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We, together with our unions and employees, expect no opposition from the Civil Service Commission on this proposed bill and will deeply appreciate your continued support of its passage. We would, however, like to suggest one change in the proposed bill in order that it may more explicity express the desired regulation. The change requested is as follows: After the words "Act of 1944," found on page 3, line 13, insert the words "and the Act of January 16, 1883, 22 Stat. 403, as amended.".

That, Mr. Chairman, concludes my formal presentation to this committee. I would be happy to attempt to answer any questions you may care to ask and, if detailed answers are not immediately available, they will be furnished you during your stay in Anchorage. Again, I wish to express my appreciation of the privilege of appearing before this committee.

Thank you.

I would like to read one other thing in support of that particular bill, and that is on June 22, 1961, the President of the United States issued a memorandum to the heads of departments and agencies on employee-management relations in the Federal service. The President's memorandum states in part:

The right of all employees of the Federal Government to join and participate in activities of employee organizations and to seek to improve working conditions and the resolution of grievances should be recognized by management officials at all levels in all departments and agencies. The participation of Federal employees in the formulation and implementation of employee policies and procedures affecting them contributes to the effective conduct of public business. I believe this participation should include consultation by responsible officials with representatives of the employees and Federal employee organizations.

The only other thing I would like to say, in your opening remarks you read a portion of a letter from the Secretary of the Interior concerning any thoughts or conflicts that may arise, or may have already arisen between the Alaska Railroad and the port. I would like to say that I think possibly this might be a little exaggerated, but rather than take your time we would be glad to give you a copy of the transcript of testimony held by the FMB a few months ago to enter into your record if you so desire. I believe that the 3-day hearing was pretty complete. I do not know the results yet; but if you would wish to make it a part of your record, we will see that you get a copy of it.

Senator BARTLETT. The committee would be grateful for a copy, and it will be placed in the file.

Does that conclude your statement, Mr. Smith?

Mr. SMITH. That concludes it.

Senator BARTLETT. Now last things first.

Alluding to S. 2593, will you inform the committee how veterans' preference operated on the Alaska Railroad, we will say 3 or 4 years ago? Was there a veterans' preference at that time?

Mr. SMITH. Mostly in the selection of hiring new help; that is, giving preference to the veterans on hiring.

Senator BARTLETT. What preference was given the veteran?

Mr. SMITH. As an illustration, if there was one vacancy and two people applying, the veteran got the preference of having the job. Senator BARTLETT. Did the Alaska Railroad have then a preferen

tial system relating, for example, to points in the manner that the Civil Service Commission does, giving the veteran automatically a certain number of points over and above the nonveteran?

Mr. SMITH. No, sir. It was mostly, I should say, more preference than the point system would have given him. In other words he just had the preference of filling the job.

Senator BARTLETT. If he had the required qualifications, he was automatically hired, as compared with the nonveteran possessing similar qualifications?

Mr. SMITH. Right.

Senator BARTLETT. What happened thereafter that finally resulted in the introduction of this bill, Mr. Smith?

Mr. SMITH. I don't believe I quite understand your question, Senator.

Senator BARTLETT. Why was the passage and introduction of this bill urged? What situation arose?

Mr. SMITH. It arose over the so-called bumping system that is universal in railroad business, and that is that a man with seniority would have the right to bump a younger man. In at least a couple of cases it turned out that the younger man was a veteran and he believed that he should have had preference over the man with the senior seniority.

Such appeals were made to the civil service and they were heard. There was quite a bit of time spent on the subject.

This destroys

Senator BARTLETT. What were the conclusions, may I ask, of the Civil Service Commission?

Mr. SMITH. Excuse me a moment. May I check?


Mr. SHELMERDINE. I am Paul Shelmerdine, personnel officer, Alaska Railroad.

The two sections which conflict most generally with all of our union regulations are sections 12 and 14, which are implemented by civil service instruction CSR-20 and CSR-22. These regulations are as Mr. Smith has said in general conflict with all of our union agree


What started all this is the case called the Peterson case, in which the Civil Service Commission ruled that the Alaska Railroad should abide by the provisions of the veterans preference and certain other civil service regulations. I don't know what other information you


Senator BARTLETT. What other regulations?

