on civilians taking place in libya and effectively that will mean the libyan people have the opportunity to choose their own future. we are responsible for delivering the first part of that, which is my team 73 being put in place. the libyan people are responsible for the second part of that. >> can you see the operations in power? >> i think it's difficult to imagine a way in which u.n. resolution 1973 could be implemented with gadhafi still around because he is the person responsible for inflicting massive casualties and damage on his own people. ..

you bridge the gap between what we all want to see which is a live will be a free to determine its own and what we have by turning up the pressure, and i think if you look back over the last few weeks you can see her repeated moves to turn up the economic pressure, agreed essentials dealing with oil and oil products, you see great political and diplomatic pressure, the coming together of the contact group and arab countries, the steady recognition by more and more

people with the transitional national council in the right into law qtr to discuss and yes, military pressure where you have seen their ramping up of the pressure within the rules of 1973 by the nato allies in terms of targeting command and control, america coming back in. we've grown over ms. ross and tripoli >> the command and control center happens to be at times. >> i said when i made my statement and the debate in the house on the targeting policy. targeting must be consistent with the resolution 1973. that is about taking all measures to protect civilian life. of course that includes takes on the artillery pieces and also command and control. it includes -- it's about the

organization and the people that are ordering the civilian life. as i said i'm not good at the commented on the target but it is within the rules of resolution 1973. >> on the point which is he wants a change to the rules of engagement to the infrastructure project. what he instead of having mission creed consider initiating settlement between the regime and i use the regime deliberately. >> i don't think it is remotely where we are, but when we're still sitting up the pressure and that is actually quite effective. people like to talk at a

stalemate the third biggest city in libya, the people snuffed out by the regime completely as we speak the port being shared by the regime that they've been beaten back by the rubble. so my view is to keep turning up the pressure diplomatically, economically, militarily. all of that is having an affect and i don't think now is the moment. the second part i would say is if you listen to the national transitional council which is made up of people representing not just one part of libya but all of libya and in my view there are not secessionists rather are the islamist. they want a space future for libya. the do not believe in holding discussions and talks with gaddafi. they want to make sure we put in

place resolution 1973 which as i say within doing what we're doing and where he is now is important. >> thank you. at what point do you feel the repression has gotten so bad that it justifies and as far as syria is concerned, are you concerned that once the arab league invites us to make an attack on libya it's being silent about syria and other countries? >> the difference between libya and syria let's begin with does that mean, syria is unacceptable, the amount of people who have been killed by the regime is appalling. the figures from human-rights watchdog and there's no reason not to believe, it has been an appalling level of regime intimidation and killing and we should condemn it as well which

we have. we shall also take steps which we have in terms of sanctions and asset freezes and arms embargoes and all the rest of it but there is a difference i think between libya and syria and one of the instances is we were invited to do what we are doing by the arab league and there was strong local and regional support. i don't think we can say that about syria. >> the one of the weapons we have nowadays in the structure reform and the strategic defense emphasized the importance of one of the ways we delivered that in britain is the bbc world. just at a time north africa is kidding quite serious don't you think for the world service to be obliged to cut the service as a result of the funding to? >> it is obliged by the government to cut.

and every organization in britain as having to cut links secure and very fair funding settlement for the world service that enables them to run good services but they have to then make reductions of as many as possible in the administration, back office and the rest but that has to be decided independently by them, not by ministers. >> of the service has a reputation throughout the world. it is one of the most respectable causes of law and there are only two houses anyone is listening to as al jazeera and the world service and i think's the bbc has a better representation of independence, yet we are cutting it and we are

doing it because they have entered all the money to run it. if we want results, your committee resources for the military organization is an important priority of the foreign office and the strategic defense review. don't provide the extra resources to fund the service if it is cut before the arab uprising? >> all the time you have to look at the decisions we've taken, the impact they are having. if you look at the figures for the reduction of the world service budget and i don't have them absolutely at hand, but it didn't seem to me this was an unmanageable reduction to make those sorts of cuts but at the same time broadcast puna services. and if i look at what other organizations in that space had to do, if think it is perfectly preferable.

>> in the press the ministry of defense moving on now to the capacity to deal, the administrative defense ran a hendee lay in finding a billion pounds of savings. is that true? >> i have to say i don't recognize many of the defense related figures i see in the press. the way i see it is this. [laughter] i recognize some of the letters on the sea, yes it would come to that. but all i recall is we had a strategic defense security review. we settled the budget and it worked on record, the budget was 33 billion pounds this year and 34 than 43 basically slashed across the period, the defense budget in the world and when we fixed the budget these were in

line. now of course with the defense budget there are all sorts of pressures and costs that come along, not necessarily libya because it is paid for through the reserve command to be fair to the ministry of defense, it probably was the most traumatized budget and frankly department that i came across as the prime minister because it had this overhang of 38 billion pounds of the commitment of the various projects that would not be possible, so the process of getting the department began to a serious budget is extremely difficult. but i do recognize but of course you get discouraged and in any department because of fuel costs or pressure or changes with land price, whichever, changes between the budget and the money you have available. >> let's abandon the figure of a billion pounds. do you -- is it true the

ministry of defence has won a delay in some of the savings was required to fund, savings which it had not oddly enough identified by the time the u.s. gr was published? >> again, i don't want to in any way get this wrong. so maybe i will have to write you as well. i get quite involved in this budget because it's very important, and the treasury, the minister of defence and the number ten work very closely on trying to make sure the process of getting the budget back into shape is going properly. late scene is in some cases they've managed to identify savings and changes there are helpful in terms of the budgetary situation but other cases make it more difficult. but that's natural when you've got this sort of car crash of a budget trying to get it back in shape. it's a sort of ongoing process

but i don't recognize the billion figure and the sort of putting it off to the future. i don't recognize that either. >> would you recognize the suggestion after seven months the u.s. gr hasn't stood the test of time? >> i don't because first of all, it needed to happen. we hadn't had a defense review for too long. our commitments were completely out of whack with our resources, 58 billion, overspend we have to deal with and the criticism you should have taken i don't accept because the decisions for the carrier strike and whether it should be tornadoes or -- i don't think the situation is getting any easier. you have to go through the arguments, listen to the arguments and make the decision. in terms of how has when you are involved in the two conflicts, afghanistan and libya, all the time you are learning about the military is learned about what works, but doesn't work, so of

course we will learn as we go along from libya and afghanistan but so far i would say the things we are learning reinforce the thrust behind the review which was flexible armed forces, easier to deploy, the importance of the transport, the importance of the drones was one lesson to reduce the extra emphasis we put on even more necessary in the future and i would like to go even faster on that. but it wouldn't lead me to question or challenged any of the fundamental assumptions. >> there was a headline today about afghanistan, this is u.s. alarmed by david cameron's push in early afghanistan withdraw. what's going on? >> to worry about peeper headlines the reality that we

are the second biggest contributor after the united states and the toughest part of the country the troops are performing magnificently and they are appreciated hugely by the americans in terms of what they are doing. obviously this year there will be some troops coming home. it's not a new announcement in any way. our enduring force level remains at 9,500 but after you know above that in special forces and some of the extra operations we've undertaken solely think if you look at things like what is happening in the troops airport at kandahar and also some people involved in the rapid reaction force will be around in afghanistan in the coming year up to february, 2012 but the force level that remains at 9,500. i am sure the americans

completely understand that. it's rather less than the reduction and they are planning to read and as i say they remain in the toughest part of the country during the most difficult jobs and when you go there one of the first things the americans say is a much they appreciate the incredible work our troops to. >> i hope by giving the answer -- last week we asked the chief of staff would you still describe national ambition as being a full spectrum of capability? and the answers were no, the chief of the general staff, no. would you answer this? >> yes. of course -- >> [inaudible] >> all of a sudden the importance of intervention with the indication for the defense?

>> the question being are you a full spectrum of defense power i would answer that by saying yes because i think if you look at the -- >> i really well, i promise. if you look across and take a navy that has got submarines for the nuclear deterrent we are renewing that has to of the most model it to date carriers coming down the track. if you look at the air force as the typhoon, one of the most capable successful aircraft anyone has any where in the world -- and we spend 900 million pounds on the special forces. to me that definitely describes the sixth biggest economy and that describes a full spectrum capability. now of course, the defense

chiefs will always quite rightly because they are standing up for their services they will want more. and i think the relationship between a primm minister and defense chiefs should be quite robust. and i like the fact that the chief of the defense are able to have good proper arguments and discussions. that's how it should be. in the and the politician has to be as responsible. i am responsible for the fact we are still in afghanistan. i am responsible for the fact i'm putting people who were at risk in libya. that's my responsibility. they do a fantastic job delivering the intent of the prime minister. but in the end of, it got to be the relationship where the politicians are able to have a frank and clear discussion and we were not always saying the same thing publicly which is not why i'm trying to give a definitive answer publicly to what they said because i feel when you look at the 33 billion-pound defense budget as i said to see a pretty full spectrum capability.

of course there are additional things you would like to have and always more that you'd like to have if you are running the navy, the army and say i got everything i want. what about this or that? what i say we've still got a very strong set of military capabilities to the like of which only one or two other countries in the world have. >> development has been for with the rapid response to the humanitarian situation in north africa and has contributed 14.75 million asra loss $17.8 million to the appeal but i fink many people as you pointed out are aware of the fact that this intervention was not at the behest of the local community to the encouragement of the arab league. if you look at the u.n. archer flash repeal part from kuwait

not a single contribution from an cno lead country and in terms of the reconstruction of north africa when they enable that should the poor people of sub-saharan africa or the people of north africa and their neighbors consider that and what assurances do you have that the air no lead would actually take a lead in the reconstruction. >> i have seen the figures, too, and on the basis of this, you could argue that turkey contributing $9.8 million is making a pretty reasonable contribution to get if you say 14 but when you look to the biggest they do look low. i want to investigate these further because of you to the principles of the country mentioned to wait to have put a huge amount of money into the transitional finance facilities. so i think the question we have to ask is everyone pulling their

weight not necessarily the same way but are there putting their way to the in different ways. i think when you look at what the cut tarries and the jordanians are actually doing in terms of the contact group, the military commitment, the political leadership i would say they have played a very positive role. i certainly wouldn't want to criticize and i would like to go and investigate and see whether they are not picking up another way is for the donation figures that you give that you would accept if i put that responsibility this attrition with the poor people of rwanda for the reconstruction. >> absolutely, and i think's when it comes to the reconstruction, britain wants to play a leading role, and we have a stabilization team ready to do that, but i think we want to work with the corporation counsel country's many of whom

have resources to bring down to do that. >> one final question on the commitment to the .7% and the secretary defense letter that is built and in trying to the law some government's ability to change its mind about the pace at which it reaches the target to directed the resources to other activities or programs rather diem aid. can i have your assurance that is not the government position but when do you think we can have in front of the parliament the bill to enshrine that commitment are you still committed to it? >> yes we are. to be clear the government is committed to 1.7%. we are going to achieve that in the timeframe that we set out. we will be bringing forward legislation in this parliament. there's the parliamentary timetable issue that will be brought forward.

