1989-09-29
To the Congress of the United States:
I hereby submit to the Congress the Annual Report of the Railroad Retirement Board for Fiscal Year 1988, pursuant to the provisions of section 7(b)(6) of the Railroad Retirement Act, enacted October 16, 1974, and section 12(1) of the Railroad Unemployment Insurance Act, enacted June 25, 1938.
Over 900,000 railroad retirees, their families, and 300,000 railroad employees rely on the railroad retirement system for social security equivalent benefits, rail industry pensions, and unemployment, disability, and sickness insurance benefits. These beneficiaries depend on the solvency and financial integrity of the railroad retirement trust funds to receive their benefits.
Recent actuarial projections included in the annual report indicate that, barring any large unanticipated declines in rail employment, the railroad retirement system will not experience short-term cash-flow problems. Board actuaries estimate that, based on Employee Retirement Income Security Act standards, the system has a billion unfunded liability.
The long-term solvency of the railroad retirement system remains highly volatile. Refinancing legislation enacted in 1946, 1951, 1974, 1981, 1983, and 1987 serves as a reminder of this volatility. More recently, the Railroad Unemployment Insurance and Retirement Improvement Act of 1988 was enacted to ensure repayment of the unemployment insurance debt to the rail industry pension fund.
The Congress sought advice and created the Commission on Railroad Retirement Reform to examine issues relating to the long-term financing of the railroad retirement system. The Congress directed the advisory Commission to consider a range of financing alternatives that do not include general fund subsidies. Yet, as part of their fiscal year 1990 reconciliation bill, the Congress is once again considering extending general fund subsidies to the rail industry pension fund. Since 1983, over .2 billion in subsidies, in the form of diverted income taxes on rail industry pensions, have been given to the pension fund. Income tax on all other private pensions goes to the general fund. Under current law, this general fund subsidy provision will expire at the end of fiscal year 1989. Extending general fund subsidies establishes an undesirable precedent. I urge the Commission, in accordance with the congressional directive, not to recommend general fund subsidies in any form. In the long run, railroad retirees and employees will be best served by a financially stable system that relies solely on rail sector funding.
George Bush
The White House,
September 29, 1989.
