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Public Statements

Floor Statement - Amtrak Reform Board

Location: Washington, DC

Mr. MCCAIN. Mr. President, the Senate has confirmed three members to the new Amtrak Reform Board, as provided for under the Amtrak Reform and Accountability Act, P.L. 105-134. That law required a new 7-member Reform Board to replace Amtrak's current Board of Directors. By today's confirmation of Governor Tommy Thompson, Governor Michael Dukaskis, and Mayor John Robert Smith, along with the automatic confirmation of Secretary Rodney Slater, a quorum of new members will be constituted and in turn, the new Board will immediately assume the old Board's responsibilities. This action ensures Amtrak's authorization remains in tact.

I think it is important to discuss the background leading up to today's confirmations. As my colleagues know, the Amtrak reform legislation enacted last December required Amtrak to operate more like a real business. After 27 years and more than $22 billion in taxpayers subsidies, that new law finally sends a real signal that this is Amtrak's "last chance" to turn itself into a viable operation. The status quo has been, and remains, unacceptable. If Amtrak cannot find a way to free itself from its subsidy "fix," then the Amtrak we know today will cease to exist.

Amtrak has been directed to institute substantive changes to enable it to operate free of subsidies by 2002. As such, Congress and the Administration agreed that new leadership at Amtrak was imperative, which is why we provided for a new Reform Board to replace the current Amtrak Board of Directors. It is absolutely necessary to instill a `new culture' among Amtrak employees and management if Amtrak is ever to become a legitimate business. And that new culture necessitates changes that start from the top.

Let me remind my colleagues that during the last days of negotiations on the reform legislation, three members of the Amtrak Board of Directors, along with Secretary Slater who is also a Board member, negotiated a new labor agreement to give union employees a raise. In the real world it is not very typical for Board members to negotiate labor deals. Yet these three-and at times four-did. They agreed to raise salaries, which is projected to cost Amtrak $35 million in FY 1998 alone, as it is assumed its terms will be extended to all its other unions. It is further projected these costs will grow to $60 million in future year obligations.

One must ask, how could these Board members have been upholding their fiduciary responsibilities by agreeing to increase Amtrak's obligations at the very time Amtrak is looming on the brink of bankruptcy? Amtrak's projected net loss for FY 1998 is greater than the previous year's due in part to the current Board's own actions. Its losses are growing, Mr. President, even though under the law Amtrak has less than two years to demonstrate it can achieve its financial goals, or risk dissolution.

Mr. President, the Democratic
Presidentially-appointed Board Members who negotiated the union salary hike assured us at the time that their high-priced labor agreement would require no action by Congress-nor more importantly, would the labor agreement place any additional obligations on the American taxpayers. That was their assurance, even though one of the agreement's contingencies was that the Administration had to request $1.4 billion in additional funding above Amtrak's glidepath projections. So, what has the Administration done?

The Administration didn't request the additional funding, yet the Board did nothing to nullify the contract. Instead, the Administration and Amtrak are now asking Congress to agree to shuffle Amtrak's operating and capital costs. Specifically, they want us to agree to shift labor costs into Amtrak's "capital" account so that Amtrak can pay for the Board's labor agreement with funds currently directed for capital investment.

When are we going to say enough is enough? Just how long are the American taxpayers going to be forced to cover the expenses stemming from Amtrak's poor management decisions? It surely won't be hard for Amtrak to tell Congress it met requirements to be free of operating subsidy if the current group at Amtrak can pull this one off. All operating costs could essentially vanish with the stroke of a pen and become capital costs.

And, if Amtrak and the Administration are successful-and I acknowledge Amtrak's political clout in the Congress-how will Amtrak make up for its loss in capital? If Amtrak is permitted to shift capital funds to cover wage increases and other items traditionally considered operating costs, would someone please tell me how Amtrak will make up for the corresponding loss in funding for its capital improvements. I think I know how. Amtrak will just come a calling to Congress to bail it out, just like always.