to be fair in the record he is saying he is in favor of the legislative target. he's in favor of the legislation and the target. even more important legislation is a truly finding the money for what is it difficult commitment to make at a time we are making reductions elsewhere. it is the right thing to do because we have the poorest in our world even in times of hardship at home. i think also if we take the view of our national self-interest trying to rebuild some of these countries we will stop problems to being visited at home and also i would say as the prime minister and i know they would agree about this the fact that britain has kept its word is worth a huge amount of input in the commonwealth in the united nations and the european union in the g20 in terms of full

spectrum capability, does britain matter and punch above its weight. >> the suggestion the government might change its mind doesn't force the case of the legislation. >> indeed. islamic can i welcome the announcement of the humanitarian aid and as we hold the discussion there is a mass demonstration planned on the streets. what do you think is the best way to try to resolve this crisis? >> clearly we need a transition in yemen and it is as we discussed before fantastically important in britain's interest in terms of the terrorist threat that has been located in yemen. that is the end of osama bin laden and sharper focus that this is a part of the world that al qaeda is still relatively

strong. what i king is in our interest to try to encourage the political process where you have greater demographic participation, the regime that has the support of its people, and the president who has agreed to the corporation counsel process delivers what everyone has promised. now it is hugely difficult with all sorts of problems and pressures but the transition to the new government, fresh elections and a great participation based on the confidence i think is in their interest and our interest. islamic when did you last speak to the president? >> i haven't spoken to him until last month or so. i have in my national security council team won extremely talented official who knows yemen very well to talk to a great deal about this issue. we discuss it at the national

security council regularly. i get regular updates. indolent it is frustrating but it keeps looking well he can't -- it can't go on like this. but it hasn't actually reached --. estimate is that for the international community to lead this? surely the u.n. or the e.u. should be moving in. it's a mediation problem isn't it? you have a president who will stand out and somebody has to go and and broker the deal and at the moment of gcc is incapable of doing that. >> riding that is a very good point. you would think that the gcc would be the best organization for the neighbors, friends in

that group but you think that would be the right way to deliver it. i can go in on this obviously the role they could play at the e.u. level may be said is something worth thinking about. but i think the idea of the gcc bringing together was a positive one. as barrett the problem for us in the national security council you notice is al qaeda and the arabian peninsula and the identification of anwar al-awlaki as a potential successor to osama bin laden. would you accept or support a u.s. move to try to remove him from this in the same way they went in and removed osama bin laden because clearly here was someone who would pose a danger to young men but also our national security. that's the interest in yemen, isn't it?

>> first of all, the relationship with yemen has to go beyond counterterrorism because clearly there are many facets to the problem and we should be dealing with all of them but it's a big part of our interest and we worked with them and it brings us to this point it's a difficult thing to do because khan yunis not be happy with everything else in the country and yet the counter terrorism corporation needs to go ahead as it should do and let's hope that whatever the transition goes to place it will be possible to go on that will affect al-aulaqi himself and the individual behind some of the more recent plots that we have seen to read and clearly it would be in our interest deferral credit and the arabian peninsula was properly effect that we should be acting with the international law and that is the way we should approach this. islamic a final question about

the widow of a summit in london who demand that she return to yemen to read you favor her being in pakistan and properly interview gindin fever of the opportunity to interview the widow of osama bin laden and they may have information that is helpful. >> i would certainly say that the americans being able to do that. i mean, i think it is time for the american pakistani situation. we have to understand each other's difficulties and pressures. >> [inaudible] >> fighting -- i don't think that the prime minister and the president of pakistan do. as i said to the house, clearly there is a support chain that went into pakistan because he was a part of that but i don't

believe the president and the prime minister knew. i think the key thing is for us to understand our respective situations in each other's countries. and as i sit in the statement in the house it is in our interest to back the democratic politicians in pakistan in the fight against terrorism to do that we need to understand the pressure they are under about all the questions they are being asked the need to understand the pressure we are under with everyone saying how could they not have known and all the rest of it and i think it is an important moment for americans and pakistanis, britain and pakistan to deepen our relationship with a moment some people say how can you trust these people i think we should be going in the opposite direction and say we've got to work with these people. the democratic politicians are trying to do the right thing. we should be free building the relationship and i hope -- >> that is the only answer to this week to throw up your hands in despair as well.

>> primm minister, it is more difficult one at the same time to unjustified intervention and not in another and to have the resources to do so any place and is their concern that with a bow stability in the region at risk of ebbing away but the one country coming out of this with that advantage and the country we haven't mentioned yet, iran. i look at it a slightly different way. it seems to me vieira sprang, what is happening across north africa is a huge opportunity. it's full of danger and things to go forward but if we deal with the great spanish history defect the countries are taking of the leaders and going down

some past are trying to move towards some form of democracy and participation that is a good thing for the world and for us it could lead to greater economic prosperity and peace so we should be positive and optimistic about what this could offer some positive and optimistic and that is why we think it's important to get the act together and offer the countries of north africa a better deal. i think it's important we persevere because of course if you let gadhaffi when that is great for the tyrants over particularly in that area. we have to accept that means you can't do everything everywhere. in terms of iran i'm not entirely sure what to say is right because the regime is one of the most dictatorial repressive of all and there is a

future for a democratic egypt and libya people struggling to throw of a leader they might think actually we don't have to go down this path. i think sometimes -- fight said this before, we can over demonize iran as a country run by a genius politicians who are strategic masters. in many ways it is a basket case country they can't even refine using the death penalty. we should be describing the regime as much more backward and ineffective and rather than beating them up is the -- i'm sorry. i am rambling on. estimate is there any risk to our credibility and not holding peace and democracy and

following the course of action the government embarked on at the moment when people can point to the fact that we may have sold weapons and gun deals and rather less than perfect democracies? >> do we get that right or not? the idea though that somehow it is illegitimate to have a defense relationship with say the kuwaitis, kuwait is a country where. there's a parliament right to defend themselves and if you believe in a country's right to defend itself it's acceptable to have a regulated trade and arms and i do believe we have to

learn the lessons, recognize we have always gotten these things right in the past. >> this may not be the favorite social location but we can get officeholders and the pri minister questions in more detail as possible on wednesday and this format makes it possible. we look forward to seeing you in september for the same questions and we are grateful today thank you very much. >> to subjects -- thank you very much. [inaudible conversations]

>> the senate appropriations subcommittee hearing looked into annual spending on u.s. programs including the obama administration's high-speed rail program and security for the nation's trains. committee members questioned the head of the federal railroad administration and passenger rail service amtrak. washington senator patty murray chairs this hour and 15 minute hearing. >> the subcommittee will come to order. this morning we are holding a hearing on the president's budget request for the federal

railroad administration and for the national passenger railroad corporation track. i want to welcome administrator of the federal railroad administration mr. joseph szabo and amtrak president and ceo mr. joe boardman. thank you both for being here this morning. we look forward to your testimony. we are now at a pivotal moment for the nation's transportation policy over the last several years we've made important investments in our rail infrastructure but the focus in congress on budget cuts has create a race to the bottom that makes it difficult to continue those investments. rail offers an environmentally sound and efficient alternative to move people and goods, creates jobs, reduces the price of goods being shipped and help commuters across the country get to work. our population is projected to reach 420 million by the mid century, almost 140 million more than in 2000. trouble on the roads and at airports is crowded today?

just wait. building more and more roads won't be enough. we have to look at other alternatives such as passenger rail for the future but we need to be smart about building intercity passenger rail in a way that works with our system of road and aviation. we need to meet targeted investment where it makes economic sense to improve mobility option in and between america's city. devalue the service and i know families in my home state of washington dalia the amtrak service which just set record writer ship for the second year in a row which is why i am so disappointed that the new republican majority in the house of representatives has targeted the transportation with the budget cuts. a year ago we sat together in this room and the last hearing discussed financial constraints in the fiscal year 2011 annual appropriations. a year later we've instituted the largest one-year reduction

of discretionary spending in the nation's history. these budget cuts have had an impact on the rail transportation program. capital grants to amtrak were cut by 78 million new funding for inner-city high speed rail was eliminated for sye11 but many republicans and house savings cuts are not enough and they are clamoring for more. the house version of the 2011 bill would cut amtrak by 151 million revoking the furloughs for up to 1600 employees. it also would have taken that over two and a half billion of high-speed intercity grants. i agree leaders here in washington, d.c. need to tighten the belts and work together to get the debt under control but we cannot be reckless about this. we cannot together a federal budget that will put our fragile economy in millions of jobs at risk. the investment will make the country more competitive long-term. as we develop the budget for fiscal year 2012, the bar has

never been high year for concrete results to justify federal investment. the administration used its budget request to show its vision of real placed on part with other modes of transportation but in today's environment a big vision just won't cut it. we need to see realistic alternatives for slash and burn politics that have taken over the budget debates. i'm disappointed the budget request doesn't offer that. the competition for limited resources in the department of transportation. the transit systems are suffering across the country shutting down service is unable to meet operating costs under constrained state budgets. the next-gen air traffic control system is costly and fundamentally necessary for the future of transportation as well. that's why i need more from you. i recognize the hard work you and the staff have done to protect the agency role as a safety organization and to build the capacity to oversee

multibillion-dollar investment choices with no small task and i commend you for your effort. but i need you to improve transparency. we need detailed and compelling answers to basic questions about the words they are making to the states like what markets make the most sense and why. what are the benefits to the investment? and what will it cost to operate? march 2011 gao report on the program found the criteria and evaluation of the grant to be found. the only recommendation is that fra provide more detailed information of its record of decisions and i couldn't agree more. as the program lechers, transparency about the analysis and consideration of projects can only need in resolving the criticism about the integrity of the program. we also need to dispose of the myths that plagued the inner-city high-speed program.

there should be no question about the interest states in the most recent $2.4 billion grant competition if ra received more than 90 applications from 24 states, the district of columbia and amtrak for projects along the northeast corridor with preliminary totaling near the $10 billion. this includes the state of wisconsin's application for to wondered 30 million the was the states that previously returned the recovery act award. i support investment in the high-speed rail but it's now time to address the program critics head-on and the program to produce and communicate tangible results that the congress and the american tax payers clearly understand. i'm sure mr. boardman can sympathize with the situation or in mr. szabo. i remember a point when there were discussions about the end of amtrak. the committee saw a series of requests coming out of the previous administration that

bankrupted the railroad. i worked hard for adequate funding for amtrak and the reform of its financial management. the passenger rail investment improvement act of 2008 helped put amtrak on the right track for success and management team has done so much to improve the ways that amtrak does its work. amtrak has a new level of cooperation between its board and management teams. they worked diligently should compete the strategic plans, developed the system to prioritize capital projects, discipline for the fleet modernization, improve the transparency of the annual budget and develop a comprehensive business plan. as the leadership at amtrak face significant challenges in the years ahead, i cannot emphasize enough the importance you administer the programs and manage funding effectively and responsibly. finally, i look forward today to discussing with you the security challenges that defaced and what steps your taking to safeguard the nation's passengers.

as you know, there is no higher priority with the tale of the terrorists against the target's emerging from the raid on bin ladens's compound, i want to make sure you have the resources you need to protect the railways and the passengers. thank you very much and i yield to senator collins. >> thank you. good morning. first let's join the chairman in welcoming mr. szabo and mr. boardman to this hearing. i want to begin by thanking the administrator for working with me, state and county officials to preserve critical freight service in northern maine. the 233 miles of the line the serving this area of my state has been proposed for abandonment, and that would have

endangered some 1700 jobs now thanks to a cooperative effort we can begin the important work of upgrading the track to preserve and actually improve the rail service. so thank you mr. szabo for coming to maine to make all that possible. over the past few years, the fra has begun to transform itself from essentially a safety oversight agency to one with the added responsibility of allocating and overseeing billions of dollars in high-speed rail and inner-city projects. i agree with the chairman that we need to have a better understanding of how money is being allocated under this program.

