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OMB COST ESTIMATE
FOR PAY-AS-YOU-GO CALCULATIONS

Report No: 564
Date: 01/25/2002

  1. LAW NUMBER: P.L.107-90 (H.R.10)

  2. BILL TITLE: Railroad Retirement and Survivors Improvement Act of 2001

  3. BILL PURPOSE: The legislation makes changes to the Federal railroad retirement system by: 1) requiring the U.S. Treasury to transfer railroad pension assets to a Trust established by this legislation; 2) allowing the Trust to invest railroad pension assets in private securities, with the proceeds used to pay for Federal entitlement benefits; 3) expanding pension benefits; 4) reducing employer tax rates.

    4.  

  4. OMB ESTIMATE: P.L. 107-90 creates a new National Railroad Retirement Investment Trust (the Trust). The Trust will invest Tier 1 (Social Security equivalent) assets in Treasury securities. Tier 2 (railroad pension) assets could be invested in private securities. The legislation directs that the purchase or sale of non-Federal assets by the National Railroad Retirement Investment Trust, expected to total $15.4 billion in 2002, shall be treated as a means of financing rather than as outlays. This is inconsistent with traditional budget concepts.

    5. The legislation also provides for benefits for widows of retired employees that are equal to the benefit to the retired employee at the time of his death, provides for full retirement at age 60 for employees with at least 30 years of covered service, provides for vesting after five years of post-1995 service, and repeals a cap on monthly benefits.

    The Supplemental Annuity Tax on employers is repealed, and the rate employers pay for the Tier 2 payroll tax is lowered from 16.1 percent of payroll to 14.2 percent by 2003.

    (Fiscal years; in millions of dollars)
    2001 2002 2003 2004 2005 2006
    Costs subject to pay-as-you-go:
    Receipts...................................... 0 -85 -219 -326 -348 -352
    Outlays....................................... 0 110 229 297 334 368
    Total, net pay-as-you-go costs. 0 195 448 623 682 720

     

  5. CBO ESTIMATE:
    6. (Fiscal years; in millions of dollars)
    2001 2002 2003 2004 2005 2006
    Costs subject to pay-as-you-go:
    Receipts...................................... 0 -118 -277 -410 -441 -443
    Outlays........................................ 0 108 227 301 339 374
    Total, net pay-as-you-go costs. 0 226 504 711 780 817

     

  6. EXPLANATION OF DIFFERENCES BETWEEN OMB AND CBO ESTIMATES:

    7. There are no substantial differences in the OMB and CBO estimates of outlays. Differences in revenue estimates are due to different baseline assumptions and estimating models

  7. CUMULATIVE EFFECT OF DIRECT SPENDING AND REVENUE LEGISLATION ENACTED TO DATE:
    8. (Fiscal years; in millions of dollars)
    2001 2002 2003 2004 2005 2006
    Outlay effect.............. 5,503 18,203 23,527 23,132 22,422 7,804
    Receipt effect............ -69,768 -34,950 -84,843 -104,138 -105,314 -123,755
    Net costs.................... 75,271 53,153 108,370 127,270 127,736 131,559