Mr. Chairman and Members of the Committee:

Good morning. I am Cherryl T. Thomas, Chair of the Railroad Retirement Board, and with me today presenting joint testimony are Mr. V. M. Speakman, Jr., Labor Member of the Board, and Mr. Jerome F. Kever, Management Member of the Board.

Mr. Chairman, at this time we would like to take a moment to extend to you our best wishes as you close your distinguished public service career. For 20 years you have been a strong and trusted voice for the residents of the 10^th district as you have championed such important issues as the protection of our environment, the advancement of human rights, the pursuit of biomedical research, and the commitment of our Government to ethical and fiscal responsibility. As Chairman of this Subcommittee, you have provided fair and compassionate oversight for programs vital to the health and welfare of millions of Americans, including the nation's railroad workers, retirees, and their families we serve. On behalf of the employees of the only Federal agency headquartered in the great State of Illinois, we congratulate and thank you for your leadership.

The Railroad Retirement Board (RRB) administers comprehensive retirement-survivor and unemployment-sickness insurance benefit programs for railroad workers and their families under the Railroad Retirement and Railroad Unemployment Insurance Acts. The RRB also has administrative responsibilities under the Social Security Act for certain benefit payments and Medicare coverage for railroad workers. During fiscal year 1999, the RRB paid $8.2 billion in railroad retirement and survivor benefits to 748,000 beneficiaries. We also paid unemployment and sickness insurance benefits of $95 million to nearly 34,000 claimants.

PRESIDENT'S PROPOSED FISCAL YEAR 2001 APPROPRIATION

We expect that, as a result of funding constraints in fiscal year 2000, we will experience a degradation of program performance this fiscal year. This is clearly presented in our Annual Performance Plan, which was submitted as part of our Justification of Budget Estimates for Fiscal Year 2001, beginning on page 40. And, despite having significantly reduced staffing and spending in such areas as travel and training during fiscal year 2000, we simply do not have the funds necessary to provide for our information technology initiatives as planned. These important investments would have strengthened our technology infrastructure, helped us to develop new systems, and allowed us to better fulfill various requirements pursuant to Federal mandates. Our inability to fund the activities needed to start and/or continue certain mission-critical automation initiatives, combined with the large number of employees leaving the agency, will affect our performance in fiscal year 2000, and probably in the years to come.

The President's proposed budget level of $92.5 million for the RRB's fiscal year 2001 administrative expenses is not sufficient to allay our concerns about our ability to provide adequate service to our customers. With a budget of $92.5 million in fiscal year 2001, we will be required to once again defer information technology investments and further reduce staffing. These technology investments are geared to improving our operations and making them more efficient, and are essential in order to continue providing excellent customer service with vastly reduced resources.

We will, for example, be unable to acquire outside assistance or new technologies to pursue our automation initiatives. We will again be forced to defer mission-related projects, such as future phases of a system to allow applications to be taken on-line, in a paperless, folderless environment, and "one and done" customer service. Moreover, we will be unable to expand our use of document imaging, a multi-year information technology project that has already been successful in our railroad unemployment and sickness insurance program. Finally, we will have insufficient funding to invest in Internet security tools and technology that are essential to conducting electronic business transactions in a safe, private, and secure environment in the future.

Regarding staffing, we estimate that the President's proposed funding would be sufficient for only 1,112 full-time equivalents (FTE's). This is 70 FTE's less than we started with in fiscal year 2000, and 84 FTE's less than we utilized in fiscal year 1999.

Over the last several years, the RRB has undergone dramatic reductions in staffing which affect our ability to withstand further cuts. As shown in the above chart, at the President's proposed level of $92.5 million, FTE reductions from 1993 through fiscal year 2001 are projected to total 586, or a reduction of about 34.5 percent of the RRB's total staff. This is almost double the reduction of 18.2 percent projected for total civilian employment in the Executive branch, and nearly four times the reduction of 8.7 percent projected for non-defense employment shown in the Analytical Perspectives published as part of the President's proposed budget for fiscal year 2001.

Over the years, we have used our automation investments wisely, which has allowed us to improve operations with significantly less staff. We fully recognize that, over time, we can and must perform our operations with even fewer staff. However, if we continue to cut our staff before we have the proper automation support in place, our customer service, including benefit payment accuracy and timeliness, will suffer even more.

VISION FOR THE FUTURE

Having successfully completed the year 2000 (Y2K) project, which ensured that our systems function accurately with dates that include the year 2000 and beyond, the major challenge we now face is solidifying our plans to support our vision of how we should conduct our business in the 21^st century. We envision our customers having a variety of choices when contacting the RRB, whether that be in person or by telephone, mail, interactive voice response system, or the Internet. Our customers should know that, in almost all cases, they will be able to conclude their business within the context of that one, initial contact. To create this environment, the RRB will need highly trained employees who are able to resolve customer issues when contacted. RRB employees, in turn, will need enhanced information technology capabilities to complete their handling of each transaction on the spot. To enable the customer to leave with answer in hand, the RRB will have programmed many types of customer transactions into its systems for automated execution on the appropriate calendar date, without further intervention by RRB employees. The benefits of this business environment include a higher level of service to the customer, who will usually receive a final answer at the first contact with the agency. Moreover, handling each transaction only once is a much more efficient process requiring fewer resources and resulting in fewer errors. With careful planning and investments, we believe we can establish a framework for an efficient and effective information technology environment that supports our vision and our strategic goals well into the future. To get to that point, the RRB is requesting additional funding in fiscal year 2001, as detailed in the next section.

