SCHUBERT OUTLINES MARAD’s NEEDS IN PROPOSED FISCAL 2003 BUDGET

SCHUBERT OUTLINES MARADÆS NEEDS IN PROPOSED FISCAL 2003 BUDGET    Capt. William G. Schubert, head of the U.S. Maritime Administration, told the U.S. House Armed Services Committee’s Oversight Panel on the Merchant Marine Thursday morning that his agency has already started to prepare for the reauthorization of the Maritime Security Program, set to expire in 2005.
   “The administration is committed to finding a replacement program by 2005,” said Schubert during a review of MarAd’s $212 million budget request for fiscal 2003. “This has been a very successful program.”
   The MSP program was enacted under the 1996 Maritime Security Act to ensure the continued presence of U.S.-flag vessels in international trade, which are readily available in times of war or national emergency. There are 47 ships enrolled in the program.
   The administration has asked for $98.7 million in fiscal 2003 for MSP. Schubert said the program essentially provides $9 billion worth of maritime and intermodal infrastructure to the military. “It’s a good value to the taxpayers,” he said.
   'Last year, the administration had proposed to transfer MSP to the Defense Department. House Armed Services Committee Chairman Bob Stump, R-Ariz., said he was “pleased” that the administration backed down on this proposal.
   “This panel found absolutely no basis for the recommendation made by the administration last year,” Stump said. “Frankly, it lacked merit and no one could identify even one penny of cost savings.”
   The House Armed Services Committee also endorses reauthorization of MSP.
   “It strikes me that this panel put together a pretty good package in 1995 and I think we can do it again,” Stump said. “In that regard, I intend to set up a series of panel hearings as soon as we can get through the Defense Authorization conference — to at least start the process.”
   In its proposed fiscal 2003 budget, MarAd asked for $97.2 million for operations and training, up from $91 million in fiscal 2002. Schubert has been outspoken about his concerns on possible manpower shortages on U.S.-flag vessels, especially during times of war.
   MarAd asked for $11.1 million for ship disposal in fiscal 2003, which should cover about four ships. The agency has entered talks with the Navy and the Environmental Protection Agency about how best to dispose of 133 obsolete ships in the National Defense Reserve Fleet, of which about 20 pose a threat to the environment.
   A more troublesome area for the House Armed Services Committee was MarAd’s request for $4.1 million for its Title XI ship loan guarantee program, which is down from $36.9 million in 2002. Title XI program allows the private sector to make a loan at a lower interest rate in that the risk of default is borne by MarAd and ultimately by the Treasury.
   During 2000, Title XI helped cover the construction of 21 vessels, valued at more than $800 million. The agency has made about $40 million in loan guarantees so far in fiscal 2002. But the program has been stigmatized since American Classic Voyages, a heavy user of Title XI loans, filed for bankruptcy. It’s estimated that the default on loans by the company will exceed $367 million.
   However, members of the House Armed Services Committee want to preserve the Title XI program.
   “Over the years this program has helped sustain the shipbuilding industry in this country,” said Thomas H. Allen, D-Maine, ranking member of the committee. “I’m troubled that the administration wants to walk away from it.”
   “I recognize that we may have to make some legislative changes to assure the public that we can prevent some of the defaults that have occurred this year,” Stump said. “Maybe these defaults were not the result of problems with the legislation — but rather economic conditions and of course downturns after Sept. 11.”
   Last year, the administration recommended eliminating the Title XI program, but Congress did not follow this recommendation and provided $36.9 million for the program in fiscal 2002.