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this. And eventually the infrastructure funding for rail, I think the council believes, ought to be all put on the same footing. But right now, with the Government having $4 billion in liens on the Northeast Corridor and Amtrak being $3.3 billion in debt, it is hard for the Government to get disentangled from that Northeast Corridor infrastructure. Amtrak has had that infrastructure-it didn't start with that infrastructure-it got that about 5 years after Amtrak was created. It got it when Conrail was created, when Conrail, or USRA on behalf of Conrail, said, that is too big a burden and Conrail doesn't need that expense and you need to give that to somebody else, Mr. Federal Government. So yes, sir?

Chairman CONRAD. I want to make sure I understand this. So one of your recommendations is that the infrastructure piece of that be under a separate umbrella. Is that correct?

Mr. TILL. Yes. And, in fact, there is some talk-and in the Amtrak Reform Act, there is a provision that provides prior Federal approval of interstate compacts for rail facilities. We looked at the possibility of having the States of the Northeast Corridor form an interstate compact to own and operate the Northeast Corridor. In the process of doing that, we talked to a woman by the name of Anne Stubbs, who is the executive director of the Conference of Northeastern Governors, which has offices right over here on North Capitol Street. She has indicated that they had worked for 18 years, or something like that, well over 10 years, to try to put together a northeastern energy compact that would have the same status as an interstate compact for this rail facility. And she said they hadn't been able to do it.

So our proposal is that to put this infrastructure into a separate Government corporation and put on its board the Northeast Corridor States, who would probably appoint their commuter operators to it or their secretaries of transportation, put on it a representative of the freight railroads, put on it a passenger train operating company representative

Chairman CONRAD. Who would be opposed to that?

Mr. TILL. I think that a good deal of fear and trepidation of the sort that you are hearing at this table today from people who are worried about highway funding and other things-would also attend to the notion of splitting this off and putting it primarily under the responsibility of the States. There will have to be some Federal funding. But right now, as I indicated in the testimony, if only 25 percent of the funds are available for non-guaranteed spending, then having this piece of infrastructure get all of its funding needs out of that 25 percent, it is not going to happen.

And so the fact of the matter is that as we move into TEA-21 and Air-21 reauthorization next year, these are the kinds of issues that are going to have to be raised, and not just for the rail passenger program, for a whole lot of issues having to do with urban transit and other infrastructure.

So this is all part of an evolving situation in which we need a better institutional structure for rail passenger service so that it can more effectively participate in terms of infrastructure development by the Federal Government, by States and localities, and in terms of any operational funding that is going to be necessary to

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operate train service that, quite frankly, the Congress may require as part of its vision for a reformed rail passenger program.

Chairman CONRAD. You know, a lot of what you say makes a great deal of sense to me. Again, I am not an expert in this area. I don't pretend to be. I have got an obligation to try to understand it better, and that is the reason we wanted this as part of the hearing today. And, again, I appreciate your being here.

You know, as you describe this, I wonder what would be the effect on a State like mine, where we have Amtrak service, I would presume, that is subsidized, because I don't know how you could run these long-haul passenger rail systems. If that were split off and put out as part of a rail passenger system, what do you think would happen to these long-haul

Mr. TILL. Well, let me give you the scholarly answer to that question based upon looking at what has happened for similar operations around the world let me also. And give you a very practical example of what happened when a company came in and said to us, Here is the map of a restructured long-haul network that we would propose to run, we will get private financing for it, enough to cover operating losses for about 5 years. And we think under this construct that we could actually make money, with the combination of luxury service, coach service, and passenger rail express service, but to do it in a way were you are actually moving where people move and where freight moves, the kind of premium freight that Amtrak has actually led the way in identifying the market for. They do provide very important premium freight services out there, but just as the council had indicated, you have seen the ears perk up on the freight railroads, and they are saying, Hey, if Amtrak can make that much money, then maybe we can make that much money, too. And so they are going after the same sort of traffic where they can compete effectively.

So you do have people out there who think they could make a go of it. An experience in Australia where they restructured that kind of operation actually has proven that out. There are trains in Australia that operate long-haul services, probably not on a scheduled basis but on a periodic basis, that are private-profitable in the private sector.

Now, if you wanted to blend those two kinds of operations, maybe someone could come together and say I will put together a package in which, maybe the train company-the Burlington Northern or the Union Pacific-would say, well, we will operate the trains and we will organize the mail and express traffic and hire some cruise line to organize the luxury service and let the national train operating company, Amtrak or somebody else, provide the coach service.