REQUEST FOR ADDITIONAL FUNDING IN FISCAL YEAR 2001

We estimate that the RRB will need an additional $2.5 million in fiscal year 2001, for a total administrative appropriation of $95 million. First and foremost, we will need an increase of approximately $2 million for automation initiatives to achieve our long-term objectives of improved efficiency and continued quality customer service. In addition, we will need approximately $0.5 million for salary and benefits to maintain our current level of customer service by funding 1,119 FTE's in fiscal year 2001. Our funding request provides for paying actual costs for rent to the General Services Administration. We are continuing to work with the authorizing committee toward enactment of our proposed legislation to make this arrangement permanent.

Our requested information technology initiatives are necessary to position the agency to achieve its long-term vision. The RRB's Information Technology Capital Plan was developed in support of our Strategic Information Resources Management Plan. Both support the agency's Strategic Plan, prepared in accordance with the Government Performance and Results Act. These plans outline a comprehensive approach toward maintaining and enhancing our customer service, but cannot be implemented without closing the sizeable gap between our planned initiatives and those which a reduced level of funding would permit. Accordingly, we are requesting a net increase of approximately $2 million above the President's budget for information technology. This will support a broad range of additional technology investments needed to ensure excellent customer service in the future by improving our efficiency. These investments in technology can be grouped into three major categories: "one and done," e-commerce, and technology infrastructure.

"One and done" -- Initiatives in this category represent key system development projects that are required to achieve our primary customer service strategy of "one and done," which represents a more streamlined, efficient, and effective process of providing service to the public. It is the ability to provide our customers with accurate, on-the-spot responses to their telephone calls, letters, applications for benefits, or other service requests. However, in order to achieve this level of service delivery, the RRB must have automated systems that can access and process information, and deliver accurate results to the customer or our employee at the time it is needed. Many of our current application systems must be replaced or extensively revised to enable this kind of customer support. Our "one and done" initiatives include document imaging and several projects to provide real-time calculation data and other information needed for prompt service to our customers.

E-commerce -- Initiatives in this category are required to provide electronic services to the public, as mandated by the Government Paperwork Elimination Act of 1998 and other Federal directives. Although we currently operate a comprehensive Website that provides a wealth of general information to the public, we are not yet positioned to offer interactive, individual-specific, electronic services as an alternative to our customers. To do so, we must develop new Web-enabled application systems that provide a high level of security, privacy, and stability. This requires new software to develop Internet applications and to establish secure Internet transactions.

Technology infrastructure -- These investments are required to establish a firm foundation for the technology advances we have planned, and to maintain our operational readiness. This will require replacements and upgrades to agency networks, desktop computing hardware and software, and system development tools. In addition, we will need contractor assistance for the development of an integrated information technology architecture for the agency.

As you consider our request for funding of $95 million for fiscal year 2001, it is important to remember that the RRB administers entitlement programs established by the Congress. Our basic entitlement programs are not subject to discretionary spending, and their primary source of financing is payroll taxes paid by railroad employers and employees. In order for us to manage the significant cuts in staffing we have already experienced, as well as additional cuts in future years, our agency must have the information technology tools in place to help maintain an adequate level of customer service.

FINANCIAL STATUS OF THE TRUST FUNDS

Railroad Retirement Accounts. At the end of fiscal year 1999, the net position in the railroad retirement accounts was $18 billion, an increase of nearly $1.5 billion over the previous year. In June 1999, we released a report on the actuarial status of the railroad retirement system covering the 25-year period 1999 through 2023. That report, which is generally favorable, indicates that no cash flow problems arise over the 25-year projection period. This is an improvement over last year's report and reflects continued favorable employment experience in the railroad industry.

Railroad Unemployment Insurance Accounts. The equity balance of the railroad unemployment insurance accounts at the end of fiscal year 1999 was $109.6 million, an increase of $7.1 million from the previous year. The RRB's 1999 railroad unemployment insurance financial report was also favorable, indicating that even as maximum benefit rates increase 43 percent (from $44 to $63) from 1998 to 2009, experience-based contribution rates are expected to keep the unemployment insurance system solvent, except under our most pessimistic assumption. Even then, projections show only a small, short-term cash flow problem with quick repayment of the loans.

In concluding our testimony, we want to stress the RRB's continuing commitment to improving our operations and providing quality service to our beneficiaries in the face of tight budgetary resources. Without the appropriate level of funding support from the Congress, we cannot do either.

Thank you for the opportunity to appear before you today. We will be happy to respond to any questions you may have.

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