In many respects, my testimony in behalf of the State bus regulators in this country can be related to-and if I might paraphrase a statement of a former President and fellow citizen or former citizen of the State of Missouri, President Truman-the paraphrase would be that, "The bus stops here." That is not to be taken as literally true, but for thousands of bus riders in this country in tens of thousands of communities, it may be true.

And I would like to mention to the committee my conviction that with respect to the protection of the general bus-riding public among the various States, their fate does rest with this subcommittee.

I would simply like to summarize a few of the six basic points which I feel are important. First of all, as State regulators dealing daily with intercity bus companies and the general public, we see that intrastate intercity bus service is a public transportation utility function in many respects. And by that, I mean that the users of the bus service in many cases do not have an alternative. There is a very loose analogy that could be drawn to the other utility-type functions of electric, gas, and telephone. This would be true of the rider who, for medical reasons, needs to get to that town served by bus or to her county seat or to his or her State government capital. Second, H.R. 3663 as it is now written, ends effective government oversight of this important public transportation utility function by eliminating effective State regulatory authority.

This result is not sought by the public served by the intercity bus industry. It is not sought by the State regulatory community.

The bill as written will visit several undesirable effects upon the public, including higher rates, service cuts; and deprivation of an effective local forum where their interests can be considered.

Fifth, the bill is inconsistent with current Federal efforts to return to State jurisdictions those matters best handled by persons closest to and most familiar with them.

Sixth, based upon all of the foregoing, the bill as written will be perceived by the public as anticonsumer in its effects.

We recommend deletion of those provisions of the legislation which would preempt State authority, and we have some solutions to offer in lieu thereof, which are contained in my testimony.

If I might just take 1 minute, I would like to offer into the record, if the chairman and subcommittee would permit, two additional items. One is the statement of the Alabama Public Service Commission.

And second, Mr. Chairman and members of the committee, I would like to submit some press clippings that I have been able to accumulate over the past 6 months or so, showing basically several things. One is that there is concern out there about bus deregulation. No. two, the Public Service Commission of Missouri, in particular, has been effective in making decisions, in some cases going along with the companies' suggestions and then where the evidence has justified otherwise, not exactly acceeding to their requests. Thank you very much, Mr. Chairman.

[The statement follows:]

STATEMENT OF JOHN C. SHAPLeigh, Commissioner of the MISSOURI PUBLIC SERVICE COMMISSION FOR THE NATIONAL ASSOCIATIion of Regulatory UTILITY COMMISSIONERS Mr. Chairman and Members of the Committee, my name is John C. Shapleigh. I am a Commissioner of the Missouri Public Service Commission and am here today as a spokeman for the National Association of Regulatory Utility Commissioners, commonly known as the "NARUC." Accompanying me today are Paul Rogers, NARUC Administrative Director and General Counsel; Rita Barmann, NARUC Director of Congressional Relations; and Michael Foley, NARUC Director of Financial Analysis.

The NARUC Is a quasi-governmental, non-profit organization. Our members include regulatory bodies of the fifty States, the District of Columbia, Puerto Rico and the Virgin Islands, engaged in the regulation of carriers and utilities. The mmission of the NARUC is to improve the quality and effectiveness of regulation for the benefit of the American public.

The members of the NARUC appreciate this opportunity to make known their view on H.R. 3663, a bill proposing the Bus Regulatory Reform Act. We wish to commend the members of the Committee for undertaking regulatory reform of the intercity bus industry. As State commissioners regulating intrastate operations of these motor carriers, we support deregulatory measures where they are feasible and beneficial to both the industry and the general public.

While we would heartily agree with the Congressional finding in the bill “that a safe, competitive, financially sound, and fuel efficient motor bus system is vital" to the Nation, the NARUC is also concerned that the needs of the general public be protected in any legislative efforts to reform the Federal regulation of the intercity bus industry.

As such, we must express serious reservations regarding certain language contained in this regulatory reform proposal as it relates to the protection of the American public from unreasonable fare increases as well as a general decline in the quantity and quality of bus transportation services.

