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Senator HATHAWAY. We have next on our witness list Mr. Neil P. Speirs. Would you like to read or summarize your statement for us, please?

STATEMENT OF HON. NEIL P. SPEIRS, LABOR MEMBER, RAILROAD RETIREMENT BOARD

Mr. SPEIRS. Mr. Chairman and members of the committee, my name is Neil P. Speirs, and with me is Wythe D. Quarles, Jr. We are both members of the Railroad Retirement Board representing railroad employees and employers, respectively. We appear here to discuss the provisions of the bill, H.R. 7200, as it was passed by the House, and the bill, S. 1867.

We favor the provisions in section 101 of each bill which provides for unreduced annuities to men at age 60 with 30 years of service, effective with respect to annuities which first begin to accrue on or after July 1, 1974.

This amendment is long overdue in that it would eliminate the discrimination between men and women employees in this regard. For the past several years, many Members of Congress have introduced bills to achieve this result. The Railroad Retirement Board, however, found it necessary to oppose such bills because, in all such instances, the bills made no provision for the financing of the added cost.

This time, however, we as members of the Board, are in favor of this amendment because it is quite clear from the other provisions of the bill that the representatives of railroad labor and management are seriously negotiating very substantive changes for the railroad retirement program which will require them to take into account the cost of the entire program including, of course, the cost of this amendment.

In this connection, we are opposed to the last sentence of section. 108 (a) of the Senate bill. This sentence would make inapplicable the provisions of section 101 as of the close of December 31, 1974. We favor the House version which would make unnecessary the provisions of section 120 (a) of the Senate bill.

Similarly, we favor the provisions of section 102 of both bills which provide for reducing employee railroad retirement tax rates to the level of the social security employee tax rates, effective with respect to compensation paid for service rendered after September 1973.

This reduction would be from 10.60 percent of taxable payroll to 5.85 percent a reduction of 4.75 percent. The same section would increase the employer railroad retirement tax rate by 4.75 percent of taxable payroll to compensate for the reduction in the employee tax

rate.

This increase would be from 10.60 percent to 15.35 percent. We believe that, after months of serious negotiations, the representatives of railroad labor and management have made great progress toward the goal of solving the problems confronting the railroad retirement system.

In its report on these problems, the Commission on Railroad Retirement made a number of recommendations with regard to the restructuring of the system. One of such recommendations would place railroad employees on a par with employees in other industries with regard to railroad retirement taxes.

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Section 6 of Public Law 42-460, after discussing the problems confronting the railroad retirement program, directed representatives of railroad labor and management to submit to Congress a report containing their joint recommendations for improving the railroad retirement system and that such recommendations should take into account the recommendations of the Commission on Railroad Retirement.

Section 102 of each bill is a partial compliance with this congressional mandate and the recommendation of the Commission; this section provides for reducing employee railroad retirement tax rates, effective with respect to compensation paid for services rendered after September 1973, to the social security employee tax rate.

We also favor the provisions of section 103 of both bills. This section would extend to December 31, 1974, the temporary 15-percent increase in railroad retirement benefits provided in 1970 by Public Law 91-377, the temporary 10-percent increase in such benefits provided in 1971 by Public Law 92-46, and the temporary 20-percent increase in such benefits provided in 1972 by Public Law 92-460, all of which are due to expire on June 30, 1973.

The reason for this extension is obvious. We doubt that anyone would want to see these temporary benefits terminated next June 30. Such termination would require reducing annuities under the Railroad Retirement Act by about one-third and we are certain no one wants to see this happen.

We support section 104 of both bills, but before discussing this section we think it important to review briefly a provision in the Railroad Retirement Act which requires that annuities be computed under a special formula (instead of the regular railroad retirement formula) if such computation would produce a higher annuity.

Mr. Cowen discussed that in this statement.

All such special formula annuities are increased automatically whenever social security benefits are increased. However, annuities computed under the regular railroad retirement formula cannot be increased without special congressional action.

