construction costs are a desirable and appropriate approach.

We realize that, in testimony before the Subcommittee on Water Resources of the House Committee on Public Works and Transportation on April 17, 1985, the Acting Assistant Secretary of the Army for Civil Works, Robert K. Dawson, proposed that in addition to the existing fuel tax, commercial traffic on the inland waterways would pay a new, additional uniform fee of 1.5 mills per ton-mile. This, according to his statement, would approximate 70 percent of the annual operation and maintenance costs for inland waterways and 70 percent of the cost of new improvements to the inland waterways system.

Mr. Chairman, although NCA does not oppose user charges as a method for covering a portion of navigation costs on the inland waterways whether such costs are for construction or for operation and maintance purposes, we do object both to the proposed new user charge mechanism-a ton-mile fee-and to the proposed level of user cost recovery. We believe that the ton-mile fee concept would result in a complicated, uncertain procedure for collection and in unnecessarily burdensome administrative costs in implementing and enforcing a ton-mile-charge process. The systemwide fuel tax mechanism is far superior and greatly preferred.

As to the level of cost sharing for construction projects, NCA supports a Capacity Utilization Concept developed by DINAMO/OVIA, the Association for the Development of Interstate Navigability in America's Ohio Valley. This concept employs data and findings of the National Waterways Study (NWS) performed by the U.S. Army Corps of Engineers. The NWS has identified 41 locks that will need to be replaced or will require major rehabilitation, including the six we have referred to earlier. Continued delay in authorizing and funding these critical projects would be intolerable. An orderly lock replacement program can, and should, be established and implemented now. The Capacity Utilization Concept is such a program.

The central idea is that the user share in financing inland waterway improvement projects be determined by the percentage of inland waterways system capacity utilized in a particular year. The balance can be attributed to economic development potential and it would not be charged to commercial traffic. About 39 percent of total system capacity is being utilized at present.

The user share of the costs of construction would be drawn from the Inland Waterways Trust Fund as provided in H.R. 6. Under this arrangement, one construction project per year could be financed by a fuel tax at about nine cents per gallon; and, as stated before, the current tax of eight cents per gallon will go up to ten cents per gallon in October of this year. Using traffic assumptions in the NWS, it is estimated that the user share based on capacity of the system utilized at a given time, would be about 39 percent rising to 57 percent in the year 2000, and 95 percent in the year 2030. The following table shows projected tax rates under the NCAendorsed, DINAMO/OVIA Capacity Utilization Concept for 1990 through the year 2030.

Mr. DORGAN. Thank you for your statement, and we thank the entire panel for the statements that you have presented to us. Mr. Frenzel, do you wish to inquire?

Mr. FRENZEL. Mr. Chairman, I want to thank the panelists for their discussion. I would like to ask Mr. Farrell, from the AWO, you are at 8 cents now, are you?

Mr. FARRELL. That is correct. That goes to 10 cents on October 1. Mr. FRENZEL. Is that where it tops off, at 10 cents?

Mr. FARRELL. Under current legislation.

Mr. FRENZEL. How much money has that developed so far?

Mr. FARRELL. The last figure I saw was $175 million. It will hit about $200 million by the end of the year.

Mr. FRENZEL. I assume whatever is in there is well under our estimates because of the recession in your industry. Is that correct? Mr. FARRELL. That is correct.

Mr. FRENZEL. And none of that money has been used yet?

Mr. FARRELL. Not a penny.

Mr. FRENZEL. What was the intention of Congress in creating that trust fund?

Mr. FARRELL. My understanding was the trust fund was created to repair and replace facilities on the inland rivers of the United States.

Mr. FRENZEL. At the time Congress was attempting to use that charge for you to satisfy all of its urges with respect to users fees. Was that the understanding of the industry?

Mr. FARRELL. Would you repeat that?

Mr. FRENZEL. At the time we established the diesel fuel tax, that was supposed to satisfy all of the Federal urgings for user fees in the barge industry. Is that correct?

Mr. FARRELL. I think the answer to that question-I should say, first, Mr. Frenzel, I was not in the industry at that time, but I think the answer to your question would depend-

Mr. FRENZEL. I am sorry you weren't around for any of the good days.

Mr. FARRELL. I brought trouble with me. I am like that guy in Little Abner with the black cloud over his head.

I think it depends to whom you ask the question. I have heard many times from executives in our industry, however, that their understanding, rightly or wrongly, was that that would be it.

Mr. FRENZEL. Mr. Ullman and I and others on this committee, I think, had an understanding when we were putting it together, and now you are being asked to absorb extra burdens as well. Mr. FARRELL. By some, few.

Mr. FRENZEL. Well, I thank you very much for your testimony. Mr. FARRELL. Thank you.

Mr. DORGAN. Mr. Daub.

Mr. DAUB. I just had a chance to listen a little bit. I just about finished your testimony. I just want to make a comment.

We appreciate your being here, and I am particularly interested in land waterway user fee segmentation and the unfairness thereof. I look at barging of lots of scrap metal and agricultural products down the Missouri River from Oklahoma to St. Louis, the Mississippi and down, and as I indicated this morning, I am very interested in the substantiation and justification of the fees and segmentation. They don't make sense to me at this time.

I appreciate your testimony.

Mr. DORGAN. Thank you.

Mr. Gregg.

Mr. GREGG. No questions, Mr. Chairman.