many, however, have questioned the basic economic efficiency of building a high-speed rail network in the country several states have already rejected funding for which they're states had been awarded with looming budget shortfalls in many states the cost of building and maintaining the high speed lines is proving to be daunting. fra has an ambitious national plan in place. however, the agency is yet to provide cost estimates on what it would take to build and maintain a new network of this magnitude off the northeast corridor, this is the commission now allows amtrak to apply directly for high-speed funding.

amtrak has projected that the planning and construction of the high-speed lines for the northeast corridor could cost upwards of $117 billion over the next three years. i can only imagine the costs that can't play a national system when the other ten quarters are included. the administration's budget also calls for a significant change in the manner in which interest is funded. under this proposal the amtrak would be eliminated and it appears to force amtrak to compete for funding through fra. i am interested as a long-term amtrak supporter in better understanding how that would work. with more than 28 million passengers in the last year

amtrak riders ship has increased with a belief by 5.5% with more than 147 passengers from march of 2010 to march of 2011. i suspect escalating gasoline prices will push the writer ship levels even higher. amtrak down easter service between portland, maine and boston has become very successful. and last august we celebrated the arrival of the first shipment for the expansion project which will expand from portland to shreveport to brunswick and i appreciate the participation in the celebration. the infrastructure gives particular will come in the brownswick area, given the closure, the brownswick station

federal investment plays an important role for amtrak. but in the time of budget constraints, it must be done in a fiscally responsible manner. i do commend amtrak for cutting its debt levels substantially from 4 million in 2002 to 1.8 billion today. but there still is in that operating loss which for fiscal year 2012 is some 616 million which is nearly more than 200 million the in the fiscal year 2010 operating lough. this stems from the district route that continue to prove on successful from the dollars and cents standpoint. finally, let me just add to what the chairman said.

only a few days after our operation in pakistan removed osama bin laden as a threat to the country the dhs and the fbi released an alert about the security. this was a result of the intelligence that was gathered from bin ladens's compound. i was pleased to see the turnaround that the intelligence gathered from half wearable the world was analyzed quickly and an alert issued. all of this intelligence was not connected to any particular city or line and was stated from early last year it demonstrates the mass transit remains a tempting target for terrorists. and of course, we all know that based on the terrorist attacks on trains and subways, in madrid, london, mumbai and

moscow. we are thankful that there hasn't yet been a similar attack here in our country. but we cannot become complacent as al qaeda or even homegrown terrorists could launch attacks particularly given the warning that we have received from the intelligence from bin ladens's compound. with a an eye towards ensuring taxpayer dollars are used as sufficiently as possible, we must be certain adequate security measures and technology deployment are implemented throughout the passenger sector and also that this primarily the responsibility of the transportation security at a ministration, i look forward to getting the thoughts of the witnesses on this issue today. thank you, madame chair. >> thank you.

>> thank you, madam chair. it's good to be sitting with colleagues to understand the urgent need to get on with investing in the systems and amtrak particularly on improving the opportunity to get the cars off the road and improve air quality and save money. trains help of america's economy forward since the 19th century when the transcontinental railroad was built and then capture the imagination to the rest of the world. almost 150 years later the railroads are still an engine of success of economic success that the u.s. is no longer leading the way, and i recently returned from china which spends heavily on high-speed rail investing about 9% of its gdp on infrastructure, lamar than three times the amount we invest here in the united states and china's

investments are paying off. when i wrote on a train that move faster than 200 miles an hour. also i might add with that hard to as it is now and i used last week so i don't want people to think my handwriting is a product of age. our fastest trains travel 150 miles an hour and that is under optimal conditions. over very short distances. to remain competitive globally, america must strengthen its network, get more people access to faster trains. it's going to help spark job creation as businesses served by new trend stations and we see that. we've seen it abundantly in new

jersey where we added a couple of new sections. and within a very short period, businesses will move to places convenient that's better for their employees and their customers and their staff alike. sweet gum also it boosted property value in the areas we served. in our state i am working with amtrak to help the gateway. it's the only innovative project for the high-speed rail in the northeast corridor. each week it takes 40,000 cars off the highways and 243 flights out of the sky is. and i can't help but repeat something everybody can understand and that is penn station new york this fester in

a day than all three major airports that service our area it is quite a fantastic thing and more would come if there is room for speed and comfort and i commend and truck on the success of the northeast corridor. when administrations have access to trains, they will gladly take them. when i came down last night and the train was pretty much felt and i see that more often than not. president obama recognizes this and the administration made nearly a billion dollar investment in improving high-speed rail in the region. out of the bold vision to build a world-class high speed network will carry america into the future. faster trains give americans a better alternative to spending their time stuck in traffic on the congested highways observing the air pollution waiting in

endless lines of the airport. unfortunately some say we can't afford this in high-speed rail right now and they are determined to slam the brakes on our car but i say we cannot afford the proposed house budget without the return to a more of robust economy. it's part of the planning and we must do it. the view is we must break transportation agreements in the past like the george washington bridge built during the great depression. created jobs but also created truffle lubber to be between new york and new jersey and highways going north and south. so, madam chair, i look forward to hearing today's witnesses about how we can reclaim its role as the world leader and to get our economy back on track.

thank you. >> we will now turn to the witnesses for their opening statement. we will begin with you. >> thank you, chairwoman marie, ranking member collins, senator lautenberg and members of the subcommittee. i'm honored to appear before you today on behalf of president obama and secretary lahood to discuss the proposed fiscal year 2012 budget for the federal railroad administration. by 2015 the u.s. census project in annual or population increase of an additional 100 million people. to put it in context it's like adding the population of other and york, california, florida and texas all combined. a plan for the future of the budget proposal details how strategic investments would build an innovative national network to move people and goods safely with speed and flexibility. railroad safety remains a top priority and i am pleased to

report this ag record for 2010 achieving all-time lows in the number of accidents per hundred train miles traveled and this is an example of the multifaceted approach brings about change, taking one of the most dangerous industries making it now one of the safest. to continue this progress this fiscal year budget proposes $223 million for safety and operation. with more freight and passengers moving as the economy improves, the funding enables fra to remain focused on the new and comprehensive safety strategies while building the national network. while we remain squarely focused on safety, the momentum in the groundwork for the high-speed intercity passenger program continues. over the past year, fra operated more than 5.5 billion in the annual appropriations bringing dollars to states and projects across the country putting americans to work. with the help of fra, states

have ground-breaking agreements with freight rail partners on four major corridors that assure the federal investment will produce quantifiable performance outcomes for passenger rails while improving of the world-class system .. ..

we know that our existing roadway systems are among the best in the world but congestion and traffic threatened to stymie the american economy and our productivity. we have to provide americans with new and enhanced mobility options. the president's budget strategically invests $8.2 billion in fiscal year 2012 or the continued development of high-speed intercity passenger rail as part of the bold 53 billion-dollar, six-year transportation proposal. $8.2 billion will lay the foundation for the passenger railways for the future consolidating passenger rail through the transportation trust fund. network development and system preservation. the budget proposals places passenger rails on equal footing with other surface transportation programs. new passenger rail corridors

keep the sun track providing 80% of americans access to a high-speed rail network within the next 25 years. our goal is to create a balance transportation system of highways, transit and aviation enhanced with high-speed intercity passenger rail, developing a passage rail network requires a long-term commitment at both the federal and state levels to keep the american people moving and communities connected. the strategic investments in rail that were made in 2009 and 2010 are paying off. we are enhancing the global economic competitiveness of america, boosting domestic manufacturing, reducing reliance on imported oil and creating a database of highly skilled well-paying jobs and we are establishing a pipeline of rail projects and future corridor development. for decades, investment transportation has connected cities and states from coast to coast and served as a foundation for economic growth in our

prosperity. by providing a long-term commitment for high-speed intercity passenger rail today, we are taking a bold and definitive approach for addressing the nations near and long-term passenger and freight mobility demands and ensuring future generations will have access to high-quality, safe and efficient rail transportation for decades to come. i look forward to your questions. >> thank you very much. mr. boardman. >> thank you. good morning senator murray, senator collins, senator lautenberg. before i get into the 2012 funding i would like to take just a second to discuss some of the revelations that have come in the wake of osama bin laden's demise. we have worked closely with both domestic security organizations and foreign rail organizations. it has been created and i have our vice president and chief of police who has taken an active role, john o'connor, it making

sure that we are keeping an eye on what is happening not only in this country but in europe in terms of the way that this is being investigated. we are most concerned with the possibility of an external attack on a train at a vulnerable.whether that be a bridge or a tunnel and we are seeking as best we can in cooperation with dhs and tsa additional support to find warning and detection systems that would help us in the event of such an attack. the administrator talked a little bit about his program and there is a large part of his program that involves development and if you look at some of the technology that is available today, adopting bad and extending it in using it for the future we think has real possibilities for us. i think it is important to really think about what we are really threatened with rather than some of the other ideas that have been expressed. and what we are really looking at today is ridership that has

increased month over month for the last 18 months in amtrak. we see people flocking back to using rail and as senator lautenberg talked about there a standing room only and many of our trains today. are ridership has grown 36% since 2000 last week the u.s. d.o.t. awarded us a 450 billion-dollar grant to improve the. >> speeds on our northeast corridor, a line through new jersey and the senator asked me this morning when i was going to be done. i don't have that schedule yet, senator. that one step in recognizing for the future a vision for greatly improved northeast corridor service that was talked about this morning. for fy12, amtrak asked for it for love two-point to billion dollars divided into $616 million to support our operations. 1.285 billion for capital programs and 271 million for

debt service as we are working hard on debt as you have already recognize. with the exception of about $50 million in funding be requested for the northeast corridor gateway project in new york and the additional debt service money to buy out leases, these are levels that are authorized by the passenger rail investment and improvement act of 2008. we have detailed many of our major programs in the written portion of our testimony but we have just updated the fleet plan. we have placed orders for new electric locomotives and single level long distance cards and we need to add capacity to the services that we expect to be able to add 40 cars to the existing 20 passenger service vehicles and this investment will generate for us about $100 million of additional revenue once we deploy it. we plan to begin out per curiam and with these cars and fy2012. amtrak has focused heavily on

controlling its cost. we have cut our debt level from 4 billion to 1.8 as as been mentioned. we are the most cost efficient passenger railroad in america covering 85% of our total operating costs from revenue of which 76% is generated through ticket sales. we are improving how we are doing our work but point-of-sale solutions on our trains with e. ticketing, with wifi on the trains which in and of itself increased an incremental 1.5% improvement in our ridership which translates into 47,000 riders in $6.5 million of incremental revenues in 2011. i understand as amtrak understands there will be difficult fiscal choices for you to make. as you know continued capital funding will allow us to reduce or eliminate problems that translate into increased operating expenses. over the long term and effect of capital investment program can

translate into permanent reductions in expense. i also look forward to questions. >> thank you very much. as has been mentioned a number of times now we have discovered credible and specific documentation about al qaeda's interest in launching an attack against our national rail network from information that was gathered at osama bin laden's compound. that information strongly suggests the administration become more diligent in recognizing rail transportation is a potential target and we have got to take some active steps to secure passengers and hazardous materials in particular. mr. boardman, can you please comment on the steps you are taking to protect your passengers, your partnership with the department of homeland security and what financial support they provide to the corporation with its homeland security mission? >> yes, maam. we have a very strong partnership with dhs and tsa.

