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Save the Coal Act[dev note: need T/K.doc] President Roberts Testimony on the Coal ActStatement of Cecil Roberts Before the Oversight Hearing on May 17, 2000 Madam Chairman, distinguished members of the subcommittee, I am Cecil Roberts, President of the United Mine Workers of America (UMWA). The UMWA is the labor union that has represented coal miners and other workers throughout the United States and Canada for 110 years. We appreciate the opportunity to appear before the subcommittee and to give you our views regarding future uses of the Abandoned Mine Land Reclamation Fund (AML Fund). The AML Fund was established by Congress as part of the Surface Mining Control and Reclamation Act of 1977 (SMCRA). The fund was designed to provide the means to reclaim lands that had been mined in previous years and abandoned before reclamation had been done. The law was amended in 1991 to permit the investment of monies held in the AML fund to earn interest. In 1992, the Energy Policy Act extended the AML fees until 2004 (or longer in the case of the Coal Act) and authorized the use of AML interest to pay for the cost of certain eligible retirees under the Coal Act. Madam Chairman, let me state at the outset that the UMWA supports the goals of the Surface Mining Act and the Abandoned Mine Lands program. In enacting SMCRA, Congress found that "surface and underground coal mining operations affect interstate commerce, contribute to the economic well-being, security, and general welfare of the Nation and should be conducted in an environmentally sound manner." That statement is as true today as it was in 1977. Coal mining contributes significantly to our national economy by providing the fuel for over half of our nation's electricity generation. Coal miners are proud to play their part in supplying our nation with domestically-produced, cost-effective, reliable energy. We also live in the communities most affected by mining and support the intent of Congress that coal mining must be conducted in an environmentally sound manner. The UMWA believes that when Congress authorized the use of AML interest to finance the cost of retired coal miners under the Coal Act, that it was a logical extension of the original intention of Congress when the AML Fund was created. When Congress created the AML Fund in 1977, it found that un-reclaimed, abandoned mine lands imposed "social and economic costs on residents in nearby and adjoining areas." When Congress enacted the Coal Act in 1992 it also had in mind how to avoid unacceptable social and economic costs associated with the loss of health benefits for retired coal miners and widows. Madam Chairman, I would like to spend my time today talking about the financial crisis at the UMWA Combined Benefit Fund (CBF). The CBF was created by Congress to provide health benefits to retired coal miners and their widows. Today, the Combined Benefit Fund provides health benefits to over 60,000 elderly beneficiaries who reside in every state in the nation. Interestingly, every member of this subcommittee, with the exception of the distinguished representatives from Guam and American Samoa, has constituents who are beneficiaries of the CBF. Cumulatively, this subcommittee represents nearly 14,700 CBF beneficiaries. The average age of the entire CBF beneficiary population is 78 years and the total estimated annual health cost is $335 million. We believe that Congress intended that the financial mechanisms it put in place would provide for self-sufficient financing of the cost of those benefits. However, rapidly rising health costs and a series of adverse court decisions have eroded those financing mechanisms and placed the CBF in financial jeopardy. At the end of the last fiscal year--on September 30, 1999--the CBF reported a net asset position of negative $12.2 million. Despite an emergency appropriation by the Congress late last year to avoid benefit cuts, the CBF still faces a financial crisis. Net assets have declined from $30.7 million immediately after the transfer of the emergency appropriation in December 1999 to $14.8 million on March 31, 2000. Unless Congress acts, the CBF is likely to exhaust its net assets sometime late this year. The CBF's actuary projects that the ending fund balance at September 2000 is likely to range from$1 million to $5 million, depending on medical cost trends for the remainder of the year. Thereafter, absent Congressional action, the CBF will plunge into a sea of red ink with losses in the range of $85-117 million over the next two years. There is an urgent need for additional revenue to prevent a disastrous cut in benefits for this fragile population. That is why Congressman Rahall has introduced H.R. 4144, the Coal Accountability and Retired Employee Act for the 21st Century (CARE 21). If enacted, CARE 21 would authorize the transfer $172 million of accumulated interest in the Abandoned Mine Land (AML) fund to the CBF. The bill also would permit the use of AML interest money to cover future shortfalls in the CBF. The Rahall proposal does not affect the principal in the AML account. The Administration's FY 2001 budget contains a proposal for a ten-year, $346 million transfer of federal funds into the Combined Benefit Fund. The Administration also proposes to reverse the NCA v. Chater decision prospectively and to clarify a provision of the Coal Act regarding the timing of assignments by the Social Security Administration of retired miners to responsible coal employers. Portions of the Administration's