So there are lots of different opportunities. In fact, Amtrak itself even participated in bidding on one of the franchises that was let for long-haul passenger operations in Australia. So people are out there who want to do it, and it has been successful, and I think in the best case you can cut your operating losses by about 50 percent, and in a more conservative way, I think you could say we would be looking at something between 20 and 30 percent in terms of improved efficiency and loss reduction with a properly managed long-haul system. So that kind of long-haul passenger train would

be less difficult to fund if the Congress decides it wants to move ahead.

Chairman CONRAD. Let me just say I have got to bring this to an end. I wish I didn't have to, but scheduling requirements compel me to do that. I have found this discussion very interesting, and I want to thank you very much for coming. I thank you for your patience here today.

You had a whole series of ideas on funding that I also found interesting because I agree with you, this is not going to happen just on Federal appropriations. I mean, if we reality-test here, it is not going to happen. We don't have the money. And I can't foresee any time now in the near future where we are going to have the money to do all that is required. And the needs out there are enormous. I don't know what the correct number is with respect to the Northeast Corridor. You used a number of some $3.4 billion of infrastructure backlog. Was that

Mr. TILL. It is 3.8. That is pretty vital stuff. It includes life/safety problems, tunnel problems in Penn Station, New York, and

Chairman CONRAD. What period of time would that be?

Mr. TILL. I think the backlog has grown up gradually over the whole 25 years. It has probably built up

Chairman CONRAD. That $3.8 billion, that is immediate needs? Those are

Mr. TILL. If you had a program that could put that into you know, begin to implement that immediately, you could spend it all. But, you know, obviously there is

Chairman CONRAD. Yes. Well, I think I kind of like this list. In fact, I made notes of things that you mentioned in terms of a combination of ways of addressing this, because I think it is going to take a combination.

Mr. TILL. Well, Senator, I think, you know, we didn't have a lot of lead time to prepare this, and I will get a revised version of this that is cleaned up and a little bit more succinct. I will provide that to the committee.

Chairman CONRAD. That would be very useful to us.

Mr. TILL. And if you have further questions you would like to pose to the council, I would be happy to take them back and we will get you an answer.

Chairman CONRAD. Thank you very much.

Mr. TILL. You are welcome, sir.

Chairman CONRAD. With that, we will close the hearing.
[Whereupon, at 12:27 p.m., the committee was adjourned.]

OPENING STATEMENT OF SENATOR TIM JOHNSON

Mr. Chairman, I am pleased that we are holding this hearing today to discuss the ramifications of the President's budget proposals on highway fuinding, education programs, and the Army Corps of Engineers.

I have strong concerns about the level of highway funding in the President's budget for fiscal year 2003. As we all know, TEA-21 was enacted to provide a guaranteed funding stream for highway projects throughout the Nation. Highway construction and improvements are funded through an excise tax on gasoline that goes directly into the highway fund. This arrangement guarantees that revenues raised are used only for road projects.

South Dakota and the Nation have greatly benefitted from this funding, which has resulted in new roads and improvements throughout my State. Because of the great distances in South Dakota, we are extremely dependent on surface transpor

tation for economic development and travel. Without adequate roads and infrastructure, the economy of South Dakota and the State will suffer.

However, the President's budget for fiscal year 2003 contains an unexpected huge reduction on highway funding of $8.6 billion-a cut of over 25 percent. This will result in a loss of $53 million for South Dakota and potential disruptions in existing road projects. 7,500 people are employed in my State on road projects that are funded through the Highway Trust. The proposed reductions means 2000 jobs will be lost in the State this year alone. For a small-population State like South Dakota, this is a major job loss.

Moreover, there are 200 projects in South Dakota that are funded through the Highway Trust Fund. In addition, there is a $700 million backlog in projects in my State that will only get worse with severe reductions in resources.

This is unacceptable. The reduction is due to largely to technical corrections and overestimations of revenues in prior years. But it is under the amount that was guaranteed for this year under the 1998 Act. Technicalities should not result in I have co-sponsored a bill that would raise the amount allocated by $4.4 billion this year, about half of the proposed cut. While this is a good start, as a member of the Senate Budget and Appropriations Committees, I will work to see that the funding: is further raised to an amount comparable to last year's figures. We must ensure that our infrastructure is adequate for future needs and growth.

In addition, I am disappointed by the Administration's decision to not fund the Missouri River Restoration Act in the Army Corps budget. Although it is listed in the United States Army Corps of Engineers fiscal year 2003 budget at $750,000, it is my understanding a decision has been made to eliminate that funding. The Missouri River Restoration Act is designed to provide needed funds for improved conservation in the river's watershed, reduce sediment loads in the river, and extend the life of South Dakota's reservoirs. Under the Act, $50 million has been authorized over 5 years and it is my hope that the Administration will take an active role in helping fund this critically important measure. As a member of the Apporopriations Committee, I will to see that this the program is adequately funded this year.

