Amtrak Issues in the 108th Congress

Amtrak Issues in the 108th Congress

Order Code RL31743
Report for Congress
Received through the CRS Web
Amtrak Issues
in the 108th Congress
Updated February 20, 2003
D. Randall Peterman
Analyst in Transportation
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

Amtrak Issues in the 108th Congress
Summary
Amtrak does not earn enough revenue, or receive enough assistance, to cover
its costs. As a result, Amtrak is regularly on the verge of insolvency. During the
period of its last authorization (FY1998-FY2002), Amtrak increased its passenger
revenues significantly, but its costs increased more than its revenues. Amtrak’s
authorization expired in September 2002. The 107th Congress failed to agree on
reauthorization legislation, so Amtrak reauthorization is still pending.
Amtrak estimated that it needed a minimum of $1.2 billion in FY2003; its
president, David Gunn, said that if its appropriation was much less than that, the
corporation would have to shut down before the fiscal year ends. Congress provided
$1.05 billion (minus a 0.65% across the board cut) plus a $105 million loan
repayment extension (H.J.Res. 2, the FY2003 Omnibus Appropriations bill), which
Amtrak said should be sufficient. In a change of policy, Congress did not provide the
money directly to Amtrak, but to the Secretary of Transportation, who will allocate
the money to Amtrak quarterly through the grant-making process. Amtrak has also
said that it needs at least $2 billion annually for the next 5 years; the Administration
requested $900 million for FY2004.
Amtrak issues facing the 108th Congress include the following: how much
funding should Amtrak receive; should federal support be conditioned on Amtrak
being restructured; should Amtrak be restructured, and if so, how; should Amtrak
eliminate some or all of its long-distance trains; should Congress support
development of high-speed rail; should states play a larger role in funding Amtrak;
should Amtrak be privatized; and should Amtrak be liquidated.
The Administration has presented a set of principles for Amtrak restructuring,
and has said it would not support significant funding for Amtrak unless it was
restructured in accordance with those principles. They include elimination of federal
operating support, separating ownership of the Northeast Corridor infrastructure from
train operations, introducing competition for certain routes, and sharing responsibility
for passenger rail capital financing between the Federal government and the states.
Senator Hollings, ranking member on Amtrak’s Senate authorizing committee,
has introduced S. 104, the National Defense Rail Act. It would authorize $2.7 billion
annually for Amtrak in its current form; it also proposes $1.55 billion annually for
grants to states for high-speed rail planning and implementation.
Senator McCain, chairman of Amtrak’s Senate authorizing committee,
introduced S. 1958 in the 107th Congress. While this bill is no longer active, it
contained several ideas that may reappear in Amtrak’s reauthorization debate. These
include: separating Amtrak’s operations, maintenance and infrastructure; phasing out
federal operating support for Amtrak; privatizing Amtrak; franchising rail passenger
service routes; federal-state matching funding for rail capital improvements; and
allowing states to use Highway Trust Funds for rail passenger service. This report
will be updated as warranted by events.

Contents
FY2003 Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Amtrak’s Financial Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Amtrak’s Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Amtrak’s Previous Reauthorization: The Amtrak Reform and
Accountability Act of 1997 (P.L. 107-134) . . . . . . . . . . . . . . . . . . . . . 4
Reauthorization Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Reauthorization Issues and Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Status Quo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Eliminate Amtrak’s Long-Distance Service . . . . . . . . . . . . . . . . . . . . . 8
Implement High-Speed Rail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Separate Amtrak’s Infrastructure From Operations . . . . . . . . . . . . . . . 10
Privatize Amtrak . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Liquidate Amtrak . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
List of Tables
Table 1: Amtrak’s Recent Financial Performance . . . . . . . . . . . . . . . . . . . . . . . . . 3
Table 2: Distribution of Amtrak Ridership, FY2002 . . . . . . . . . . . . . . . . . . . . . . . 9