proposal, including the 10-year $346 million transfer, have been included in Senator Rockefeller's bill, S. 2538, the Coalminers and Widows Health Protection Act of 2000, which was introduced in the Senate last week. The UMWA supports these legislative efforts because we know that a promise was made by the federal government and by the coal industry that these retirees would have lifetime health benefits. Today we need the help of Congress to ensure that the promise is kept. We are not alone in urging Congress to act. At least six state legislatures in coal field states (Alabama, Illinois, Indiana, Kentucky, Pennsylvania and West Virginia), along with dozens of county and city governments, have adopted resolutions urging Congress and the Administration to ensure that retired miners continue to receive the health benefits they were promised. In coal field communities, Coal Act supporters have gathered signatures from nearly 40,000 residents urging Congress to act immediately to keep the promise to retired miners. And today, on the west front of the Capitol about 10,000 Coal Act beneficiaries and their supporters are expected to convene to ask that Congress and the Administration support a long-term legislative solution to the financial crisis at the UMWA Funds. I urge every member of this committee to walk over to the west side of the Capitol this afternoon to see the workers and their spouses who gave a lifetime in the mines to provide this nation with energy. These Coal Act beneficiaries, who average 78 years of age, and who have supported this nation in war and in peace, come today to ask for simple fairness and the keeping of a simple promise. As you consider the future use of the AML fund, I ask that you keep these folks in mind. I can think of no higher purpose for monies collected from the coal industry than to ensure that America's retired miners not be abandoned. The UMWA Health and Retirement Funds and the U.S. Government The UMWA Health and Retirement Funds (the Funds) was created in 1946 in a contract between the United Mine Workers of America and the federal government during a time of government seizure of the mines. The contract was signed in the White House with President Harry Truman witnessing the historic occasion. When the National Bituminous Wage Conference convened in early 1946, a health and welfare fund for miners was the union's top priority. The operators again rejected the proposal and miners walked off the job on April 1, 1946. Negotiations under the auspices of the U.S. Department of Labor continued sporadically through April. On May 10, 1946, President Truman summoned John L. Lewis and the operators to the White House. The stalemate appeared to break when the White House announced an agreement in principle on a health and welfare fund. Despite the White House announcement, the coal operators still refused to agree to the creation of a medical fund. Another conference at the White House failed to forge an agreement and the negotiations again collapsed. Faced with the prospect of a long strike that could hamper post-war economic recovery, President Truman issued an Executive Order directing the Secretary of the Interior to take possession of all bituminous coal mines in the United States and to negotiate with the union "appropriate changes in the terms and conditions of employment." Secretary of the Interior Julius Krug seized the mines the next day and ordered the miners to return to work. The miners refused, and negotiations continued, first at the Interior Department and then at the White House, with President Truman participating in several conferences. After a week of negotiations, the historic Krug-Lewis agreement was announced and the strike ended. It created a welfare and retirement fund to make payments to miners and their dependents and survivors in cases of sickness, permanent disability, death or retirement, and other welfare purposes determined by the trustees. The fund was to be managed by three trustees, one to be appointed by the federal government, one by the UMWA and the third to be chosen by the other two. Financing for the new fund was to derive from a royalty of 5 cents per ton of coal produced. The Krug-Lewis agreement also created a separate medical and hospital fund to be managed by trustees appointed by the UMWA. The purpose of the fund was to provide for medical, hospital, and related services for the miners and their dependents. The Krug-Lewis agreement also committed the federal government to undertake "a comprehensive survey and study of the hospital and medical facilities, medical treatment, sanitary and housing conditions in coal mining areas." The expressed purpose was to determine what improvements were necessary to bring coal field communities in conformity with "recognized American standards." To conduct the study, the Secretary chose Rear Admiral Joel T. Boone of the U.S. Navy Medical Corps. Government medical specialists spent nearly a year exploring the existing medical care system in the nation's coal fields. Their report, "The Medical Survey of the Bituminous Coal Industry," found that, in coal field communities, "provisions range from excellent, on a par with America's most progressive communities, to very poor, their tolerance a disgrace to a nation to which the world looks for pattern and guidance." The survey team discovered that "three-fourths of the hospitals are inadequate with regard to one or more of the following: surgical rooms, delivery rooms, labor rooms, nurseries and x-ray facilities." The study concluded that "the