my vice president for security, chief of police, has an almost daily conversation with tsa staff in terms of what we can work together to do. security grants since 2005 total almost $200 million we have used those for infrastructure protection, for bridges and for example to expand our k-9 program. are k-9 program has grown from about 23 animals and handlers to 47 today. we believe that we are probably the best in the united states with both vapor weight dogs and determining or detecting ied explosives. even one of our recent competitions, our dogs and team handlers came in first, third and forth across the country in terms of our ability. we have the ability to train and we do every single day to stay at a high level of readiness with those animals and with

their handlers. we have increased their patrols. we have had a public outreach program and worked diligently with dhs and the secretary on see something, say something. we have a real safe program which really is a multistate and multiagent -- agency effort to immediately mobilize and provide assistance from all of the community resources available for security and enforcement and we have been able to demonstrate being able to set that up in a very short. lack of time. is a matter of fact a little bit off the side of this we were able to help alabama with our own mobile command post and our employees in alabama by providing them with assistance during the recent tornado and we have an entire team of amtrak police and security folks that provide that assistance. we work with the tsa on regular screenings on in the air regular

basis and we are proposing today and looking at an inspector right-of-way patrol. some of the viper operations and maybe even some air support on things that we are trying to provide across the country. the low ride issue is a difficult one especially in railroads. railroad security is very different than aviation security in the sense of the access there is even on the northeast corridor. so often we talk about the ridership nationally of amtrak being 28 million but we handle every day in the neighborhood of 6,700,000 commuters on the northeast corridor and most of the facilities that we operate we handle and manage and control so we are well into the millions of ridership that depend on amtrak stability. >> what about additional security checks? >> additional security checks? we have worked with especially

the new york city police agencies to make those additional checks at penn station and up and down the corridor. we have had many of our viper teams providing that. >> mr. szabo do you want to comment on fra? >> the president boardman did a great job articulating it from an amtrak perspective. from an fra perspective we talk at least weekly with tsa who has primary jurisdiction here more often if necessary. we meet with them at least quarterly more often than necessary to ensure that we have the proper level of coordination we are deeply involved in the inspection and implementation of programs to protect hazardous material shipments. we work very closely with tsa on that. i think one of the most important things we can do for the future is to ensure that we have appropriate funding for

research and development. there is quite a bit that we can do through enhanced tech knowledge he to make sure that there is and interference with the railroad right-of-way, to make sure that both passenger trains as well as freight trains are properly protected. we have got some r&d underway that i think would be helpful on this as far as real detection and in real-time but ensuring programs like that and technologies like that moving forward would be very important. we do require and regularly inspect both the rail carriers and the shippers, plans for their personnel security, what guarantees they have to prevent unauthorized access to property and they are en route security plans. >> well i appreciate the comments from both of you. i want to reiterate that rail security going forward is going to be very important as both of you know and we all know long

before potential plots were uncovered in osama bin laden's compound security officials have been warning the u.s. that are railways for potential terrorist targets. they did that in part because we have seen attacks abroad but also because they were failed attacks on our service transportation systems here at home. congress passed the 9/11 commission implementation act which required tsa to address a variety of surface transportation security issues including passenger rail and mass transit, but unfortunately there are many unfilled requirements of the acts that are of concern. tsa developed several risk assessments to address rail and other public transportation at high risk of attack but they have not done a comprehensive and a session -- assessment risk of all modes of transportation and i am i'm concerned that the security strategy or rail focuses almost exclusively on rail shipments of toxic

inhalation hazards despite other assessment that i've identified potential security targets such as tunnels and bridges. despite nearly doubling tsa's service transportation security budgets, these issues do remain unaddressed and unanswered and in fact a "wall street journal" article recently pointed out the fact that for every $50 tsa spent on aviation security, the agent budgets 1 dollar to protect service transportation. now i realize that these issues ironed solely under the jurisdiction of our witnesses today but i do feel that they are very critical issues moving forward and i want to work with my friend and colleague, sue collins. she and i wrote the port security act and move forward on that and i think that is very important that we really focus on this as we move forward in the or to working with anyone who will work with us again to do that. thank you very much and i will turn it over to senator collins. >> thank you.

mr. boardman let me just follow-up on follow up on the chairman's question. you mentioned, and you are exactly right, that it is far more challenging to deal with train security than air security. air security, you can vet every passenger that plane is presumably out of danger during the transit if there has been appropriate screening of passengers and baggage and other freight. but trains can be able marble every step of the journey. so, my question to you without asking you to disclose classified information, is when you receive the joint intelligence olefson about the data that was confiscated in bin laden's compound, what specific additional set -- steps did you take to improve rail security

for amtrak? you talked about inspections and k-9 use but those have been around for some time. what additional measures did to to put in place in response to this intelligence? >> the i think the answer to that is that we needed to think about how this may happen and where it might happen for example, and you have argued pointed out that it could happen anywhere. it could happen anywhere across the country. so one of the things i looked at was, as being in the former role of being the fra administrator, was to look at what does fra and what does the industry have on its plate and looking at development of the detection devices we might be able to

employ? it is mostly development in the areas because fra as was pointed out earlier is primarily, has been primarily a safety organization as rail flaw detection to see where there might be a potential board derailment based on some flaw in the rail that exists. but the technology began to come forward with ultrasonic testing and laser-based projection of that technology to see a head of a train, to see how far ahead we could investigate whether a rail had the ability to sustain the train and a b. even if you are looking ahead and looking at the gauge of the track whether there was any widening of the gauge ordinarily of the gauge in some fashion. the first real step was, let's think about what it was that we could do for the future to

detect it through technology. there is some potential. right now the way they are looking at though is at 40 miles an hour and that is okay for freight but it is not okay for passengers especially for a high-speed rail. there needs to be an improvement that. there is not funding there to do that and whether the capability is there or not, and investigation funding needs to happen to see us improve the technology. the second thing was that we needed more patrols right away -- right-of-way patrols that we could look at and find whether there was any difficulty at vulnerable locations. there have been studies in the past done to identifiable marble infrastructure, at least in many places early on after 9/11. we began to look and catalog what those vulnerable locations are, so that there would be an increase in the number of patrols. some of that has occurred. morbid needs to happen.

we are working with tsa, dhs to find a better way to do that as well. >> one of the lessons that we have learned in the homeland security committee is the importance of the partnership among all levels of government, and it occurs to me that given the challenge you face in addition to looking to technology, maybe we should look at some sort of program like operation stone garden which dhs had where the border patrol works with state, county and local law enforcement to do patrols along the border, because federal officials, federal law enforcement, homeland security, amtrak officials cannot be everywhere. it is simply impossible, but if in fact it happened to state,

local, and county law-enforcement, it really is a force multiplier, and the operation stone garden program has worked very well in that regard. so, i would be interested in your taking a look at whether we should create some sort of similar program for train security where you can work in partnership with state, local and county officials to do some of those patrols along your railways. i think that would be a way to expand coverage and an economic way. the partnership is absolutely essential if we are going to increase security of our country, no matter the mode of transportation. >> may i respond? >> yes, please. >> i absolutely agree with you and i think a few years ago amtrak lost its way in terms of what was going it was going to do for security but we now have

a direction of a very strong relationship and community policing that begins or helps with the kind of thing you are talking about and we do that with rail safe. the one caveat and i'm sure you have recognized this is we have to be careful with having untrained people in any kind of right-of-way along the railroad because of the danger that is involved. even our own folks have lost their lives because of how quick a train is upon somebody. so, yes i agree with what you are saying. yes, i think we can do better and do something different and i will talk to our staff about doing that, but it needs to be people that are knowledgeable about the environment they are in. >> thank you. >> senator lautenberg. >> thank you each for their work that you do and the leadership that you provide in your respective departments.

we see really good progress being made. however, it is not enough. it is not a discredit to you. it is the fact that we are not devoting enough energy, not enough funding and enough attention to what the circumstances are with rail. last year we saw 700 million airlines passenger trips -- airlines, 10 billion on transit and rail trips and yet we spend 98% of our money on aviation security and 2% on rail security. we know the risks are real. if we look at the experience in madrid and london and moscow in and mumbai, we know that these are soft points for terrorists and that is confirmed obviously by the information obtained as a result of osama bin laden

information that has come out. so, we have got a job to do and it is frustrating and i am sure you feel it as we do here. that is, why isn't the subject overwhelming, overwhelming and not a place that we have to battle to get basic funding for these projects? george washington bridge was built during the depression. jobs and improvements in the future and that is what we are looking at. when we talk about population growth, that might come in 30 or 40 years. when i see, when i get there i want to know that we can travel, so i would like that cooperation from you. 40 years from now the net population growth includes you

will be able to move around. but, apart from bad attempt at humor, i commend the administration for recognizing the importance of the northeast corridor by awarding amtrak nearly half a billion dollars in high-speed rail funds to upgrade the corridor in new jersey, and i asked specifically mr. szabo how will these funds like the gateway tunnel help advance the president's national high-speed rail plan? >> in making those improvements, they really do three things. reduce trip times, improve reliability and provide for additional capacity. the improvements that were announced last week, particularly those investments

in the power supply in the canton area, you do all three. there has been a source of reliability problems historically so it will help fix that problem. the the new cat mary is going to allow for top-end speeds of up to 160 miles per hour so with that it is reducing trip times. the ability to expand utilization of the northeast corridor has historically been hindered because of the power supply. so, provides that additional power that will allow for future enhancements. i think it has to be viewed as, these are only first steps but they are very very important steps that do those three things, improve reliability, reduce trip times and provide for additional capacity. >> mr. boardman amtrak included $50 million for the gateway tunnel project in its budget request next year.

what will be the impairments to these ideas, to the ability to develop a more reliable higher-speed system? what will be the impairment if we don't build that gateway? >> i think we are out of capacity in the northeast corridor. we cannot add, specially in penn station, so we have tone mulls, we have signals and approaches, we have power. we have nowhere to put the new jersey transit trains for example thatcome into penn station whereas the long island railroad trains come in and go to the west side yard and get out of the way. we don't have an ability to find a place to put the new jersey transit trains so it is really capacity is really beginning to constrain the ability to add service and then the fluidity of high-speed service. if we are really going to have high high-speed service that works, where we have three hours

between boston and washington d.c. we need not to have new york be any more of a bottleneck bennett already is. >> so that is a key item in the development of the high-speed system. >> absolutely, critical. >> without question, a tunnel is essential and this one -- i mean we have had a few attempts at other designs and so forth but this one looks like it really fills the bill and will permit more amtrak trains to get through on an hourly basis and improve the transit distance, the transit opportunities as well. >> they all work together. >> thank you madam chairman. i assume we will have an opportunity to submit questions. >> yes, you up an opportunity to submit questions. and a member well. thank you very much. i know know but fra has done

extensive work to develop a commercial feasibility study for high-speed rail development strategic plan and progress of port on the national rail plan and gao reported recently of done a good job of developing clear application criteria and the merit-based review process for high-speed rail grants. at this point congress is looking for more detailed information about the designated corridors, regional services and emerging routes you have identified. for example we want to nowhere does it make sense to focus investment in the short and long-term, what it will cost in terms of initial capital and operations and maintenance and what are the tangible benefits that we achieved with these investments? mr. szabo, when we have answers for this committee on questions like that? >> first off, let me say this. we were very pleased with the gao report backing up to that and it was the first time in more than a decade that the term good has been used in a title of

the gao report. it happens only once every 12,000 reports that they issue, so we appreciate the fact that the vast majority of that report was complementary in our selection process. you made a statement in her opening address, which is imperative and that is that we show that these corridors make economic sense. we absolutely have to provide the business case that shows we are not simply building high-speed rail just to build high-speed rail but in fact we are selecting corridors that makes sense make sense from both an economic standpoint, public benefits standpoint as well as a transportation standpoint. we are in the process now of putting together both what i would call it brought her business case that will analyze and quantify the broad benefits

of high-speed rail for the nation and then as a second component to that building the business case on the individual high-speed rail projects for the corridors. and we intend to have information out to you in the next couple of months. >> the budget isn't going to get any better and we need to be able to show exactly what we are doing and why, so if we can get that sooner rather than later and have it cleared idea of how you evaluate the public benefit for us and what those investments need to be, we will need this as we put this budget together. the high-speed intercity rail grants that have been awarded so far largely supported capital projects. obviously there are costs associated with operating the rail services and one of the reasons that florida and ohio pulled out of the program was due to concerns by the newly-elected governors about the lifecycle cost of operations and maintenance of services.