I am concerned with funding level the Administration has provided for the Pierre/ Ft. Pierre buyout in South Dakota. This is an ongoing project to relocate homeowners who have been displaced because of flooding on the Missouri River. $10 million is needed this year to continue that process. Unfortunately, only $1.426 million is included in the budget and because of this very low figure, it will be much harder for Senator Daschle and I to bring that funding level up to where it needs to be. Last year, $6 million was appropriated and I will work to see that the funding is increased this year.

With respect to education, the passage of the recently-enacted. No Child Left Behind Act means States and local education agencies will now be equipped with new resources and guidelines for improving our education system and continuing our efforts to provide every child with the best education in the world. The new education bill also provides for new testing and accountability measures to be implemented by States and public schools. Therefore, it is critical that we provide sufficient education funding from the Federal level to allow our States and schools to meet these new testing and accountability mandates. Without adequate funding, we are simply setting up our schools for failure.

Along those lines, we must also preserve funding in the Fiscal Year 2003 budget for rural education initiatives. I am deeply concerned with the Administration's education budget which includes an elimination of funding for critically important rural education programs. Specifically, the Administration's budget eliminates funding for Rural Education Achievement Program (REAP) initiatives which were funded at $162.5 million for Fiscal Year 2002. Designed to help rural districts that lack the personnel and resources to compete effectively for Federal competitive grants and that receive grant allocations in amounts that are too small to be effective in meeting their intended purposes, these flexibility programs are vastly needed in rural school districts throughout States like South Dakota.

I am hopeful that the Chairman will share my concern on these issues and I look forward to working with the Committee to adequately these programs in the Fiscal Year 2003 Budget Resolution.

¡The prepared statement of Senator Murray follows:]

THE PREPARED STATEMENT OF SENATOR PATTY MURRAY

Mr. Chairman, thank you for calling this hearing on two issues vital to the ongoing success of our Nation and the renewal of our economy-education and transportation. Last year the Congress passed and the President signed ESEA reauthoriza

The bill had two parts. On one hand, it called for higher standards and accountability. On the other hand, it promised more investments so schools could make progress. Just a few months later and already the President's budget has pulled the rug out from under our students by reneging on the promised investment. It cuts funds for teacher quality and class size reduction activities. It freezes funding for after school programs and Safe and Drug Free Schools. And it does not fully fund our share of special education costs, failing yet again to fulfill that commitment to our communities, our schools and our disabled students. We know what the needs are out there. We know what works to help our children succeed. Unfortunately, this budget does not do enough to help.

Education is not the only area where this budget falls short of meeting our country's needs. Mr. Chairman, our communities are working to strengthen their economy during the current recession. Unfortunately, many regions are being held back by outdated and inadequate infrastructure.

In my own State of Washington, we are experiencing a transportation crisis. We know that investing in our critical infrastructure will pay real dividends for our communities. Better roads and highways mean less time wasted in traffic, greater productivity, and a better quality of life. In addition, transportation projects create jobs and lay the foundation for our future economic growth. That's why I'm so disappointed that the President's budget cuts billions of dollars in infrastructure investments.

In fact, this $8.5 billion cut in 2003 is the single largest proposed cut across the entire government. Not only will it prevent us from improving our productivity, business climate and economic growth, it also threatens to eliminate over 350,000 jobs across the country.

Mr. Chairman, I want to insert into the record a list of what this cut means to the people of every State. Let me just summarize this chart with one statistic. Looking just at the States represented on this committee, our communities will lose more than 3 billion dollars in infrastructure investments.

When I asked the President's Budget Director about the cuts, Mitch Daniels said that the Administration was only following the requirements of the TEA-21 law. What Mr. Daniels failed to say is that throughout his budget proposal—there are hundreds of examples where the Administration is asking us to ignore existing law or to change the law.

Just within the Transportation Budget, we are asked to ignore current law and to adopt measures to throw several communities out of the Essential Air Service program. We are asked to ignore the TEA-21 law and divert transit formula funds to the President's "New Freedom Initiative." We are asked to ignore current law and impose new user fees on railroads, shipping companies, and transporters of hazardous materials. We are also asked to ignore the TEA-21 law and lower the Federal cost share for major transit projects.

Simply put, the Administration wants to change the law dramatically in many areas, but uses the law as an excuse for cutting highway funding.

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