Railroad Retirement Bill Revised, Advances

August 10, 2001

By a vote of 384 to 83, the House has passed a bill to revamp the Railroad Retirement System that critics complain would bust the budget and open the door to government investing in private capital markets.

In an attempt to meet some of those objections the bill, HR 1140, was amended to limit the ability of government to manipulate the investment decisions of the Railroad Retirement Trust Fund, which would be able to directly invest Railroad Retirement funds in private capital markets. Because the members of this Trust were originally to be appointed by the Railroad Retirement Board, a government agency, opponents of the legislation had warned that it opened the door to government investment, raising the possibility of politicized investments, and providing a bad precedent for Social Security reform. In response, the bill's supporters amended the legislation to give the Trust more independence from the government. Its members will now be appointed jointly by railroads and railway unions with no government role.

Under the bill, the government would buy back about $15.5 billion in Treasury bonds held by the pension system, providing it with a cash infusion that the new Trust could invest in private equities. The bill also would lower the retirement age for railroad workers from 62 to 60.

There are still significant problems with the bill, including huge subsidies from general revenues and a financing structure that fails to achieve long-term balance. It also bypasses the best reform, allowing railroad workers to contribute to individual accounts. However, the new amendment appears to remove the most onerous provision. Despite the bill's problems, strong support from unions and the powerful railroad lobby has lined up 71 cosponsors in the Senate, where opposition is being led by Senators Pete Dominici (R-NM) and Don Nickles (R-OK).

2002 Index | 2001 Index | 2000 Index | 1999 Index | 1998 Index