Amtrak Issues in the 108th Congress
Amtrak does not earn enough revenue, or receive enough assistance, to cover
its operating costs and capital needs. As a result, Amtrak is regularly on the verge
of insolvency. Congress will likely confront a number of issues connected with
Amtrak in the 108th Congress as it considers various funding proposals as well as
reauthorization of the passenger rail system. These include the appropriate level of
federal funding for passenger rail, and how that funding, if any, should be provided
and to whom; the advisability of developing the federally-designated high-speed rail
corridors, and how to fund them; and whether Amtrak should be restructured and if
so, how.
FY2003 Funding
Amtrak estimated that it needed a minimum of $1.2 billion in federal assistance
for FY2003 to maintain its existing level of service.1 Congress provided $1.05
billion2 in funding and postponed Amtrak’s repayment of a $105 million loan (H.J.
1 Amtrak says that amount will just cover basic capital investments (those required by law
or for safety and reliability), $840 million; the net operating loss from long-distance trains,
$200 million; and the cost of excess railroad retirement taxes paid into the Railroad
Retirement System, $160 million.
2 Congress provided $522 million for operating expenses, $295 million for Northeast
Corridor capital expenses, and $233 million for general capital improvements. Congress
also included a 0.65% across-the-board cut in H.J. Res. 2; that should reduce Amtrak’s
(continued...)

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Res. 2). However, in a change of policy, Congress did not provide the money
directly to Amtrak; rather, the money is provided to the Secretary of Transportation,
who is to allocate the money to Amtrak quarterly through the grant making process.
Congress also provided for tighter control over Amtrak’s activities by requiring
Amtrak to submit capital and operating plans to Congress and the Secretary that will
serve as the basis of Amtrak’s operations. Amtrak may not spend money on projects
not in the plans, and must submit changes to the plans to Congress, with justifications
for the changes. Amtrak will also have to follow DOT guidelines for reprogramming
funding (except for amounts under $10 million, and for transferring capital funds to
eligible operating expenses). Before the Secretary can release any money to Amtrak,
Amtrak must agree to continue to abide by provisions of the loan agreement of June
28, 2002, including financial reporting requirements and the identification of $100
million in cost saving options for 2003. The Secretary will have to vouch for the
accuracy of financial information Amtrak reports to Congress.
Congress also required Amtrak to develop a more uniform state cost-sharing
methodology for its short-distance trains. For its long-distance trains, each route
must seek funding through a grant application to the Secretary. Amtrak shall report
to the House and Senate Committees on Appropriations by April 1, 2003 on cost-
savings measures for long-distance trains; this report should include specific
estimates of savings in 2003 and over a 5-year period.
Amtrak’s Financial Status
Amtrak’s $1.2 billion budget request for FY2003 did not include any work on
its backlog of capital needs, estimated at $5.8 billion ($3.8 billion for infrastructure,
$1.1 billion for fleet, and $900 million for stations and facilities).3 To begin to
address those needs, Amtrak has estimated that it needs $2 billion in assistance
annually over the next 5 years.4 Over the last 5 years, Amtrak received an average
of $1.1 billion in federal assistance annually; it also increased its total debt by $3.1
billion, an average of $620 million annually. In total, Amtrak spent an average of
$1.7 billion a year more than it received in revenue during its last authorization
period, yet it still had to defer maintenance for lack of funding.
The goal of Amtrak’s last authorization bill was to produce an organization that
could function without federal operating subsidies. As Table 1 on page 2 shows,
Amtrak made no progress toward that goal over the last authorization period.
Since 1997, Amtrak’s performance improved by some measures: ridership grew
by 11% and passenger revenue increased by 26% (as of the end of 2001).5 Amtrak
2 (...continued)
appropriation to approximately $1.043 billion.
3 Amtrak, FY02-03 Business Plan/FY03 Legislative and Grant Request, February 15, 2002.
4 “Amtrak Needs $10 Billion Through FY ’08 to Fund Operations, NE Work, Gunn Says,”
Daily Report for Executives, Bureau of National Affairs, 15: January 23, 2003, A-13.
5 Office of the Inspector General, United States Department of Transportation, Amtrak’s
(continued...)