can you tell us how and fra is ensuring states will be capable of sustaining services from those investments? >> first off i think it is important to note while there is a lot of chatter about the fact that three states chose to pull out, one of them chose to get back in and apply again number one and more important than that, 32 states in the district of columbia and amtrak continue to move forward with projects. the vast majority of states in this nation are choosing to move forward. you know to your question first off, there is an old saying that the more you capitalize the less you have to subsidize relative to operations by having modern infrastructure, modern equipment and a good on-time performance and frequency of service. you can actually drive down the operating subsidy to the point where in many cases if you choose the right markets you can eliminate it entirely. i think the northeast corridor is a great example they are that

there is the appropriate level of service, frequency and reliability that allows them to actually generate a net operating profit. if you take a look at the president's 2012 proposal, our budget proposal we do propose in their transitional assistance for the states. with the understanding that if some of these corridors go through their initial startup. not that it does take a period of time to grow the ridership, and so we are in fact are posing in the 2012 budget this transitionary help for the states to be phased out over a period of time at the point that either they become self sustainable or at least the state you know knowingly went into a position that they would have to cover operating support because of other public benefits that they are receiving. that is part of the application that we review from the states, their business plan and you know

they understand their commitment to cover the cost of operation should there be a deficit. >> mr. boardman i wanted to ask you about some recent criticism about amtrak for excessive overtime payments to some of its employees. as we try to put together a bill in this very tough environment we need to know that every expense is justified so i wanted to ask you today if you could explain why the corporation faces those expenses or whether it is more cost-effective cost effective than increasing the workforce and what steps you are taking to manage that? >> thank you. yes maam. a particular area of overtime cost is on maintenance and the capital work we are sustaining. is not a new problem for amtrak. it has been a series of problems over the years and being able to control that cost. very difficult to control and initially because it requires

training for the people that are involved from 24 to 30 months of training to do the work that expects to be done. it is difficult to do that planning and i think it is part of what the administrator was talking about on their proposal of having a different way of giving amtrak money for the future on a 12 month timetable that we operate on for our capital program. for example when we got the additional funds, one of the things that increased the overtime cost was the demand to get so much of that work done as quickly as it needed to get done. but in terms of whether you hire more staff are not and take a couple of years to train them, the overtime is actually at a lower cost from a burden. in other words there is about a 54% or so benefit package that goes along with full-time employees and in the overtime that comes down to about 18%,

even though the numbers of overtime dollars look high, and they are, there's actually an overall higher cost if we had been able to get people on board, train them and get them working at that point in time. then when they are a fundings went away we would have had to lay them off and we would not have gotten it done in the same period of time. all that being said, we were not doing as good a job managing the overtime as we could have with the work rules that were available even though those work rules in some cases are not very flexible for us. so the percentage of the amount of overtime paid as opposed to the percentage of straight time paid was escalating beyond where it should be. that is back down with a focus on that. the chief financial officer and the chief engineer have made great strides in making that happen. i know that has happened because a number of grievances is gone up among the workforce because of their concerns about having

some of that overtime down. >> thank you very much. i appreciated. senator collins? >> thank you. mr. wardman let me ask you a fundamental question. in your testimony, you noted that amtrak has enjoyed 18 straight months of year-over-year ridership increases, get as i noted in my opening statement, your projected deficit, you are operating loss for this year, is actually projected to be worse than last year's. so reconcile this for me. i don't understand how you can be serving more passengers than ever before and it is not just a click lives. it is every month for the last 18 months, so that presumably means you are getting more revenue and fuller trains by

everyone's experience. how come you are losing more money? >> it is a difficult thing to understand but i think i can explain it pretty well. it is the long-distance trains and it is almost entirely the long-distance trains. and there are several reasons. wages have gone up and the fuel costs have gone up. the expenses for us to operate those services has increased. while there has been increased in both revenue and ridership in the long-distance trains, nowhere near what the increase in revenue and ridership has been on the northeast corridor. what make's it look even worse is we were able to in the past use some of the money that they have received we received over and above the northeast corridor revenues to offset and reduce the demand or need for long-distance trains subsidy. now it is more difficult because we are actually executing a fleet plan and we are using the

potential of the revenue that is coming from the northeast corridor to go to pay for the debt costs on the 70 electric locomotives that we purchased, which means that there is a greater need again on the long-distance trains. the business model for long-distance trains does not work in the pro-rail folks always shudder and worry and get very concerned when i talk like this. that is what is necessary for this transparency, is to understand that you are not going to cut costs far enough on the long-distance trains to make the long-distance trains profitable. we can cut costs. food and beverage costs are continuing to be something we are focusing on to bring down. there is a fairly significant cost today, about $60 million, that we pay the freight railroads for on-time performance. that needs to be adjusted. the program doesn't work in every fashion and formed the way but like you to do.

so, it becomes more a question of policy and the united states about whether we are going to have a border to border, coast-to-coast service transportation connectivity in the united states. 42% of the disabled people that ride amtrak ride the long-distance trains. the rural isolates are particularly dependent on the long-distance trains and it is not just the long-distance trains. about $180 million worth of subsidies needed for the state-supported trains because we haven't gotten back in the states yet the amount that was expected in the prior legislation so the corridors that they operate, some of them are part of the long-distance network. some of them operate independently. but it is that area where there is a low density that it is difficult to recover those kinds of costs. >> would you consider recommending determination of

some of those long-distance routes that are unprofitable year after year? >> they are all in profitable. all unprofitable. >> as soon as we eliminate does, there will then be some that are more unprofitable on the remaining ones. is kind of like the old story about if you live in a red house and people are coming to take away the people in the red house, the people in the yellow house don't care until they come for the yellow house, the people in the yellow house. that act is my recommendation is we either run them or don't run them but if you don't run them the first-year cost, and this is a business decision, is a little over a billion dollars because of the protections that are there for labor but also putting it -- putting away the equipment and protecting it and so on and so forth. we bring a huge benefit economically to the rural portions of the united states by

having a place that people can actually get on a surface transportation mode of service. the faa itself, the whole faa is 50,000 people in the u.s. d.o.t. added 60,000. 50,000 people are paid for for the faa for aviation and about 33% of their salaries are covered back from the aviation industry. but because of the way we are financed and subsidize compared to other modes it does not stick out like that where we have that kind of cost. >> i assume therefore that you are not a fan of former pennsylvania governor ed rendell's proposal to spin off the northeast corridor into a separate public private corporation? because that would reduce the subsidy that you have available for those other lines? is that accurate?

>> i'm not. british rail when they spun off they went from about would say 1 billion a year to about 7 billion a year in public subsidy but by the time they were done. i believe you need a connected intercity passenger rail service in the united states. >> thank you. i was not endorsing it. i was just soliciting the views of the web notes. madam chairman i am participating in the holocaust remembrance ceremony at the capital which begins very shortly so i am going to excuse myself. thank you for holding this hearing. >> submit further questions for the record. i just have a few more. mr. boardman i appreciate amtrak is focused on strategic long-term capital planning, fleet strategies and evidence describes how amtrak will replace rail cars and locomotives and i understand that amtrak applied for a

563 million-dollar loan from d.o.t. to pay for those 70 electric locomotives back in 2009. however fra and amtrak have yet to finalize the loan agreement so mr. szabo can you explain why this process is taking so long and when do we expect to have this finalize? >> we are prohibited about talking about pending applications but i will say this. we are incredibly close to having that close. >> incredibly close? okay. amtrak is requesting 70 minute alien -- $79 million for its fleet plan in fiscal year 2012 and of the 60 million is for the first four installments to purchase new cars. i understand this would result in sufficient revenue to repay the cost of procurement by 2018. mr. boardman, why do you ask for a direct appropriation rather than a d.o.t. loan for those cars? >> i don't remember. hold on a minute.

it is a backup plan if we don't receive the loan. than we need to get the money that we need to move forward. >> okay. you are hoping that is what happens at this point? >> the application for the loan is not in yet but we intend to. >> okay. mr. szabo at our hearing last year you indicated one reason for the delay in the development of the national rail plan was the congress shaped his program as a state driven process and the 2012 budget request argues there should be a stronger federal role in the development of rail infrastructure than the current statutory framework allows. can you define for us what an enhanced federal authority means and how it would change fra's relationship with the state? >> think interstate system. frankly, this is based on the

feedback that we have received from the states and from our partners over the past year, the past 18 months in implementing this brand-new program. it will always continue to be a strong federal state partnership. is going to have to continue to be a strong partnership, but we believe particularly when you start talking about express service, the top tier, you are talking 150 220 to two under and 20 miles per hour, because this is going to be in multiple states, more regional based in most every case, there needs to be a stronger hand in the development of those segments of the high-speed rail network. in addition our experience in the past 18 months has shown us that states continue to need a much higher level of support from us then i think we first anticipated.

in many cases, great example would be dealing with the freight rail industry. who are the hosts in many case for the emerging rail lines. they are national in scope and so the states have been coming to us looking for much stronger hand from fra. you know we have got basically 70 or 80 years of experience with the u.s. d.o.t. end state d.o.t. and building highways. we have now got about 24 months of experience in building high-speed rail corridors and clearly there is a need for a stronger federal and. >> i wanted to ask you about positive train control. the rail safety improvement act mandated it and as we know the gao has been saying delayed risks. can you tell us where we are? are we going to meet the 2015 deadline? >> is a statutory deadline and

fra is absolutely committed to ensuring that deadline is met and we do believe that it is achievable. the implementation plans are in from all of the carriers, particularly for the class 1. they are very very strong. there's no question it is an aggressive timeline and that everything must fall in. there is a more significant challenge for the commuters and there is for the class 1 but we believe that deadline can and should be met. >> and mr. boardman i wanted to ask you about ada compliance. can you explain to us what challenges you have been encountering and how those will affect amtrak's ability to meet the ada compliance charter? >> i think the challenge senator has been that first understanding what needs to be done, who owned the station, whether we could get agreement from either the local community or the freight railroad or both to get whatever was that was necessary for that particular

station was a bigger challenge than we ever expected across the country with a number of stations that we were dealing with well into the hundreds, 400 some odd stations. but we are now making real progress we believe in terms of making that happen and yes, because of that progress we are going to meet at least in the spirit of what needs to be done, our spots abilities for ada. >> thank you are in much and i do have additional questions i will submit for the record. i appreciate both of their testimonies today and i want to reiterate that safety is a concern to everyone. as we all know and we look forward to working with you as the proposals come forward on the safety and security of our national railway system. >> thank you senator. >> thank you senator.

[inaudible conversations] [inaudible conversations] [inaudible conversations]

>> delaware senator tom carper today reintroduced a bill aimed at shoring up finances at the u.s. postal service. the legislation would reimburse the postal service for overpayments made to its pension fund resulting in billions of dollars in added revenues. the senate hearing chaired by senator carper, looks into the finances of the postal service. it is two hours.