SERVICE TO SMALL COMMUNITIES JEOPARDIZED

One of the principle concerns of the NARUC is Section 16 of the Act which pertains to exit policy. The U.S. intercity bus industry which presently serves in excess of 350 million revenue passengers per year operates in 15,000 cities, towns, and villages-of which only about 1000 are served by other common carriers. In addition the industry serves some 50,000 flag stops located along its existing route network throughout the United States. Thus in the vast majority of communities the intercity bus is the only available common carrier.

As one can readily appreciate, the loss of bus service to small rural communities could prove to be devastating not only to the individual bus riders who depend on the service but to the communities at large who are finding themselves increasingly isolated, particularly in light of diminishing airline and Amtrak availability.

The exit policies spelled out in Section 16 of the Act enable The Interstate Commerce Commission to reverse a State regulatory action which disallows a carrier's request for discontinuance of service. Any carrier denied permission to abandon or severely reduce service by the State regulatory body can merely petition the ICC for relief. If no one protests within 20 days, the Act requires the ICC to reverse the State decision and grant the service reduction. Furthermore, if one were to register a protest, the burden of proof in the matter would shift to the party filing the protest.

Thus, in spite of the fact that a State regulatory agency may have already conducted a thorough examination in the matter, the carrier can easily exempt itself from proving that the service reduction is warranted by merely “appealing” the question to the Federal Agency. Not only does this place the State commissions in a subservient position to the ICC, but it provides the carriers with a running start against anyone who would attempt to question the need for the service abandonment. The NARUC sincerely doubts that the thousands of small towns and cities— critically dependent upon bus transportation-will be able to defend their interests if Section 16 of the Act is written into law.

In addition, the NARUC would urge this Committee to take note of the fact that the track record of the ICC in the area of service abandonment has been extremely permissive. In separate reports, the U.S. Department of Transportation and the Management Analysis Center document that during the 1970's the bus carriers dis

continued serving over 1800 communities located throughout the United States.1 The general practice of the carriers has been to discontinue service to a community along an existing interestate route and hope that nobody at the ICC takes note. This point is also acknowledged in the report of the House Committee on Public Works and Transportation which accompanies the Bus Regulatory Reform Act. According to the House report, the ICC restrictions on exit have had only a "minimal effect in the past" while State regulatory review of service abandonment has been “more

FEDERAL PREEMPTION OF INTRASTATE RATEMAKING

The NARUC is also concerned with the preemptive language contained in Section 17 of the Act which would "Federalize" the intrastate ratemaking process. Section 17 imposes a 120-day decision deadline on the States (60 days in the case of a rescheduling request) after which the ICC would prescribe intrastate rates and practices. While the State commissions do regularly process rate cases within these time frames, such a rigid deadline would not allow adequate time for evidentiary hearings and a thorough investigation and consideration of the issues if complications were to arise in a contested rate case.

In addition, carriers would be free to appeal State ratemaking or scheduling decisions to the ICC. The States would then be forced into a position of having to justify to the ICC as to whether or not the State action was reasonable and not burdensome on interstate commerce. We are also concerned with subsections c, d, and e of this Section which require the States to establish uniform standards and procedures consistent with those of the ICC within a two year period following the efective date of the Act.

INDUSTRY RATIONALIZATION OF FEDERAL PREEMPTION

Industry representatives are quick to rationalize the need for Federal preemption of State regulatory functions on the grounds that the State commissions do not process cases in a timely manner and that the rates authorized by the States have impaired the financial viability. Let's set the record straight on both of these points. Recent reports prepared by the industry purport to document regulatory lag "horror stories" experienced by the carriers. One such "story" involved the Colorado Public Utilities Commission and Trailways in a discontinuance of service case decided last year. Trailways maintanined that the commission took 178 days to process the case and that the lag cost the firm in excess of $25,000.00. Yet upon closer scrutiny by officials of the Colorado PUC it was revealed that the case was processed in 162 days and that fully 52 days of the total represented delays and postponments requested by the applicant. We're confident that the State regulators can provide plenty of "horror stories" of their own regarding the delays in rate proceedings caused by the carriers.