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introduced a new fast train, the Acela, on its Northeast Corridor (NEC, the line
between Washington, DC and Boston) which has increased Amtrak’s share of the air-
rail market between Washington DC and New York City from 38% to 62%.6 On the
other hand, Amtrak’s costs rose faster than its revenues, resulting in increasing, not
decreasing, financial losses. Nevertheless, Amtrak repeatedly told Congress that it
was on course to achieve the goal of operational self-sufficiency by December 2002.7
That pretense could not be maintained after the economic downturn and the
events of September 11, 2001 reduced travel in general. Amtrak admitted that it
would not meet the self-sufficiency requirement, and in fact needed additional federal
operating support just to survive FY2002. Congress provided the additional support
($205 million) as part of an emergency supplemental appropriation (P.L. 107-206,
July 24, 2002), but could not agree on Amtrak reauthorization during the 107th
Congress.
5 (...continued)
Performance, Budget, and Passenger Rail Service Issues, CC-2002-122, March 14, 2002.
6 This change was also due in part to the impact of September 11, 2001 on air transportation.
7 For example, George Warrington, Amtrak President, Testimony before House Committee
on Appropriations, Department of Transportation and Related Agencies Appropriations for
2001, Part 5, p.2.

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Table 1: Amtrak’s Recent Financial Performance
($ millions)
FY1997
FY1998
FY1999
FY2000
FY2001
FY2002
Amtrak Revenues
$1,674
$1,708
$1,834
$2,040
$2,203
$2,225
Amtrak Expenses
$2,470
$2,566
$2,743
$2,983
$3,277
$3,258
Operating Loss
$797
$860
$916
$944
$1,072
$1,033
Amtrak Total Debt and
Capital Lease Obligations
$1,737
$2,157
$2,449
$3,577
$4,628
$4,833
Government Assistance
Annual Federal
Appropriation
$843
$594
$609
$571
$521
$831
Total Federal Spending*
$1,006
$1,564
$1,081
$1,339
$573
$1,118
State Operating Assistance
$70
$83
$100
$112
$122
$126
*Total federal spending includes Taxpayer Relief Act funds received by Amtrak, as well as
supplemental appropriations.
Source: Amtrak Revenue, Expenses, Operating Loss and Debt, DOT Inspector General, 2001
Assessment of Amtrak’s Financial Performance and Requirements, CR-2002-075, January 24,
2002, except FY2002 Debt, DOT Inspector General, Top DOT Management Challenges,
January 21, 2003, PT-2003-012, and FY2002 Revenues, Expenses and Operating Loss, Amtrak
Monthly Performance Report to Congress, September 2002, YTD September 2002 Result
(unaudited); Federal Appropriation and Spending, Senate Report 107-224, Appropriations
Committee Report on FY2003 DOT Appropriations Bill, 103-104; State assistance, Amtrak
communication.
Amtrak’s Structure
When Congress created Amtrak in 1970 to preserve passenger rail service, it
created a corporation to provide passenger rail service over a route system chosen
by the Department of Transportation (DOT). Amtrak maintains and operates
passenger trains, but operates those trains over tracks that are mostly owned and
maintained by other companies–Amtrak owns only about 3% of its network (but that
section, the Northeast Corridor from Washington D.C. through New York City to
Boston, has the heaviest passenger traffic in the country). Amtrak operates both
short-distance (corridor) routes and long-distance routes; it operates both
conventional and high-speed trains, although the high-speed trains are available on
only one route in the country (the NEC). Amtrak operates some routes at no cost to
the states they serve while charging other states a portion of the cost of the trains that
serve those states. Amtrak loses money every year, and receives assistance from the
federal government to help make up those losses. Amtrak is required by statute to
operate a national network of passenger service.