>> i especially want to welcome senator danny akaka who has beeh gone for a week or two but hee s back, all fed and rested. we need him at his best and that is what we are going to get. senator akaka's here with ranking regular pencil for scott around. this is not the first hearing that we have held with regard to the postal service's financial

financial -- but it is important one. while the witness is full ofimpo familiar names and organizationa the hearing today is likely to be somewhat different from those we have held in the past.feren it needsfr to be different beca thea crisis of the postal servie faces is more urgent now than it has been in the past.nt n t ebsen prompted dramatic action absent, prompt action in our next postal hearing they will be about how we can help to shut down operations. it is my hope is here to jumpstart this process to develop a bipartisan bicameral consensus around the changes needed to restructure the postal service and transfer of its operations to reflect the uncertain future that it now faces. just last week the postal service board of governors for the some sobering data about the postal service's financial performance in the second quarter of this fiscal year on march 31. the board released numbers

summarizing revenues for the fiscal year today. these data showed that as those of us who follow postal issues is not recovering the economy as a whole. rather than electronic version, the male is likely permanent despite the postal service's best efforts to bring in new customers and reserve those that it has today. in the period between the beginning of january in the end of this march, mail declined by more than 2% versus last year. this follows two quarters of modest growth. at the same time the postal service had first-class mail last 6% containing its patterns of years of steady decline. these developments are contributing to losses by the postal services.

midway through the current fiscal year the postal services and programs than $2.8 billion. his projected losses were $8.3 billion, nearly matching the record 8.5 experienced last year. these volume and revenue numbers are worse than postal service initially project did and if the losses at the end of the year are truly as bad as we are now being told they will be, i understand the postal service will have exhausted all of its $15 billion line of credit for the treasury by the end of september and into the fiscal year 2012 with just enough cash on hand to get by. and it doesn't get a lot better from there. getting by in 2012 will likely mean that the postal service will not be able to make its $5.6 retiree health pre-funding payment and could even have difficulty meeting other

normally routine pension and workers compensation related team spirit and top of that miniature crisis occurs at the next next year or so purchased for their economic slowdown could well push postal service over the edge to insolvency and results in a shut down of its operation, something none of us want or need. the postal service were to shut down, the impact on our economy would be dramatic. as opposed master charles donahue will testify to us today, postal service operates at the center of the industry that employs some 7 million people and generates more than $1 trillion of sales and revenue each year. at such a difficult time for a country, we can now afford to put those jobs and product to be in jeopardy. in recent years the postal service is to ensure to respond to its declining demand for

hardcopy mail it to to better align its cost with his revenue. total cost has been reduced by $12 million in recent years. a big contributor to the success of an elimination of more than 113 postal service jobs since 2007 and more than 200,000 over the past decade. i think it represents reduction of our first by a little bit over 25%. these savings are continuing includes significant new workforce flexibility is. the postal service has introduced a number of new projects. one of those is the flat rate priority mail box. we are rapidly reaching the point however by which the postal service no longer has the authority under current law to do what it needs to in order to

survive and prosper. that's why i'm introducing today legislation that aims to clean up the postal service's finance and health implement the initiative reorganization plan that it announced last spring. the main provision in my bill, postoperation sustainability and transformation that for the post act aims to personally address the various pension and related issues that have plagued the postal service for years now. the postal service inspector general, the post of regulatory commission and two independent actuaries have all come to the conclusion that the postal service has overfunded its obligation of civil service retirement system by between 50 and $75 billion. numerous observers and the office of management and budget

out the posta .. and makes it pre-funding payments taken up words of $5 billion when those payments are satisfied could be used to pay workers compensation obligations and retired to go to the treasury. these changes are sent and similar to them will need to be a vital part of any effort to improve the postal service's financial condition for both the short and the long term, but stopping these reforms and avoiding potentially more difficult changes simply will not be enough. more than $203 billion between

now and 20/20. 230 billion. the pension and retiree health plans for my bill and others have been introduced including a belt that senator collins would only address a third of these losses. in addition the postal service latest financial data shows that even the retiree health pre-funding not made this here come the postal service would still face insolvency and shut down in 2012 and even if the 2012 retiree health payment is not needed, they would enter 23rd team with no cash and no borrowing room at all. more will clearly need to be done. that is why my bill takes important step towards truly giving this postal service the flexibility that those of us in congress always say they want to give them to adapt to new

realities and forth like businesses. no business faced the kind of difficulties and challenges the postal service faces today was survive for very long if we were told how many retail outlet to have midway should be located or if it were prevented from making operational changes and expertise that it has as its disposal. if that's what the congress does to the postal service. i stress these problems and take congress out of the day-to-day management of the postal service. the postal service can continue to build on its recent cost-cutting efforts in the labor unions that are represented in most of the workers. but even at the postal service can continue to build on its recent cost-cutting efforts, these changes in years to come.

the gao is releasing today a viable case study. the report clearly sending a negative impact of the financial uncertainty and sometimes harmful dictates from congress have been on postal operations. gao found on the for example, that due at least in part to the postal service's dire financial situation, and they currently have no plaintive pleas to replace its very large fleet of delivery vehicles, some of which were first put on the streets a generation ago or more. the cost of operating and maintaining vehicles are increasing and at least some cases is having an impact on operations. i believe it's unacceptable that the postal service has no plans to date to begin replacing its aging fleet. perhaps of more fuel-efficient vehicles for purchase at which the large numbers could help commercialize new technologies.

it's also unacceptable the postal service has been placed in this position financially, in part due to the acts of congress or inaction of congress. i look forward to hearing from witnesses today about these and other pressing issues facing the postal service and i would also note that senator susan collins with whom i've worked on a lot of issues has introduced around bill and a fair amount of overlap between the overlap between the sheets proposed. my hope at the end of the day is work on these issues and others will find common ground. as i said earlier, we need to develop a bipartisan bicameral approach to address these challenges. i hope his many of the members in this committee will be part of the resolution. having been said i recognize senator brown and then we'll turn to senator akaka.

>> thank you mr. chairman. i'm not going to repeat a lot of what you said, but i do want to point out that i agree with you in that we need to allow the postal service to tools and resources they need to move forward. we need to remove some of the roadblocks so they can provide the service and guaranteed to their communities and not adversely affected. the party dressed obviously the fund overpayment. i think there's general agreement. the question of flexibility to work in a responsible manner to solve their own problems because clearly the path they are going down is not sustainable as you pointed out and i look forward to working obviously with u.s. senator collins and working on these very real issues. i appreciate the opportunity and the court to testimony. >> inc. so much.

the entire statement will be made part of the record. senator akaka, welcome. >> thank you very much, chairman carper. i went to thank you so much for holding this important hearing about the future of the postal -- united states postal service and may also want to welcome the postmaster general and ceo of our u.s. postal service and herr to our hearing. as we have heard time and again over the last three years, the postal service faces a devastating financial crisis. at the end of the fiscal year, the postal service may not be able to fully pay its $5 billion retiree health benefits free funding obligation.

the government accountability office released last year expanded several options to help the postal service. so i want to commend senator carper and senator collins who have both introduced legislation that aims to help the postal service meet these obligations by addressing overpayments to the retirement funds. additionally, senator carper's post at offers several provisions, which would allow the postal service to innovate and expand its business. both of these bills still contain a provision introduced in the last congress, which would bias the collect the bargaining process to favor the

postal service during arbitration. the fact that the postal service ratified the contract just last week demonstrates that the postal service and employees can work together to reach an agreement that meets everyone's needs. congress does not need to inject itself and the collective bargaining process. i also want to mention the issue of five day delivery. as i expect it, the postal regulatory estimated saving for cutting a day of service and more than the postal services. the prc also points out that postal service did not examine

thoroughly the impact on rural areas. i am concerned about the impact of cutting service, which already has slowed delivery to its location and the challenges moving between islands. ultimately, i do not believe this change would help the postal service attract new business quarter revenue. instead, it could harm those who rely on the postal service. again, i want to thank my colleagues for their hard work on these issues and thank all of our witnesses for their contribution to the entire process. these hearings will help us to move forward with legislation to finally ensure long-term postal

service. thank you very much. >> it's great to have you back. our first witness is supposed master general -- senator begich, and he slipped on me. it's good to see you. they can, we spend most of our day together. our first witness today's the post general master pat donahue or this is mr. donohue's first time testifying the subcommittee this is your first time? first time this postmaster general. for assuming the position mr. donnie is served as deputy postmaster general and chief operating officer at the postal service. mr. donahue spent his entire career at the postal service as a clerk in his hometown of pittsburgh. next we have the lip herr at the

government accountability office. mr. herr has been the gao since 1980 and has a broad range of issues including postal issues. we look forward to your testimony here today. both of your statements will be admitted in their entirety for the record. if you exceed five minutes, i will say much. if you exceed seven or eight minutes, i'll say something. so please proceed. mr. postmaster general. >> thank you, mr. chairman. good morning, mr. chairman, members of the subcommittee. i appreciate the opportunity to testify in behalf of the u.s. postal service. thank you for the invitation and thank you a mr. chairman for calling this hearing. the postal service plays a vital role in american society and the american economy. postal service will deliver more than 165 billion pieces of mail this year and shipped within 2 billion packages. read the backbone of a

$1,000,000,000,000.000000 industry. the postal service is a self funding entity to innovate and compete for customers. we provide reliable secure and affordable delivery platform for american business come and therefore in the national interest to keep the postal service financially strong. like any business, the postal service is subject to marketplace trends. unfortunately seen a significant long-term decline in their most profitable product category, first-class mail, which accounts for approximately 15% of our revenue. people and businesses are electing to send and receive statements to pay bills electronically. this produces mail volume. with aggressively cut costs in response to economic trends and reduce the size of the workforce by more than 113,000 employees over the last four years and we are consolidating processing and retail facilities. our total cost reduction in excess of $12 billion.

we responded to volume declined by working with corporate partners and improving experience and creating innovative products for demand. it would've recorded a cumulative profit over the last four years. mr. chairman, despite our significant role in the american economy and our interest in cost cutting and generating a first come i regret to say that we are in serious financial predicaments today. as things stand, we cannot have the cash to make a $5.5 billion prepayment for future retiree health and if it and we may be forced on other payments that could extend to operational expenses. the cost of potential delivery disruptions to the economy into the country country cannot be

overestimated. even the threat of such disruption would have significant impact on america's business and irreparable harm and america's faith in the mail. mr. chairman, we need legislation this fiscal year and i am grateful that both you and senator collins have introduced bills that address some of our most serious constraints. we especially support provisions that would eliminate the retiree health benefit repayments by reallocating our civil service retirement overpayments, that would return the federal employee retirement system overpayments to the postal service and provide the postal service flexibility to determine its own delivery schedule. i would also urge the subcommittee to start the legislative process with the long-term approach our business model. we assisting financial losses over the past several years that have created negative perceptions about the male postal service to some extent has had a negative impact on their business.

the fact is that the right legislation the postal service can return to profitability is given the flexibility to do so the postal service will continue to serve the american public are effectively and continues to sustain and propel american commerce. mr. chairman and members of the subcommittee, look forward to working with you in support of the schools and thank you for your leadership on this port. thank you. this concludes my remarks. >> thank you. we have a motto, five minutes or less. chairman carper, ranking member brown, i'm pleased to be here to discuss chios work on the fiscal service. i'll discuss the postal service says key issue on that seat being released and broader challenges the postal service needs to realign all its

business model in the face of mail volume. total mail volume decreased 3% in the second quarter declined by 7.6% compared to the same. i share. halfway through the fiscal year, postal service is reporting a net loss of 2.6 elion. as acknowledged today, the postal service projects a $15 billion debt limit this year in default on a 5.5 pre-funding plana for retiree health benefits. against the backdrop for the postal service needs to modernize its operations, including preparing to upgrade. the postal delivery has 192,000 people is, most of which are custom-built about 16 to 23 are sold in her perch in the of the day to 24 year operationalize. the fleet includes about 22,000 commercially available from age two to 13 years for the expected operational life with 10 years. they cost about a billion

dollars in fiscal year 2010 or about $18 per vehicle. our analysis found that track maintenance costs averaged about 2600 per vehicle which is a bit understated because subcontractor costs were not included. about 53 new vehicles required more than 7000 costs. the 700 vehicles required more than 10,000 direct cause. over one dbx says replacement cost. dirty 1% of delivery maintenance cost for scheduled maintenance. 11 percentage points. we identified maintenance problems for replacing frames were not being followed. friends were only replaced with four holes. we also found frames in severe

less problems in new york state. featuring replaces private fleet managers reinterview to the vacation that's designed to replace however, upgrading about 31,000 people. fully refurbishing thusly would cost less, about 3.5 billion or about 20,000 per vehicle, although the current course and replacing frames, motors and transmissions is effectively refurbishment at the slower. deepak acquisition requirements need to be factored in to replace delivery vehicles as well, namely the 75 vehicles as i acquisition costs and may not be operating mines and currently travel about 17 miles a day.

by the postal service has been able to maintain its current sleep come in the time of come when the cost will not allow further delays. we recommend the timeline for addressing this need. more broadly, an agreement will stabilize the postal service and align it cost of revenues for capital investment. as we previously reported, congress will consider modifying the funding requirement in a fiscally responsible manner chairman carper, ranking member brown and members of the committee, that concludes a prepared statement and returns the questions.