With respect to the financial condition of the industry, the most recent quartely report on the status of the industry published by the ICC provides some interesting food for thought. The report notes that for the 12 months ended September 30, 1981 the Nation's large Class I motor carriers of passengers earned a rate of return on equity well in excess of 10 percent while Greyhound and Trailways ended approximately 14 percent and 12 percent respectively. Though these earnings are off somewhat from the higher returns earned by the industry 12 months earlier, the earnings are respectible when one considers the general deterioration in the national economy during the past year.

IMPLICATIONS OF FEDERAL PREEMPTION

The NARUC can only view the radical preemption language of Sections 16 and 17 as yet another regrettable example of creeping Federalism which attempts to perpertuate the myth that Washington knows best in areas of joint Federal/State interest. Clearly, the net effect of these sections of the Act will be to shift the most critical aspects of the ratemaking process to the ICC-an action which is obviously inconsistent with proposed Federal efforts to return to State jurisdiction those matters best handled by the people closest to and most knowledgeable fo them.

1 "Intercity Bus Service in Small Communities"; published by U.S. Department of Transportation; January, 1980; p.ii. "Deregulation of the Intercity Bus Industry"; published by Management Analysis Center; January, 1981; p. 22.

2 Bus Regulatory Reform Act of 1981; House Report No. 97-334; published by the House Committee on Public Works and Transportation; November 17, 1981; p. 42.

Impairing State jurisdiction over rate increases and over the discontinuance of regular-route service would be highly detrimental to the general public. Those affected by a proposed rate change or curtailment of service would, in the case of ultimate decision-making before the ICC, be without the accessible local forum that the State commission now provides. It is improbable that a citizen of a rural town, for example, would have the time, the financial resources, or even the means to travel to Washington, D.C., to protest a proposed change before the ICC. Morever, the ICC does not have the time or resources to hear them and therefore their complaints would be dealt with in impersonal "paper" proceedings.

FEDERAL/STATE REGULATORY COOPERATION THE NARUC PROPOSAL

In lieu of the heavy-handed, preemptive, inequitable balancing of Federal/State regulatory interests which would result from enactment of the language contained in Sections 16 and 17, the NARUC would like to offer language amending the Act in the spirit of true Federal/State cooperation.

The language of the amendment (see Attachment #1) would provide for the creation of a Federal-State Joint Board for the purpose of establishing rules governing the jurisdictional separation of property and expenses, between interstate and intrastate operations, of motor carriers of passengers.

The creation of this board would provide regulators, both Federal and State, with an excellent forum for conducting the difficult task of establishing uniform criteria for all the States in separating the cost of buses, terminals, salaries and other expenses according to the ratio of intrastate to interstate passenger miles or any other appropriate ratio as adopted by the Joint Board.

The Carriers have loudly complained that the State commissions have prescribed rates less than those prescribed by the ICC. It is the position of the NARUC that if this is a problem in some States, the way to address it is to separate the costs between_intrastate and interstate operations as is done in other industries subject to joint Federal and State regulation. In this way, each agency will be bound by the true costs, plus a reasonable allowance for profit, in fixing rates and in acting on service abandonment applications.

This amendment would enhance the effectiveness of the Bus Regulatory Reform Act without trampling on the historical jurisdiction of the State regulatory agencies and therefore has the full support of the NARUC.

Thank you very much.

[Attachment 1]

NARUC PROPOSED AMENDMENTS TO H.R. 3663; A BILL PROPOSING THE BUS
REGULATORY REFORM ACT OF 1981

1. Section 6, paragraph (2) and Sections 16 and 17 of H.R. 3663 are hereby stricken and the subsequent Sections are renumbered accordingly.