Section 104 of both bills provides for increasing all regular formula annuities, but only if social security benefits are increased in the period July 1, 1973, to December 31, 1974, and only by no more than the same dollar amount by which they would be increased under the Social Security Act if the service and compensation on which they are based had been employment and wages, respectively, under the Social Security Act.

As you know, no increase in social security benefits is contemplated in this period, and the cost-of-living increases now provided in the Social Security Act will not be effective before January 1, 1975.

Nevertheless, as a precautionary measure, section 104 of both bills would make certain that, should social security benefits be increased in that period, regular formula annuities under the Railroad Retirement Act would also be increased.

The differences between the two bills are as follows:

1. The Senate bill would terminate the provision in section 101 for unreduced annuities to male employees at age 60 with 30 years of service as of the close of December 31, 1974. Although section 120 (a) of the Senate bill would make this provision permanent effective January 1, 1975, we prefer the manner in which this provision is made permanent in the House bill to the Senate bill, since the end result would be the same.

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2. Section 107 of the House bill requires the parties to continue their negotiations and to report their joint recommendations to the Congress not later than July 1, 1974. This would allow the parties. about a year to negotiate, and to reach agreement on, the very complex problems confronting the railroad retirement system-problems which, in our judgment, can be resolved only by them because they understand these problems and they will be personally affected by their solutions. Only through collective bargaining were the parties able to reach the agreement on the tax provisions provided in section 102 of both bills.

Considering the complexity of these problems and the fact that representatives of railroad labor consist of two groups-the Congress of Railway Unions and the Railway Labor Executives' Associationand that representatives of railroad management consist of two groups the Association of American Railroads and the National Railway Labor Conference-and the fact that sometimes there are differences of opinion among representatives of any one of those groups, the provision to allow them 12 months to negotiate with a view to reaching agreement is quite reasonable.

Under section 107 of the Senate bill, however, the representatives of railroad labor and management would have to report to the Congress their joint recommendations not later than March 1, 1974, instead of July 1, 1974. Of course, if they should reach agreement within less than the 12-month period, provided in the House bill, they would so report to the Congress.

On the other hand, if they should be unable to reach agreement within the 8-month period allowed in the Senate bill the unresolved problems would fall into the lap of the Congress; and this, of course, we believe should be avoided.

This section of the Senate bill provides further that the representatives of railroad labor and management should give notice to the Congress, within 30 days after the enactment of the bill, of the identity, by name and position, of each of them.

In addition they would be required to hold meetings not less often than once a month, to keep minutes of their meetings, and to file with the Congress "interim reports as to the progress being made toward completion" of their report. In this connection Mr. Quarles and I have had considerable experience as negotiators in the railroad industry at the national level.

It is our opinion that some of the provisions contained in section 107 of the Senate bill would not tend to stimulate collective bargaining on these very complex issues, but, on the contrary, may very well act as a deterrence.

Particularly we believe that the requirement to keep minutes of the meetings will impede a free exchange of ideas among the negotiators. We have no objections to the requirement that the parties hold meetings as required by this section.

However, the very nature of negotiations are such that progress cannot be indicated by periodical reports since often all elements remain tentative with neither party committed until the entire package is agreed upon. In our opinion, therefore, such a requirement might be a deterrence instead of an aid to negotiations.

We should point out that representatives of railroad labor and management have an impressive record of reaching agreements on

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crucial issues affecting railroad retirement programs, beginning with the Railroad Retirement Act of 1937 itself, which was the subject of a mutual agreement after several years of controversy.

In each instance the negotiators were not impeded by the conditions in section 107 of the Senate bill-conditions which as stated before, would be certain to inhibit their free exchange of ideas.

In the light of our past experience as negotiators in the railroad industry, we feel confident that by July 1, 1974, if not before, representatives of railroad labor and management will recommend to Congress a plan that not only meets the policy expressed by the Congress but also can be fully supported by both railroad labor and manage

ment.

We are also opposed to the provisions in title II of the Senate bill which would limit the increase in freight rates to the cost incurred in section 102 of the bill. We believe that the House version which would permit such freight increases to cover the costs of the railroad retirement amendments of 1973 is more realistic to the financing of the provisions of the bill.