>> thank you for that testimony. i want to drill down sql on the gao report released today, dealing with vehicles. as i understand it, the number of vehicles the poster service pack, roughly 135,000, close to 200,000 about 20 years don't go very far. they average about 17 miles and the cost of see how, you can clarify, we're talking about the cost of fuel for these vehicles? >> we said a billion dollars for maintenance. the direct maintenance cost was about 750 million the feel cost less fiscal year was about 250, although the prices going up probably would've increased. >> one of the things the previous postmaster general, organize labor unions that represent the postal employees in the previous postmaster general is for us just to be

creative and think outside of the box. we're looking for the postal service and we've even suggested you create if you haven't already and they come up with clever ways to create revenues and reduce costs. i want to think about energy costs and talk about what were doing already to bring down energy costs within buildings. and whether or not there's any potential for a similar approach >> first of all, let me thank you were very proud of that and an energy program about four or five years ago now mainly

focused on buildings and when you look at electricity, it comes down basically to how much it cost to keep the lights on in the facility. we've done a lot of investment around special system setup was in our large facilities to manage that, but we've done a lot of simple things, just like replacing light bulbs or more cost efficient bulb fixtures and very simple things like keeping the lights off. so we've been able to cut electric usage by about 30% over the last four years and that something was very proud of. i've also listed a number of other facility innovations and upgrades. we've invested in things like reverse to help us not only sustained, but also an energy comp survey should standpoint, too. from the vehicle standpoint, we look at on the options right

now. we have been experimenting with hydrogen vehicles, natural gas, diesel, lecturer, hybrid and try to make sure we look at everything and anything out there and we have two considerations. number one, the daily cost to operate the vehicle, but more importantly the long-term cost and that's why doesn't he look to a lecture, we've got to maintain calm in mind that leaves come the idea to replace batteries and that has to be considered part of the long-term investment. right now we're at a place where we will have to buy some vehicles in the next two years. but in order to do that, we've got to get our finances in order. again, you appreciate your bill because that will help us get the short-term finances in order that we can address on the long-term investments. >> any comments in response to that quiet >> we did ask a few folks in the industry about the idea of the energy sharing contracts. one of the points they made is because the vehicles travel

relatively short routes and use small amounts of fuel, that can -- it may work well with domains, but may be a tougher thing to use in terms of vehicles. >> under the energy sharing contacts, as i understand folks coming into work to reduce energy consumption. and their payment stream will flow from the energy savings that are created by the retrofit. and that just doesn't work for vehicle assessment. >> it would be a new idea for that deal, but i think given the fleets and also the long -- they are hoping to do another by would raise some other questions in the long-term commitment, too, for the industry. >> one other thing i asked you to keep in mind as we know places that are undemocratic and

unreliable. we're pursuing and my estate may be though windmill farm and be able to seal at least 100,000 homes a day. we know the windows don't always blow in the sun does in a way shined. one of the things i like was to keep in mind i don't expect you to think as we look outside the box and trying to reduce not just are building costs, but also her vehicle costs for energy, see if there's some other way we can use the opportunity to make money or save money, not just throw out an idea. are moving towards hybrid vehicles. chevrolet built 10,000 this year come in extra totaled 50,000. we're going to lunch 80 miles

per gallon at the end of next year. they have to be field someplace and were going to be looking for fueling stations for electricity. to the extent the postal service or the business of using electricity to power vehicles, there may be an opportunity to also sell electricity to the customer or for looking not the price of natural gas. the other thing cannot predict the ball soars of wind and solar because they're not aslw fair. but if we had somehow a fleet of vehicles come in maybe 185,000 vehicles that could almost be a reservoir for electricity. so when the sunshine and wind is

blowing, you actually charge the batteries in the vehicles and then sell it back onto the grid. that might be the opportunity. i don't know if any of those ideas will actually work out. that kind of way we have to think outside the box, be more entrepreneurial than we've ever been. part of the responsibility is for us on this side. and the others may be working with the folks in the abu industry with what might be possible. let me stop there. i have another round of questions about come to that later. tanks. >> thank you, mr. chairman. mr. donahoe, what do you need congress to do to get your financial house in order? what recommendations do you want us -- to have to so you can solve the problems? i appreciate the hearing. and that to you exactly specifically what you need from us in order to become financially viable.

>> well, we need this bill passed this year. >> what though? the ability you recommend we passed? >> i think the post that was by senator carper answers the need for the postal service both in the short-term and long-term. it's a very good portions of the bill by senator collins and hopefully everybody can get together and get those parts into the post though. but the postal does for us is that it provides immediate resolution on the retiree health and it fits. >> that the number one thing. >> that's the number one thing. we need the ability to shift out of her. >> that has to be addressed. the critical thing and that's the reason i see the entire bill is because not all make it says to break even now. it does not help us in the future in terms of paying off debt and even when you get out two or three years down the line will be back in the same boat. >> so if we allow for the

shifting it will basically give you about a one-year window? >> that gives us a year window. >> that's number one paired with number two? >> to resolve and returned her federal employee retirement system. we are overpaid the post though against the retired health benefits and paid that going forward >> how far does that get you? >> is worth 7.9 billion. that would pay half of our debt off. >> and then were? >> in the delivery flexibility. one of the issues were faced with going forward is the problem of declining first-class revenue. and mention the first classes half of our revenue. it is two thirds of our contribution in terms of paying for the overhead that pays for keeping the routes fully staffed

on a daily basis of 200,000 routes plus 35,000 post offices. that's all paid by first-class. >> the price of the first-class keeps going up. i'll just get in line and out. why would i spend another 44 d., whatever the ultimate number will be. what if the volume goes down? >> us who are facing. this year is 7% last. in the last four years, first classes dropped 25%. if it's unreasonable pressure in the organization. what we're proposing is flexibility for delivery. >> talking about routes and elimination of potential services to get in there and get great at it. >> here's the thing. there's two things. we have been very -- we've worked very well with the agents and will carry you need to consolidate routes. we've taken 15,000 routes on the

last four years, which is well over a billion dollars in cost there alone. but we need is flexibility to eliminate saturday delivery is required and mandated by congress. >> saturday everywhere for saturday somewhere quite >> we are proposing to keep the post office is open, allow customers to receive mail through post office on saturday, but we would eliminate regular delivery on saturday in regular express mail on saturday. there would still be serviced, but we would take costs out of our network. >> what's next? >> what is next after that is continuing to be able to be very flexible as far as what we do with product offerings and additional revenues generated in the organization. senator carper mentioned innovation. we are very pleased with the innovation we've taken on listening to our customers. you've heard about flat rate boxes. if it fits, it ships is great

because customers can use this in many different sizes, different prices. all you do is put your package and you can even ship it from your home with free carrier pickups. we've got other products coming to sample box coming out. we think there's a lot of growth in there. here's something that's really interesting. we've been talking to the mailers about this. it's called a qr code. this ties in some of the latest technology he heard here so it works. he was a mailer to send to somebody's house. they take it out of their mailbox on the message says for information take your phone is scan the barcode. what this does is ask you up to a website where you can find out more about the product and buy the product online to conduct a whole transaction within about five minutes. >> you going to get a piece about? >> yeah, we've even talked to people, so free enough to do

those things to continue to work with the postal regulatory commission has a lot of options there, too. >> mr. herr comic thank you. were talking about the fleet vehicles and updating and not be a slave as they travel such a short amount, i have a hybrid conversion bill that would allow the conversion with a simple process, say 25% consumed. i am interested in dissecting your report a little bit and understanding. if there is a mandate to do ask amount, does that come into play that it may not be cost effective to do that quite >> in terms of alternative fuels? >> right now there's a price differential is $10,000 -- over a fleet of that i've come it would race and challenges. it's also been improvements in technology and gas engines being developed as well. some of those on some have been

certified by epa as well as the mission. there have been some things evolving. over the next two years i think senator carper said from watching how the industry changes may be important to see what makes the most sense. >> i'm all set, mr. chairman. >> senator, there are more marks in the u.s. senate. how many are there? four or five? >> four with marco rubio. the mark caucus is well represented today. >> if i can do a quick follow-up on a couple friends. i agree with you on the short-term -- on the short distance it's hard to get economics under fuel efficiency. but on your long-haul trucks, are you looking on those with some of those large semi truck

movements because that's where the real money is in energy saving on vehicles. they go done a big long path there, that tracks, are you looking at that piece of the equation? >> yes, senator. we do two things is what we call the heavy fleet. we've got her own fleet of vehicles, two-ton on the way up to the tractor-trailers. we are working with the industry to have the latest as far as technology. as a matter of fact in new york city would operate 30 electric and two-time vehicles and we've been very successful with using the technology. the majority of our long-haul heavy fleet is done by contract and we work with our contractors on that, too. they are senates the contract to make their vehicles more energy-efficient. when you're driving along the road, discursive and putting on the trailers, all of our contractors are moving that

direction because we found a simple addition like that helps fuel economy. we have sent people to work closely. >> have you thought on the under the -- i forget the number. you said 185,000, 20,000 vehicles. just going out to the market and say look, here's what we need. we need to replace this vehicle fleet. we're open to lease, purchase, you know, when we got heavy into 15 oliver computer systems, for example, the department says we are buying this stuff because the change occurs, but also we figured we could get a better deal with the companies because they refused us as poking up their production and therefore cut their costs and do other product off the same frame and ours was the same computer technology. have you looked at it rather than you are trying?