2. Title 49 of the United States Code is hereby amended by inserting between Sections 11501 and 11502 a new Section to read as follows:

FEDERAL-STATE COOPERATION IN THE REGULATION OF MOTOR CARRIER OF PASSENGERS ENGAGED IN INTERSTATE OF FOREIGN COMMERCE

Section 11501a. (a) The Interstate Commerce Commission shall establish within thirty days after the effective date of this Act the Federal-State Joint Board which shall be empowered to determine within six months after the effective date of this Act, and to revise from time-to-time thereafter as apporpriate, rules governing the jurisdictional separation of the property and expenses, between interstate and intrastate operations, of motor carriers of passengers authorized by the Commission to transport passengers in interstate or foreign commerce.

(b) The rules adopted by the Federal-State Joint Board under subsection (a) shall be binding upon the Commission and each State authority to assure reasonable and just rates and economically feasible service.

(c) The Federal-State Joint Board shall be composed of the Chairman of the Commission, two other commissioners of the Commission designated by the Commission, and two State commissioners nominated by the national organization of the State commissions, as referred to in sections 10344(f) and 11506 of this title, and approved by the Commission. The Chairman of the Commission shall serve as the Chiairman of the Joint Board. The State members of the Joint Board shall be allowed travel expenses, including per diem in lieu of subsistence, in the same manner as persons employed intermittently in Government service are allowed expenses under section 5703 of title 5 of the United States Code.

(d) Any rulemaking of the Joint Board shall be subject to chapter 5 of title 5 of the United States Code. Any final action taken by the Joint Board shall be subject to judicial review in the same manner as a final decision of the Commission in a motor carrier proceeding.

Senator DANFORTH. Mr. Hitchcock.

STATEMENT OF CORNISH F. HITCHCOCK, DIRECTOR,
TRANSPORTATION CONSUMER ACTION PROJECT

Mr. HITCHCOCK. Thank you very much, Mr. Chairman. Having testified before the last Congress on the truck and household moving bill, we appreciate the invitation to be here this morning. And I would like to submit for the record the prepared statement as well as a somewhat lengthy article dealing with the issue.

During the testimony by Chairman Taylor, Mr. Chairman, you asked why should we pass this bill, what is the public interest or public concern? And I think the answer is probably best provided in an ad in the Washington Post 3 weeks ago by Texas International Airlines, where they said, "Airline offers bus fares." You can go to Houston for $20 less by air than you can if you take the bus. And this is not unique. People's Express, Pacific Express, and some other carriers have been offering fares that are lower than the bus, and advertising them as such.

It seems that there is something wrong with this type of result, particularly when you consider that the bus industry has lower costs than the airlines and when you consider that the poor, the elderly, minorities, people with modest incomes rely disproportionately on bus travel.

And it seems that the major reason for the current problem in the industry stems from its regulation, which has kept fares high, limited new entry and competition, and done little historically to prevent a decline of service, particularly to rural America.

I find particularly significant the fact that during the 1970s service was dropped at 1,800 communities across America. That is far more than were lost prior to airline deregulation when there was debate about the effects of that system.

With respect to H.R. 3663, there are some additional reforms in line with what the administration has proposed that would be particularly helpful from the consumer standpoint. First of all, going further with respect to antitrust immunity and ending immunity for general rate increases, between early 1979 and the end of 1981 the ICC approved general rate increases that allowed fares to rise an aggregate of 57 percent. During the same time, the Consumer Price Index went up only 35 percent. And from the public figures we have, that 57-percent increase is higher than the cost of Greyhound or Trailways.

Chairman Taylor is correct. They did set aside part of a general rate increase that came in during the last 3 years, but they rubberstamped each and every one of them. 57 percent is too much.

Also, with respect to entry, what we would recommend is moving toward a fitness only standard and sunsetting all entry regulation by January 1, 1985, except for the safety and insurance regulation, which would continue.

And I think even viewed in that context, there are some additional reforms which might be useful to try to get the benefits of