present practice of medicine in the coal fields on a contract basis cannot be supported. They are synonymous with many abuses. They are undesirable and in many instances deplorable." Thus the Boone report not only confirmed earlier reports of conditions in the coal mining communities, but also established a strong federal government interest in correcting long-standing inadequacies in medical care delivery. Perhaps most important, it provided a road map for the newly created UMWA Fund to begin the process of reform. The Funds established ten regional offices throughout the coal fields with the direction to make arrangements with local doctors and hospitals for the provision of "the highest standard of medical service at the lowest possible cost." One of the first programs initiated by the Funds was a rehabilitation program for severely disabled miners. Under this program over 1,200 severely disabled miners were rehabilitated. The Funds staff searched the coal fields to locate the disabled miners and sent them to the finest rehabilitation centers in the United States. At those centers, disabled miners received the best treatment that modern medicine and surgery had to offer, including artificial limbs and extensive physical therapy to teach them how to walk again. After a period of physical restoration, the miners received occupational therapy so they could provide for their families. The Funds also made great strides in improving overall medical care in coal mining communities, especially in Appalachia where the greatest inadequacies existed. Recognizing the need for modern hospital and clinic facilities, the Funds constructed ten hospitals in Kentucky, Virginia and West Virginia. The hospitals, known as Miners Memorial Hospitals, provided intern and residency programs and training for professional and practical nurses. Thus, because of the Funds, young doctors were drawn to areas of the country that were sorely lacking in medical professionals. A 1978 Presidential Coal Commission found that medical care in the coal field communities had greatly improved, not only for miners but for the entire community, as a result of the UMWA Funds. "Conditions since the Boone Report have changed dramatically, largely because of the miners and their Union--but also because of the Federal Government, State, and coal companies." The Commission concluded that "both union and non-union miners have gained better health care from the systems developed for the UMWA." The Coal Commission Medical benefits for retired miners became a sorely disputed issue between labor and management in the 1980s, as companies sought to avoid their obligations to retirees and dump those obligations onto the UMWA Funds, thereby shifting the cost to signatory employers. Courts had issued conflicting decisions in the 1980s, holding that retiree health benefits were indeed benefits for life, but allowing employers to evade the obligation to fund those benefits. The issue came to a critical impasse in 1989 during the UMWA-Pittston Company negotiations. Pittston had refused to continue participation in the UMWA Funds, while the union insisted that Pittston had an obligation to the retirees. Once again the government intervened in a coal industry dispute over health benefits for miners. Secretary of Labor Elizabeth Dole appointed a special "super-mediator," Bill Usery, also a former Secretary of Labor. Ultimately the parties, with the assistance of Usery and Secretary Dole, came to an agreement. As part of that agreement, Secretary Dole announced the formation of an Advisory Commission on United Mine Workers of America Retiree Health Benefits, which became known as the "Coal Commission." The commission, including representatives from the coal industry, coal labor, the health insurance industry, the medical profession, academia, and the government, made recommendations to the Secretary and the Congress for a comprehensive resolution of the crisis facing the UMWA Funds. The recommendation was based on a simple, yet powerful, finding of the commission: "Retired miners have legitimate expectations of health care benefits for life; that was the promise they received during their working lives, and that is how they planned their retirement years. That commitment should be honored." The underlying recommendation was that every company should pay for its own retirees. The Commission recommended that Congress enact federal legislation that would place a statutory obligation on current and former signatories to the National Bituminous Coal Wage Agreement to pay for the health care of their former employees. The Commission recommended that mechanisms be enacted that would prevent employers from "dumping" their retiree health care obligations on the UMWA Funds. Finally, the Commission urged Congress to provide an alternative means of financing the cost of "orphan retirees" whose companies no longer existed. The Coal Act Congress acted on the Coal Commission's recommendations. The original bill introduced by Senator Rockefeller sought to impose a statutory obligation on current and former signatories to pay for the cost of their retirees in the UMWA Funds, required them to maintain their individual employer plans for retired miners, and imposed a small tax on all coal production to pay for the cost of orphan retirees. Although the bill was passed by both houses of Congress it was vetoed as part of the Tax Fairness and Economic Growth Act of 1992. In the legislative debate that followed, much of the underlying structure of the Coal Commission's recommendations