sometimes i wear the government and quasi-government tries to analyze what is the best result rather than going out to the private sector, saying okay, this is so weak. 185,000 vehicles to purchase the parameters. give us your best deal and what you can do to bring the same cup even though the hesitation would be the money. well, you don't know what they can offer good until you ask the question, they are hungry out there. to approach it that way? >> you're so we've been doing. we have been working through the technology is just to get an idea of how well it works within our organization. one of the things we learn from the vehicles with the original intent to try to keep for 25 years was to test ban in arizona. arizona is not a real good place to test vehicles. if you need to be in the states and from pittsburgh. granados know if you, but we have our obstacles going up and

down how the wintertime. at any rate, what we are doing is looking to figure out what the best technology is. we are working with the private industry. with a general motors on the hydrogen fuel. we've had a number of companies with ford, chrysler and other companies. we're trying to figure out the best thing. the key thing for us right now is this, we have got to get a good idea going forward on what the technology for quake four, five, six in 10 years down the road. we've done some leaseback work in the past that's not been the most effective for us from a financial standpoint because i can't write anything off from a tax perspective. so we are looking ahead. we've been talking to private industry will make some decisions, probably two or three years down the line because again i've got to get the short-term financing straightened out the rest

assured it will work with the private industry on this. >> let me ask you when you came to map a couple months ago, first i want to say thank you for recognizing alaska's unique. we had a conversation about universal service is for all areas. as you know, we've written a letter regarding five days. i recognize flexibility in my big concern is how do you deal with the areas that may have flights coming in and certain supplies that come in on certain days in rural alaska. maybe saturday is the day because the weather is good on some other issues. can you give me first your thumb in universal service and bypass combination of the two and how yellow dress borough communities and obviously unalaska with five day versus what it is today. but first on universal and then

bypass. >> as you know, we are fully in support of our mission to provide universal service to the american public. any changes we make so comes first and foremost. services are name and that their mission. from the standpoint of how that ties to the bypass to realize how important the postal service is to not just the economy in alaska like it is to the rest of the u.s., the people's livelihood to get food and medicine and we also take that very serious way. i think our people to a good job making sure the mail gets through everything. your point about the delivery and discussion around saturday's something we've been looking at. we've had some comments from a number of people from different parts of the country about what do you do going forward? our proposals are delivery flexibility and it's just that. we think for the most right that we would make the changes and saturday would be a day, but there's some weeks during the year that we don't deliver mail on monday.

we are taking this may be delivering on monday and some of those cases. in the case of alaska and hawaii after some provisions we've got to work with, like you said, there's no cause on a saturday. we have to be flexible with that, too. that's why we've used the term delivery flexibility. we went to her because we realize it's our responsibility to provide the service. >> lasley because my time is about to expire, how would you be engaging stakeholders like in the case of rural alaska versus anchorage or fairbanks? how you engage on this schedule flexibility? >> one of the things we did last year we spent some time and of course we can do that again as we move towards changes that we would be getting out of the passage of the post-act. we would engage customers the same way we change post office access point. we're going through a process right now where we are looking

at mailing out and inviting people into talk to us. we would do the same thing, with the customer service is the mail and customers to center. >> i just want to agree to in the pension issue. that is a critical number one issue in a very supportive. i think you're doing a great job there. >> senator pryor. >> thank you on mr. chairman. when you start with your family. the poster regulatory commission made some recommendations last year about some things you should do is your closing post office is. one of the recommendations is people in the area should receive actual notice, which i assume would be like a postcard notice and apparently your current practice is just to notify your p.o. box customers and carrier delivery customers about the affected facility.

the site recommendation would be that the postal service would expand methods available for providing and receiving customer input. the third recommendation they made is they would expand the contents of the public notice and include better information about alternatives for customers. my understanding is he didn't implement those recommendations? do you know why you didn't? >> were having some post offices closed in our state and the people in our state at least feel like they are not notified of this adequately. they don't have opportunities for input. whether opportunities for input it seems like decision had been made and maybe are going through the motions to check the box but you're really not take in consideration. if you want to comment on that. >> we don't go through the motions. i may say this. we agree with all the recommendations and we have

changes be posted in the federal register recently to implement those changes. here's what were looking at. we like to call it access change versus disclosing post office because the intent is to provide their access to the american public. we are going for a process right now we've had a process in place for 30 years where we've examined small offices and we agree that it could be much more customer friendly. milly notices out to customers, having community meetings and also listening to and providing them -- listening to their recommendations and providing what they're asking for. we're looking at this across the country. today 35% of all postal service products are bought outside the post office whether it's online or at cost or office depot or places like that you can buy stamps and packages them that will continue to evolve in that direction. what we want to do is make sure where we are aware the american

public needs is to be. that's the case with large offices like in washington d.c. for rural. but when i do is take a close look at how to provide the access in the best way both financially as well as the number of hours a day. i give you an example as things were some small offices were looking for consolidation because we find many houses don't have an hours worth of work in a day and people don't have that much business. if it's close, a mile or so. other cases are looking at many talents of three businesses, gas stations, general store and post office. we're looking for talking to the general store for gas stations that keeps them in business, keep the cash flow and allows people to have access to the business at the same time get their postal services through that way. many options are willing to want to hear from people.

>> let me ask you this follow-up. it was me and you want to hear from people? >> yep. >> how many facilities have been on the list for closure? and then he went to the public comment process and decided not to close? >> i have to get back to him that. i can't tell you off the top of my head. what we've been focusing on most recently prior commitments that were rd closed and we've just seen the paperwork up and finish them off. there is a number we're looking at right now is about 1000, but it have to get back is far as specifics. >> i like to know those numbers. mr. chairman, other record along those lines. i would like to ask about senator carper's bill. sounds like you a party said he the financial parts of this legislation and you think that's very important for the financial viability of the post service.

but if you got a five day delivery, how much will that be the postal service? >> i will say this about $3.1 billion. >> the year? >> a year. and on the criteria -- this is another part of the chairman's bill, but in the for closing post office is in postal facilities, you mentioned today small facilities or low-volume facilities. what's your criteria. what criteria does the postal service used? the mac we are looking right now the first at less than an hours worth of business in a day and that's generally 10 or less transactions. >> is that in that the postal office will close their? >> that means we are looking on it to either consolidated or potentially contract the work out or leave it alone. we're trying to keep as much of

an open mind on this thing, but again from a financial perspective we have to put everything on the table as far as taking costs out of organizations. >> it seems like its members driven. i can to get some samaritan center begich his favorite low-volume because they have very sparse populations. would you consider that as well? >> again to my comments was to balance the requirement for universal service. in many cases is something you don't look at. if you have a small office that doesn't generate much revenue, we certainly wouldn't close it. but if it's something that generates the revenue and there's the potential for better access within a half-mile per mile, that's a different story. >> one of the provisions in senator carper's bill talks about the shipping of alcoholic beverages, which right now you are prohibited from doing. q. how much revenue it generated

fewer like to ship alcoholic beverages? >> we don't know, but we think it's an excellent i.t. is because the postal service brings his convenience and the whole industry. we've seen other -- australia has done that and that's one of their biggest growth products. we've got the network to provide that service along with the ability to have it held. our proposal is more for pickup, so that talk about to come in and pick the alcoholic beverage. we think it's a very interesting proposal. >> one last question on senator carper's bill and that is there some provisions in their about when you are in arbitration with your employees that the arbitrator could consider the financial condition of the postal service. is that the rule today or would that be a change? >> that would be a change. we support that. we think it's important anytime you go to arbitration,

especially in today's world where if you look at the future of postal service, the arbitrator should consider -- we recently conducted a negotiation with the american postal workers union. i think it was a very good responsible contract by both sides. that's a great thing.

and i think was a partnership between hallmark he used pictures he had taken visiting a month or two earlier and made a beautiful mother's day card and was delivered by the postal service. our next-door neighbors get netflix and a good piece of. business and i'm not sure how it will be when people move into i 'treaming but it's a nice piecet of business and the kind ofthinw thing we want you to do more ane more of. i want to ask a question -- i want to ask a question about hot the postal financial bill that we consider here in converse go beyond the pension and health issues. how important is that? >> it is critical. as i mentioned to senator brown, what happens is if we just address the retiree health benefits that just gets us

through this year from the cash standpoint and if you recall we lost $8.5 billion unfortunately this year we are predicting losses around a billion dollars so you can see if you get the relief of the 5.5 or $5.6 billion going forward that will not be enough. it's critical that we address the issue, the overpayment and then we can get that money back that will go against the dead we will not spend that anywhere else on the retiree health benefits or the debt, the delivery flexibility, the flexibility going forward on the products we talked about anything and everything in the bill was critical. we have to get the whole thing done and from the industry standpoint we have to make sure we make all those things happen. >> it seems there is a fair amount of agreement we'll try to redirect the payments in the retirement system, the overpayments into the system and to use those to pay down the obligation for the retiree

health and also for maybe workers' comp. but as we understand, that's only about maybe one-third of the problem. so in terms of going forward if the flow of money from the retirement system and stopping the overpayment i think that is only about a third of the problem. >> this is what happened. right now we have an outstanding responsibility of $91 billion for the prepayment of the health benefit. we pay 43 so far through the rate payers money, so that's -- we've got about 47% of the way paid. if we were able to access the funds 50 to $75 billion, that would clear that side of the ledger. the volume loss we are experiencing in first-class mail keeps the pressure on our organization and the industry as a whole to continue to reduce cost and at the same time figure out how to use it in more

creative ways like i've shown before - with packages and even trying to slow down the drop-off in the first class. one of the things our customers told us is if you can figure out a way to make the first class more appealing from the bill presentment standpoint, we will try to work with our companies to stay in the mail. the first recommendation is what was called reply rights where we were going to charge the same post for 1.2 offices as we do for one else. the customer said it's too complicated so what we are proposing now is to give 2 ounces for the price of one this with the customer can use better paper, the messages in with the first class correspondence because in many cases that's the only way a customer gets the customer's eyes, so our proposal is we want to keep our foot on the gas pedal of the cost slightly we've been talking about, the revenue is just as important.

>> dewaal to comment briefly on the question. the first question i asked in this exchange is hauer important is it the postal financial relief bill we consider go beyond pensions and the retiree health issues? >> if you take care of the one without addressing the overcapacity processing network and looking at alternative ways to provide the retail access in a few years you will come back and find some of the structural problems were not addressed and you will be facing a similar set of challenges. the list of 25%. the projections for it is going to continue to decline so address in that capacity and making sure the system is aligned with the needs of the mail coming in would be critical >> you've concluded a round of negotiations, and it sounds with

the contract negotiation but i think it seems like a fair contract and heading in the right direction. we have three other unions to deal with. give us a status on the negotiations with those, please. this to meckler stila in negotiations with several carriers. we would like to conclude a successful negotiation with the same outcome. i think the ap w is a responsible contract not just for the postal service and the employees but also the industry so we would like to conclude the same way. this november we began discussions or i should say august because the contract ends in november with the mail handlers and the national association of letter carriers, so we expect to see the same type of framework in those contracts we've been able to negotiate with the apw. estimate this will be the last question i asked and we are joined by senator mccaskill.

i want to talk about a business opportunity to read the last white feel about the six day delivery, and i said why was agnostic on that and if there could be a way to save substantial amounts of money not as much as 3 billion but through the negotiations, then i think we ought to consider that. if we can't find substantial savings we are not going to consider that as much the we talked about the opportunity costs cut and of not having that sustainability. i think there is -- we talked about this before. someday somebody will look back at the postal service and say we had a post office in every community in america and went to every door six days a week. why didn't we think of xy or z in being able to exploit that all business model, just talk to us very briefly about the opportunity cost of eliminating the mail delivery whether it is expressed or doing the work for fed ex and ups, let's talk about

a little bit if you would. >> you know we would rather not eliminate saturday delivery. we feel proud of the fact we do go to homes and businesses every day, six days a week to every home and business across america. the critical issue was the continued pressure we have on first-class mail and the fact that the contributions as that drops continues to put financial pressure on the organization hot hot. we think it's important to provide that service and even if five days a week we will still have the greatest network of everyone because we will continue to go to every home and business five days a week. we also think it's important to continue to work with our customers to sustain first class as long as we can as well as new opportunities from the other standpoint. and i think you would be