With regard to section 121 of the Senate bill, which provides for increasing tax rates on employers and employees with respect to compensation paid for services rendered after December 31, 1974, we believe that the financing provisions of the railroad retirement system is the most important problem confronting the system and is very properly the subject of negotiations between the representatives of railroad labor and management.

We, of course, appreciate the importance of placing the railroad retirement system on a sound financial basis, and this is, as you know, the very crucial problem which section 107 of the bill expects the representative of railroad labor and management to solve through continued negotiations.

But the provisions of section 121 of the bill would take this subject away from the negotiators. We believe that the agreement between representatives of railroad labor and management with regard to taxes as provided in section 102 of both bills is a high mark in their collective bargaining and that the parties should be allowed to negotiate further with regard to the financing of the railroad retirement system. Accordingly, we believe that the enactment of H.R. 7200, as it was passed by the House, would make the continued negotiations between representatives of labor and management more meaningful and more substantive than would the bill S. 1867.

That is the end of my statement.

Senator HATHAWAY. Thank you very much, Mr. Speirs. Mr. Quarles, you are joining Mr. Speirs in his statement?

Mr. QUARLES. That is correct.

Senator HATHAWAY. So we con question you both on the same statement. I wanted to straighten out first what the provision was with reference to keeping minutes of the meeting. The intent of that provision was not to keep a verbatim account.

I agree with you that that would have some deleterious effect on negotiations. We simply wanted to have someone at the conclusion of the meeting state what progress was made, and have that entered on the record. It would not in any way be a verbatim account.

I don't think that this would be too burdensome on the negotiators and would give the Members of Congress the assurance that a meet

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ing, or meetings, are being carried on and that something is being done at the meetings.

What reason do you have to believe that we should allow until July, the 1st of July, rather than the 1st of March, as the date on which the final recommendations should be in, having in mind that after the 1st of July, especially in a campaign year, it will be very difficult, or could be very difficult, for Congress to take any action upon the recommendations.

Congress may not agree with the recommendations and extensive hearings might have to be held. Under the informal rules of the Senate this year, which may obtain next year, no legislation is to be reported to the floor after the 30th of June. We would be in quite a time bind unless we had an earlier date for the recommendation, and that was the purpose of it.

Mr. SPEIRS. Of course, I am sure everyone recognizes the complexity of the problems with which they have to deal. I believe that the negotiators are aware of the fact that next year is an election year and will take that into consideration. I think that in this situation, it would be much more preferable to have the parties reach the agreement even if it took a litle more time, than to have them cut off in the middle of negotiations. We would like to see the negotiators have all the possible time to reach an agreement.

Senator HATHAWAY. It is my understanding that they have already discussed this matter, because they were exhorted by the Congress last year to come up with a solution this year. My informal talks with both sides indicate to me that they have had some discussions on this.

The services of the Board with respect to actuarial problems and drafting problems will be made available, as Mr. Cowen says, and it seems to me if they start now, certainly by next March, which is several months off, they should be able to come up with some kind of recommendation.

Mr. SPEIRS. We certainly hope that they could and would come up with a joint recommendation. If they should come up with a solution within 3 or 4 months they would, of course, submit it to the Congress, but due to the complexity of the problem-and it is complex and involved I believe it would be beneficial if the parties are allowed sufficient time to settle it themselves, rather than have a solution imposed upon them by the Congress.

Senator HATHAWAY. I am sure I express the opinion of the majority of the Members of Congress that we would like them to come up with some agreement, and that is the proper way to proceed. It is just a question of time. There is no question, is there, in the minds of either one of you that there is a deficit in the fund that will have to be taken care of?

Mr. SPEIRS. That is right. We recognize that.

Senator HATHAWAY. Now, you say you are not in favor of the provision that would enact the 72-percent tax effective January 1, 1975. As expressed by myself in the course of these hearings and at the time I introduced the bill, this is simply a method to prod the employers and employees to come up with something. If we added an amendment to that section stating that that provision would be repealed if you come to some other agreement, would that satisfy your objections to the section?