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Amtrak’s Previous Reauthorization: The Amtrak Reform and
Accountability Act of 1997 (P.L. 107-134)
Amtrak was facing financial difficulties in the period leading up to its previous
reauthorization act, the Amtrak Reform and Accountability Act of 1997 (P.L. 105-
134). Amtrak’s authorization had expired in 1995. As an aid to the reauthorization
debate, the General Accounting Office (GAO) produced a comprehensive report in
1995, Financial and Operating Conditions Threaten Amtrak’s Long-Term Viability.8
GAO noted that Amtrak’s financial and operating conditions had declined steadily
since 1990, due in part to a slowing economy and increased competition from airline
fare sales. They concluded that it was unlikely that Amtrak could continue to operate
its current system without significant increases in funding from its current level
(FY1995 funding was $972 million). GAO noted that eliminating subsidies for
Amtrak and privatizing the railroad would reduce federal expenditures, but
considered it unlikely that any private firm would be willing to offer passenger rail
service, since none of Amtrak’s routes earned enough passenger revenue to cover all
its costs.
Congress was unable to agree on an Amtrak reauthorization bill in 1995 or
1996. In 1997 the House Committee on Transportation and Infrastructure created a
bipartisan Working Group on Intercity Rail; this group published a report, A New
Vision for America’s Passenger Rail, June 1997. The working group set 2 goals for
a restructured passenger rail system:
1.
provide safe, reliable, comfortable, convenient, and financially sound
passenger rail service in all densely populated corridors of the United
States that show declining air quality and presently, or potentially, traffic
congestion problems; and
2.
encourage public/private development of attractive overnight passenger
rail service, on a periodic basis, throughout regions of the nation with
significant cultural, historical, and scenic character (for example, a kind of
“rolling national park”).
These goals did not require that Amtrak provide passenger service across the nation,
which is how some people interpret the statutory requirement that Amtrak operate a
national passenger rail system. The report recommended placing passenger rail on
a financial basis similar to other transportation modes, with the federal government
contributing to infrastructure funding and other entities covering operating costs. To
facilitate that change, the report recommended dividing Amtrak’s infrastructure
responsibilities from its operating responsibilities; the infrastructure and capital
investment would be handled by a new federally-owned corporation (AmRail), while
Amtrak would provide passenger services. AmRail would be provided with a
dedicated funding source, though the report did not specify the source. Also, the
report recommended that over a period of time provision would be made by AmRail
for other operators to compete with Amtrak on particular routes or in particular
regions.
8 GAO/RCED-95-71, February 1995.

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Amtrak’s 1997 reauthorization act, which was signed into law on December 2,
1997, did not incorporate any of the major recommendations of the Working Group.
Congress left Amtrak intact, while making changes to enable Amtrak to operate more
efficiently, and providing Amtrak with more funding.9 Congress also required
Amtrak to operate without federal operating assistance by December 2002. Amtrak
was not able to achieve that goal, as was predicted by the GAO and the DOT’s Office
of the Inspector General soon after passage of the Act.10
In the Act, Congress initiated two sets of reports on Amtrak’s performance, one
by the Office of the Inspector General (OIG) of the DOT and one by the Amtrak
Reform Council, an organization created by the Act to review Amtrak management
and make recommendations for improvement. Since 1997, the OIG has issued four
annual reports assessing Amtrak’s financial performance and future financial
requirements. In the most recent of these reports,11 the OIG noted that Amtrak’s
operational performance had improved in several respects since 1997, but that its
financial performance had not; its costs had risen faster than its revenues, and its
operating loss and long-term debt increased significantly as a result. The OIG also
noted that Amtrak’s capital needs are estimated at $1-$1.5 billion annually, and those
needs are inherent in the passenger rail infrastructure, regardless of whether Amtrak
or some other entity or entities is providing passenger rail service.
In addition to requiring annual reports from the Amtrak Reform Council, the
Act also directed the Council to prepare “an action plan for a restructured and
rationalized national intercity rail passenger system” if it determined that Amtrak
would still require federal operating grants after FY2002.12 The Council published
two annual reports on Amtrak, in 2000 and 2001, and its restructuring plan in
February 2002.13
The Council’s plan proposed dividing Amtrak’s infrastructure responsibilities
from its passenger operations. The Council proposed three passenger rail entities:
9 The Act authorized $5.2 billion for Amtrak over FY1998-FY2002 (of which Amtrak was
appropriated $3.0 billion); it also enabled Amtrak to receive another $2.2 billion which had
been provided to Amtrak, contingent on passage of an Amtrak reform bill, through the
Taxpayer Relief Act of 1997 (P.L. 105-34).
10 “As currently structured, Amtrak will continue to require federal capital and operating
support in fiscal year 2002 and well into the future.” General Accounting Office, Prospects
for Amtrak’s Financial Viability, GAO/RCED-98-211R, June 5, 1998, 4; “The bottom line
is that [Amtrak’s March 1998 Strategic Business Plan] would not achieve Amtrak’s
mandated goal of operating self-sufficiency by 2003.” Office of the Inspector General, U.S.
Department of Transportation, Summary Report on the Independent Assessment of Amtrak’s
Financial Needs through Fiscal Year 2002, #TR-1999-027, November 23, 1998, xii.
11 Office of the Inspector General, United States Department of Transportation, 2001
Assessment of Amtrak’s Financial Performance and Requirements, CR-2002-075, January
24, 2002.
12 P.L. 105-134, Sections 203 and 204.
13 Amtrak Reform Council, An Action Plan for the Restructuring and Rationalization of the
National Intercity Rail Passenger System, February 7, 2002. This and the other Council
reports are available at [www.amtrakreformcouncil.gov].