was maintained, but there was strong opposition to a general coal tax to finance orphan retirees. A compromise was developed that would finance orphans through the use of interest on monies held in the Abandoned Mine Lands (AML) fund. In addition, the Union accepted a legislative compromise that required the transfer of $210 million of pension assets from the UMWA 1950 Pension Plan. With these compromises in place, the legislation was passed by the Congress and signed by President Bush as part of the Energy Policy Act. Under the Coal Act, two new statutory funds were created--the UMWA Combined Benefit Fund (CBF) and the UMWA 1992 Benefit Fund. The former UMWA 1950 and 1974 Benefit Funds were merged into the Combined Fund, which was charged with providing health care and death benefits to miners who retired prior to July 20, 1992. The UMWA 1992 Benefit Fund was created to provide care to retired miners who retired prior to October 1, 1994 and whose employers are no longer providing benefits. In order to prevent future "dumping" of retiree health care obligations, the Coal Act mandates the continuation of individual employer health plans maintained by signatories to the NBCWA of 1978 and successor agreements. The Combined Fund is financed by a per-beneficiary premium paid by employers with retirees in the fund. The premium is set by the Social Security Administration and is escalated each year by the medical component of the Consumer Price Index. Interest on the AML fund is made available to finance the cost of orphan retirees. The UMWA 1992 Fund is financed solely by operators that were signatory to the NBCWA of 1978 or later agreements. In passing the Coal Act, Congress recognized the legitimacy of the Coal Commission's finding that "retired miners are entitled to the health care benefits that were promised and guaranteed them." Congress specifically had three policy purposes in mind in passing the Coal Act:
Without question Congress intended that the Coal Act should provide "sufficient operating assets" to ensure the continuation of health care to retired coal miners. So what went wrong? How is it that eight years after passing the Coal Act that we find ourselves in a financial crisis? Adverse Court Decisions A number of court decisions are eroding the financial condition of the Combined Fund. The 1998 Supreme Court decision in Eastern Enterprises removed the obligation to contribute for companies that were signatory to earlier NBCWAs but did not sign the 1974 or later contracts. Those employers were relieved of contribution obligations in the future and the Combined Fund returned millions of dollars in prior contributions. A 1995 decision by a federal court in Alabama in NCA v. Chater overturned the premium determination by the Social Security Administration (SSA) and reduced the premium paid by employers by about 10%. A 1999 decision by the same court recently ordered the CBF to return about $40 million in contributions to the employers, representing the difference between the original SSA premium rate and the rate established in NCA. More recently, a court decision in Dixie Fuels ruled that original determinations of responsible operator status could not be made by the Social Security after October 1, 1993. If applied nationwide this ruling would relief operators of the responsibility to pay for their retirees and create more orphans. The effect of these court decisions threaten a repetition of the problems in the 1980s that led to the creation of the Coal Act--employers are being relieved of liability for their retirees and revenues are being significantly reduced from the employers that remain obligated. Compounding the revenue loss stemming from these court decisions is the fact that the escalator used to adjust the premium for inflation (the medical component of the Consumer Price Index) is inadequate to measure the health care cost increases in a closed group of aging beneficiaries who experience annual increases in utilization. The combination of loss of income and an inadequate escalator leads to an imminent financial crisis for the Combined Fund and its beneficiaries. The Financial Crisis Must Be Averted Madam Chairman, the financial crisis at the UMWA Combined Fund must be averted. As I noted earlier, the average age of the CBF beneficiaries is 78 years. About two-thirds of the population are widows of retired miners who receive a small survivors pension of $135 per month. Many of them have multiple debilitating medical conditions that require substantial medical intervention and treatment. It is no exaggeration to say that the benefits that flow from the Coal Act literally provide a lifeline to these deserving beneficiaries. We ask every member of Congress to consider the plight of these elderly miners and their widows. They did everything that was asked of them during their working lives to keep their part of the bargain that began in Harry Truman's White House. Now, in their twilight years, it is incumbent on the government, the coal industry and the UMWA to ensure that the promises made to them are kept. We can do so by enacting the CARE 21 proposal that has been introduced by Congressman Rahall with bi-partisan support from both Democrats and Republicans. We urge the members of this subcommittee to co-sponsor H.R. 4144 and to actively seek its enactment by the House of Representatives. Madam Chairman, I thank you for the opportunity to address the subcommittee today. I would be happy to answer any questions you may have. |
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