April 15, 2002
CHICAGO (April 15)–With more than 20,000 scheduled employees, Amtrak, the nation’s passenger railroad, is a major contributor to the Railroad Retirement fund.
So what happens to the fund’s cash flow and benefit payouts if Congress fails to re-authorize Amtrak this year and the carrier is forced to go out of business? Amtrak’s contributions would stop flowing and the fund would have to borrow or cut back benefits to railroad retirees and the unemployed.
Here’s how actuaries at the Railroad Retirement Board modeled the consequences of an Amtrak failure on retirement benefits if all Amtrak employees were terminated as of December 31, 2001:
Initially, the Tier 2 tax rate would decrease from the current rate of 20.5 percent to 18 percent; but in 2021 it would increase to 27 per cent and remain there at least until 2074.
Cash-flow problems would arise in 2024 and remain through 2074 (the actuaries did not calculate beyond 2024).
Beginning in 2024, the Railroad Retirement Account would have to begin borrowing from some unspecified source in order to meet obligations in succeeding years.
By contrast, if there is no change in Amtrak employement, the RRB’s actuary projects that:
The Tier 2 payroll tax rate will reach 27 per cent in calendar year 2025, remain there through 2042, then decrease to 8.2 per cent starting in 2066.
No cash-flow problems will occur prior to the end of the projection period (2074).
The effects of an Amtrak shutdown on the Railroad Unemployment Insurance System would be even more drastic than its effects on retirement. The impact of 20,000+ ex-Amtrak employees filing for benefits simultaneously would essentially bankrupt the system, say the RRB actuaries. Cash reserves would be exhausted within a year, and nearly $338 million would have to be borrowed during Fiscal Years 2002-2004 and repaid entirely in FY 2005. The peak loan balance would be $349 million, including interest. The costs of Amtrak’s sudden and unprecedented unemployment payouts would have to be born by other employers, including the railroads and the rail unions.
The disastrous consequences of an Amtrak shutown on the families of all railroad employees cannot be tolerated and should be brought to the immediate attention of Congress. All active and retired rail-industry employees and members of their families should communicate at once with their two U.S. senators and the congressman representing their district. The message: Provide Amtrak with sufficient funding now to operate a national system of modern passenger trains, and establish a long-term funding mechanism that will guarantee a predictable, reliable and sustainable revenue stream to support a growing and healthy passenger-rail network.
After all, the nation’s airports, highways and waterways don’t have to return to Congress each year to plead for a budget. Passenger rail service shouldn’t have to either. Passenger-rail transportation needs to have the same access to predictable, reliable and sustainable funding for capital improvements and operating assistance that our highways have been receiving since 1956 and airports have enjoyed since 1971. It’s the American way of financing mobility.