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an infrastructure organization, with dedicated federal funding, to manage the
Northeast Corridor; a passenger operations organization; and a federal passenger rail
policy and administrative organization which would contract with the other two
entities for services. The Council’s report recommended that, after a transition
period, the federal agency put some passenger operations up for competitive bid. The
report also recommended that rail passenger operations and infrastructure receive
stable and adequate funding, through a combination of federal and state sources.
Reauthorization Proposals
Amtrak’s 1997 authorization act expired in 2002. During its second session, the
107th Congress was not able to agree on reauthorization legislation. Two
reauthorization bills were introduced: the National Defense Rail Act (S. 1991) by
Senator Hollings, then-Chairman of the Senate Commerce Committee; and the Rail
Passenger Service Improvement Act (S. 1958) by Senator McCain, Chairman of the
Senate Commerce Committee in the 108th Congress. In addition, the Bush
Administration proposed a set of principles for restructuring Amtrak.14 Senator
Hollings introduced a new National Defense Rail Act bill in the 108th Congress.
While Senator McCain has not introduced an Amtrak reauthorization bill in the 108th
Congress, his Rail Passenger Service Improvement Act reflected some of the
elements of the Amtrak Reform Council’s restructuring plan, so it will be discussed
here. No bill has been introduced reflecting the Bush Administration’s principles,
but since the Administration is insisting on a restructuring of Amtrak, they will be
discussed here also.
The Bush Administration’s principles for restructuring Amtrak include
eliminating Federal operating support, separating ownership of the Northeast
Corridor infrastructure from train operations, introducing competition for certain
routes, and sharing responsibility for passenger rail capital financing between the
Federal government and the states. Some of these principles have been part of other
Amtrak reform proposals, and so will presumably be represented in Congress’
Amtrak reauthorization debate.
The Administration proposal supports an ongoing federal role in capital funding,
but suggests that the need for operating assistance can be eliminated by dropping
unprofitable routes and contracting out services to private bidders. However, the
history of passenger rail in this country and the experience of other countries provide
little evidence to suggest that a national system of passenger rail service in the United
States can survive without government assistance with operating costs.15
14 Statement of the Hon. Norman Y. Mineta, Secretary, U.S. Department of Transportation,
On the Future of Intercity Passenger Rail, June 20, 2002. Available at
[www.fra.dot.gov/public/speech/sp_mineta_intercityrail.htm].
15 General Accounting Office, Financial and Operating Conditions Threaten Amtrak’s
Long-Term Viability, February 1995, GAO/RCED-95-71, p. 10; Office of the Inspector
General, United States Department of Transportation, 2001 Assessment of Amtrak’s
Financial Performance and Requirements, January 24, 2002, CR-2002-075, p. iii.

