Alaska Railroad to cut 54 positions, 29 to be laid off

Budget shortfalls are forcing the Alaska Railroad Corp. to make major changes, beginning with the elimination of 54 positions this year.

The layoffs include 20 non-union management positions and 34 positions from three of the five labor unions railroad employees work under, according to a March 7 statement the corporation issued formally announcing its plans. Of the 54 positions, 25 are currently vacant, meaning 29 employees will be laid off.

In 2008 the Alaska Railroad Corp., or ARRC, had about 800 full-time employees President and CEO Chris Aadnesen said. That number will be down to 570 when the layoffs are completed at the end of this year.

ARRC also cut 50 positions in the spring of 2012.

“We have some pretty severe financial issues that are forcing us into a restructuring of the company,” Aadnesen said.

Leadership from the union groups affected by the layoffs — the Alaska Railroad Workers, Local 183; the United Transportation Union, Local 1626; and the International Brotherhood of Teamsters, Local 959 — was unavailable for comment.

Since 2011 ARRC has seen its federal funding and operating revenue decline significantly, Aadnesen said. When combined with the federally mandated and unfunded positive train control system, or PTC, it is required to implement by the end of 2015 — a $15 million per year expense — AARC has experienced a $45 million hit to its finances since 2011, he said.

Federal funding for ARRC had been about $36 million since 2006 until it was cut in the Surface Transportation Extension Act, which the president signed into law last July. At the time it was thought Rep. Don Young, who led the fight for railroad money, had gotten $31 million for ARRC. However, variances in how the funding is formulated resulted in a $4 million shortfall in funding.

The funding formula is determined by regulators in the Federal Transportation Administration, or FTA.

Aadnesen said ARRC has been working with Alaska’s Congressional delegation to restore the money, but it can’t be counted on. The parties have been aware of the funding gap for several months, he said, but it was kept quiet for as long as possible in hopes of coming to a resolution.

“We budgeted for $27 million because there’s no light at the end of the tunnel right now,” Aadnesen said.

A statement for the Journal from Young’s office said the funding shortfall was a mistake in the formula.

“Ever since the FTA drafting error was discovered after bill passage, the Congressman has urged the FTA to use the administrative authority given to them in MAP-21 to correct their error,” according to the statement from Young’s office. “The Alaska Railroad has played an important role in Alaska since well before statehood, and Congressman Young will continue work to defend this vital piece of Alaska’s economy.”

The first Senate version of the transportation bill allocated just $6 million to the railroad before Young secured the additional funding in the conference committee. The transportation bill also increased ARRC’s required funding match to qualify for federal dollars from 9 percent to 20 percent of the money it receives.

Aadnesen said lessening demand for coal and oil that ARRC hauls have cut its revenue approximately $15 million over the last two years. Current freight operations are only about 40 percent of what was predicted for 2013, he said.

In 2011, ARRC operated on $187 million in revenue and had a net income of $13.4 million.

The most recent workforce reduction will save ARRC an estimated $4.5 million, Aadnesen said. He declined to comment on the specifics of future restructuring but said, “We have a whole variety of initiative we’re looking at — some of the processes in how we run our trains, how we deal with internal functions, even down to how many cell phones we have.”

The PTC system is designed to prevent human error from causing accidents while a train is moving and was passed in 2008 after three fatal rail accidents in the Lower 48.

In part, the system is designed to calculate a train’s weight and speed when traveling to help it stop as quickly as possible in emergency situations. A communications network will also be developed to monitor train activity and minimize the possibility of train collisions and other railway accidents, according to a Federal Railroad Administration tutorial.

According to Aadnesen, most railroad companies across the country will not be able to meet the 2015 PTC installation deadline.

“PTC is a hugely expensive program and we have to implement it like other railroads do in the country,” he said. “We still have $80 million to spend on it — which we don’t have.”

Aadnesen said he is hopeful an industry-wide outcry about the program’s timeline will push Congress to extend the deadline to the end of 2018. An extension would also reduce the amount of money ARRC would need to spend per year to implement the program, he said.

Wendy Lindskoog, vice president of corporate and government affairs, said ARRC is now turning to the State of Alaska for help.

A company statement said ARRC is requesting $35 million from the State’s 2014 fiscal year budget for PTC work. Further requests to fully-fund the program will be made as well.

“It’s an uphill battle. We’ll be working it hard in the final days of the (legislative) session, here,” she said.

Elwood Brehmer can be reached at [email protected].

03/13/2013 - 11:44am