Mr. SHELMERDINE. The most important one and the one which conflicts with union agreements to the greatest extent is civil service regulation part 20, which applies to veterans as well as nonveterans. I might explain that by saying, for example, that under CSR-20 the Alaska Railroad employees would be given retention credit points first if they are a veteran for their veteran's service in years, months, and days. Secondly, they would be given retention points for other creditable Federal service. That could be in the Navy yards at the

base or any place other than the Alaska Railroad. In addition to that they would be given retention credit points for their Alaska Railroad service.

This would be for veterans.

For nonveterans they would also be given credit in retention points for their other creditable service prior to the time they came to the Alaska Railroad, and in addition would be given credit points for Alaska Railroad service.

This is in conflict with our present seniority system all the way through because, in the railroad seniority system, seniority simply means your length of service for that particular railroad. In other words, if we had a man on the railroad for 10 years on the Alaska road, he would have 10 years seniority. If he happened to work at the base as a powerplant engineer for 5 years prior to that, he would have seniority on other people on the Alaska road by this retention system which would exceed that.

In other words, it directly conflicts with all of our seniority agree


Senator BARTLETT. Let's get a specific illustration here.

Mr. SHELMERDINE. I can give you a specific illustration, an actual


Senator BARTLETT. All right.

Mr. SHELMERDINE. We have a man who is now a freight carman on the Alaska Railroad. He has been there some 3 years. Prior to that time he was a powerplant engineer at the base; at Elmendorf for 22 years. Presently he is on the bottom end of the Alaska Railroad seniority list for carmen since he has only about 3 years with the Alaska Railroad. But under SCR 20, even though not a veteran, he would be given retention points for his other 22 years of creditable service with the Federal Government which would give him the equal of 25 years on the Alaska Railroad, and he would have seniority under retention points under that kind of arrangement over anyone who had less than 25 years on the Alaska Railroad.

Senator BARTLETT. Let's assume this case in recognition of the fact-because that is what I understand you to say it is that the Civil Service Commission has ruled that the Veterans' Preference Act of 1944 must apply to the Alaska Railroad. Is that correct?

Mr. SHELMERDINE. That is correct.

Senator BARTLETT. The assumption is that you have an engineer, a nonveteran, who has worked on the Alaska Railroad for 27 years, and has been an engineer all of that time. And the other engineer is a veteran who has been an engineer with the Alaska Railroad for 1 year. Under the Veterans' Preference Act if one of those men has to be bumped, who goes?

Mr. SHELMERDINE. The nonveteran; regardless of his 27 years.
Senator BARTLETT. Thank you.

Mr. SMITH. I would like to add one more thing about this particular bill.

The Alaska Railroad can operate under veterans' preference. There would be some hardships to it. Our main interest in the passage of the particular bill is the fact that we think that there is definite value in having good employee relationships and good morale.

The greatest amount of our employees want the passage of this bill. If it isn't passed and we have to throw out all of our existing agree


ments and start from scratch, we are going to end up with a tremendous amount of disgruntled people and unhappy. This leads to injuries, accidents, and so on and so forth.

Our main interest is in the continuation of good labor relations. Senator BARTLETT. The Alaska Railroad might properly be described-might it not-as being in a very peculiar, even unique situation? You are a Government agency, and yet your employees negotiate agreements with you and work for the railroad under pretty much the same labor situations as the employees of a private railroad; is that right?

Mr. SMITH. Yes, sir. And as I stated before, we have been negotiating between employees and the railroad long before the Government accepted it actually as a policy.

Senator BARTLETT. Do you have any civil service people at all, as


Mr. SMITH. No, sir.

Senator BARTLETT. All right, Mr. Smith. I have no doubt at all that Mr. Grinstein, the committee transportation counsel, will want to address a question or two to you relating to the other bills which you discussed.

