Rail service is improving, AAR's Jefferies tells T&I Committee

The House Transportation and Infrastructure Committee (T&I) yesterday held its first hearing of the 118th Congress, with the topic focused on the state of transportation and supply-chain challenges.

The hearing marked the first for new T&I Chairman Sam Graves (R-Mo.), who opened the morning by noting the U.S. transportation network's "vulnerabilities were laid bare during the COVID-19 pandemic and were only made worse by stifling regulations."

Graves also noted that he did not vote for Infrastructure Investment and Jobs Act (IIJA), the $1.2 trillion infrastructure bill that Congress passed and President Joe Biden signed in November 2021. About half of the federal funding in the law was directed to programs that fall under T&I's jurisdiction.

"Athough I did not support IIJA, I accept that it is the law of the land," said Graves in a prepared written statement. "What we have to do is make sure Congress and this committee ensure the money from IIJA is spent responsibly and is directed toward making our nation’s transportation supply chain more efficient and resilient."

Also testifying before the committee yesterday was Association of American Railroads President and CEO Ian Jefferies, who reminded the committee that unlike other transportation modes, the nation's freight railroads operate almost exclusively on infrastructure they own, maintain and pay for.

"From 1980 to 2022, freight railroads spent more than $800 billion of their own funds, not government funds, on capital expenditures and maintenance expenses," Jefferies said, according to his written testimony. "That’s more than 40 cents out of every revenue dollar invested right back into a rail network that keeps America’s economy moving."

But Jefferies also acknowledged that rail service over the past year has not been what the railroads' customers "want or deserve." Railroads are committed to restoring the quality of service, but they continue to face a tight labor market, he said.

"To this day, competition for workers remains fierce. In December 2022, the national unemployment rate was 3.5%, matching the lowest it’s been in 50 years. In many key railroad states, the unemployment rate is even lower," Jefferies said. "The extremely tight labor market means railroads’ single biggest service-related challenge is finding and keeping employees."

Railroads are making progress, with total Class I employment in December 2022 up 6.8% over January 2022 levels, he said. Train and engine employment was 9.6% higher in December than in January 2022.

Metrics show that rail service is improving, said Jefferies.

"Data reported by individual railroads and compiled by the Surface Transportation Board indicate that railroads are making progress on a variety of key service metrics," Jefferies said. "A recent STB report stated that railroads are meeting six-month targets for service improvement, with key performance indicators trending in a positive direction."

STB data isn't the only sign of improvement, he added. A recent survey of rail shippers by Wolfe Research found that rail service ratings have reached the highest level in the survey for the past 10 quarters.

"The pace of rail service improvement might be slower than some rail customers and policymakers would prefer, and not every service metric for every railroad has been improving in recent months, but the progress railroads have made is unquestionably good news and the work to improve service is continuing," Jefferies said.