Mr. President, time and again we have been told Amtrak faces critical infrastructure investment needs which must be met if Amtrak is to have any chance of becoming a viable operation. Time and again we have been told Amtrak needs capital resources to invest in its future. But as I see it, the change they propose has the potential for completely jeopardizing Amtrak's abilities to meet its capital needs which it has sought so long to accomplish.

Mr. President, it is unconscionable that while Congress was under intense negotiations to reach agreement on reform legislation, which was required to release the $2.3 billion so-called "tax credit" to Amtrak, the Amtrak Board was doing anything it could to appease the labor unions. Of course, it is no secret who the democratic party is beholden to. While Amtrak's financial situation is in dire straights-looming on the brink of bankruptcy-its democratic Board members agreed to raise union salaries, increasing Amtrak's opperating-and I stress operating-costs by millions of dollars annually. By adopting these wage increases, the current Board failed to fulfill its fiduciary responsibilities not only to Amtrak, but to the American taxpayer as well. Is it any wonder the Congress decided that the Board has to go?

The Congress should be concerned about this situation because two of the six Presidential nominees for the new board are holdovers from the current Board. Another holdover is the Secretary of the Department of Transportation. That makes THREE holdovers according to my count. And these are three of the four that negotiated this sweetheart deal for labor. Surely we did not call for a new Board only to maintain the current members? Doesn't the Administration have any respect for Congressional intent?

The Administration can not argue that it was unaware of Congressional intent because Administration representatives participated in the reform legislation negotiations. Let me remind the Administration about the provisions we discuss today. First, a new 7-member reform Board is to be established. Second, specific eligibility criteria was incorporated in the new law in an attempt to ensure that the new Board members would be qualified to perform their duties. Third, the law requires the new Board to be comprised of individuals with transportation, corporate, or financial expertise.

To further enhance Amtrak's operations, several provisions were included to prompt timely action by the Administration and Congress on filling the new Board. Unfortunately, the spirit of these provisions was met with little respect by the Administration.

The law required the new Board to be in place by March 31, 1998-more than 2 months ago. Yet, the Senate did not receive even a single nomination from the President until the eve of the Memorial Day Recess. Due to concerns that the Administration may drag its feet indefinitely-which only would hurt Amtrak-Amtrak's authorization was linked to the nomination and confirmation of a new Board. Specifically, the law provides that if the new Reform Board has not assumed the responsibilities of the Amtrak Board of Directors before July 1st, Amtrak's authorization lapses. The law also automatically discharged pending Board nomination from the Senate Commerce Committee if the Committee had failed to act by June 1st.

As I said, the new Reform Board was to be in place more than two months ago. Presidential nominations require Senate confirmation, with hearings and review by the appropriate Senate Committees accompanying nominations. Yet due to the lack of timely action by the Administration, the Commerce Committee had no opportunity to carry out its duties prior to the statutory automatic June 1st discharge. I must ask, was the Administration's timing a direct attempt to circumvent the Commerce Committee's authority in this regard?

Mr. President, my position regarding the new Board was made clear from day one. I repeatedly voiced my concerns to the Administration each time I heard rumors of its plans to reappoint current members. I was very clear that the Commerce Committee would not report favorably any Board hold-overs and I remained firm on that position. I truly believed even the Administration would acknowledge we didn't create a new Board only to reappoint the same members.

So what happened? The Administration sent up the nominations as Congress headed into the Memorial Day recess. Two of the six nominations needing confirmation were Board holdovers-that is, one-third. The Administration must have known that the Commerce Committee would be unable to fulfill its hearings and review prior to the statutory discharge date, given the Administration's stealth nomination submission.

Mr. President, if a new board is not constituted before July 1st, Amtrak's authorization will lapse. That is why the Majority Leader, myself and others are seeking to move forward with some of the nominations in order to meet that deadline. But I stand firm that we should not take these or any other confirmations lightly.

We should demand the intent of the law be fulfilled. We should demand that the new Board not be riddled with potential conflicts of interest by members representing competing transportation businesses and serving on state transit agencies. We should demand some legitimacy to this operation if we really expect Amtrak is to ever become a viable transportation provider.

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