Mr. GRINSTEIN. Mr. Smith, in what particular areas do the authorities granted in S. 2413 conflict with the requirements of other Federal agencies with regard to the Alaska Railroad?

Mr. SMITH. Of course, we spoke about this one here and the possibility of the Justice Department becoming, let's say, a court of decision because they would be both prosecuting us and defending us. That is one particular place.

Although there is consideration given in the bill, we believe it is rather loose and that is with regard to our responsibility of Government economy totally.

To have to make special reports to the ICC is just an added burden that shouldn't be placed upon us.

We are wondering, we believe that there is sufficient doubt in the bill as to even our ability to carry Government freight. There is a provision of the Interstate Commerce Commission that was definitely written to prevent railroads from being in the manufacturing business. The way it is worded we think that somebody might try to apply this to us.

Mr. GRINSTEIN. That is the so-called commodities clause?

Mr. SMITH. Right.

Mr. GRINSTEIN. If the problems of accounting, the commodities clause, and the question of the Department of Justice were ironed out, would it be your opinion that the Alaska Railroad would have no ob jection to the ICC assuming economic regulation over your rights? Mr. SMITH. That is definitely our policy. We think that-I see absolutely nothing wrong with the wording in that portion of S. 2413 where it gives the authority for them to handle our rates under the conditions stated in there, and I think it would be good.

Mr. GRINSTEIN. And you see no conflict there between the goals of the ICC and the specific mandates to the Department of the Interior? Mr. SMITH. Will you restate the question?

Mr. GRINSTEIN. You see no conflicts there between the policies of the ICC and the policies or mandates of the Department of the Interior with respect to the railroad?

Mr. SMITH. I can't say that I can't see any. Yes; I can. However, I don't think they are insurmountable as long as a little judgment is used on both sides, because definitely the Secretary of the Interior, under law, is responsible for the operation of the railroad. If some of his authority is removed but the responsibility isn't, there could be some conflict.

Even in view of that, we still think that the economic regulation, that is, of the rates, would still be worth it.

Mr. GRINSTEIN. Does the Alaska Railroad directly compete with carriers by highway or water carriers, aside from terminal area pickup and delivery services?

Mr. SMITH. We handle freight between Seward and Anchorage and Fairbanks. We issue tariffs in connection with certain water carriers. And I would say therefore that we are in competition. Mr. GRINSTEIN. You do compete from point to point for traffic with carriers by highway?

Mr. SMITH. That is right.

Mr. GRINSTEIN. Are the rates of the Alaska Railroad adjusted to reflect the competition between the two modes?

Mr. SMITH. The rates of the Alaska Railroad are adjusted from time to time as a matter of competitive ability. However, there is no joy in handling anything at below cost. And if someone else does develop a method of handling some freight at a cheaper rate than we can afford to handle it, we would just as soon not have the commodity.

Mr. GRINSTEIN. When you say below cost, do you mean out-ofpocket cost, operating cost?

Mr. SMITH. Right.

Mr. GRINSTEIN. You publish tariffs?

Mr. SMITH. That is right.

Mr. GRINSTEIN. Do you publish them in advance of the rate taking effect, or does the rate take effect immediately upon publication?

Mr. SMITH. No; we try to comply with the ICC regulations. In the event of any type of an increase of course it is 30 days. Generally on a decrease, not less than 10.

Mr. GRINSTEIN. Is any forum provided for another mode of transportation to bring a view perhaps adverse to the proposed rate of the railroad?

Mr. SMITH. Do you mean in the way of appeal?


Mr. SMITH. The only method of appeal now I would say is directly to the Secretary of Interior. That is one reason we think there should be some sort of economic regulation, to set up a system where another carrier or any shipper could protest any rate that we put in.

It gives them an avenue to go through this system.

Certainly the Secretary of the Interior would not have anyone on his staff who would be a qualified rate man. He would have to go outside to get one.

Mr. GRINSTEIN. Have any appeals been taken to the Secretary of the Interior that you know of?

Mr. SMITH. I would say that that is pretty regular. Generally it is on a general basis. Our competitors say our rates are too low. The customers say they are too high.


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