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Senator Hollings reintroduced the National Defense Rail Act (S. 104), which
would reauthorize Amtrak in its current configuration, authorizing $2.2 billion
annually in capital funding, $550 million annually in operating assistance, and $1.55
billion annually to the DOT for high-speed rail planning and implementation grants
to states. This bill does not address the structural difficulties Amtrak faces, and
while its authorization levels might provide enough money to surmount those
difficulties, appropriations at those levels would represent a significant increase in
funding in a period of tight budgets.
Senator McCain introduced the Rail Passenger Service Improvement Act (S.
1958) during the 107th Congress. Its provisions incorporated elements of the of the
Amtrak Reform Council’s proposal, as well as other ideas: creation of a federal
agency to franchise rail service and manage capital improvements to the Northeast
Corridor; separation of Amtrak’s operations and infrastructure; elimination of routes
with net losses unless the losses are covered by states; appointment of an Amtrak
Control Board to enforce budget discipline; transfer of the Northeast Corridor to the
DOT; state contributions to the cost of Northeast Corridor improvements;
privatization of Amtrak; and flexibility for states to use Highway Trust Fund funds
for intercity rail passenger service (but not for the state match for a federally-assisted
project). S. 1958 authorized $500 million annually for Northeast Corridor capital
improvements, $400 million annually for capital grants for rail passenger service
improvement projects, and a reduction of operating support for Amtrak, from $400
million to $100 million, for a 4-year authorization period. While some NEC service
might survive, since the bill provides federal funding for NEC capital improvements,
and some state service might survive, since the bill allows states to use their Highway
Trust Fund apportionments for passenger rail, much of Amtrak’s current service
could disappear under this bill. The idea of letting states use Highway Trust Fund
monies for passenger rail faces opposition.16
Reauthorization Issues and Options
Key issues include (1) whether a federally-supported passenger rail system
should continue and if so, how to fund it in an equitable manner; (2) whether
passenger rail services should be improved by investing (through Amtrak or some
other means) in developing the federally-designated high-speed rail corridors; (3)
whether federal funding for Amtrak should continue, and if so, at what level; (4) if
federal funding is provided, whether it should include operating support or be limited
to capital improvements; and (5) whether Amtrak should be restructured and if so,
how. Numerous options for addressing these issues have been debated in various
forums; restructuring options include reducing Amtrak to a system of time-
competitive (i.e., short) routes where passenger demand is relatively high, splitting
Amtrak into two or more functional parts by separating its infrastructure from its
operations, privatizing some of Amtrak’s functions, or liquidating Amtrak. Some of
these options are capable of being combined.
Status Quo. Reauthorizing Amtrak in its current configuration would
continue its existing problems; reauthorizing its current configuration at status quo
16 Washington Letter on Transportation, 21:7, February 19, 2002.

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funding levels will also quickly lead to insolvency, according to Amtrak. Average
annual federal support for Amtrak during its last authorization period was around
$1.1 billion.17 At that level, Amtrak was able to introduce a new train, the Acela, but
only by increasing its long-term debt and postponing capital maintenance as well as
life-safety improvements.18 For FY2003 Amtrak says it needs at least $1.2 billion
just to continue current operations and perform critical infrastructure work (Congress
provided $1.15 billion, H.J. Res. 2), and $2 billion annually over the 5 years after
that. The Amtrak Reform Council and the DOT Inspector General have estimated
that Amtrak, as now structured, requires around $1.5 billion annually to maintain its
current level of services: around $500 million in operating support and $1 billion in
capital support.19 Even if $1.5 or $2 billion is provided annually, the problems of the
current policy structure would remain: the annual conflicts over Amtrak funding
levels and uncertainty about its funding through the annual appropriations process,
and the lack of federal incentives for states to invest in passenger rail, among others.
Eliminate Amtrak’s Long-Distance Service. One of Amtrak’s few
options for immediate reductions in costs is suspending its long-distance train
service. Amtrak estimates it could save $160-$210 million in the first year, and
eventually as much as $460 million annually, by discontinuing its 18 non-state-
supported long-distance routes.20 Amtrak estimates that up to 6,700 employees could
be laid off as a result of closing those routes (out of a total workforce of around
22,300).21
As Table 2 shows, most of Amtrak’s ridership is on a handful of its 40+ routes.
Its 18 long-distance routes carry fewer than 21% of its annual passengers22; in 2001,
they carried on average a passenger load less than 1/10th their capacity. Because the
ridership of those trains is so low, the deficit per passenger is very high–on some
routes, Amtrak loses over $200 for every passenger. Traversing long distances at
average speeds less than 60 miles per hour, those trains are not time-competitive with
other modes. These considerations have led many observers (for example, Ronald
17 Including Taxpayer Relief Act funds as well as annual appropriations.
18 “Life-safety improvements” refers to improvements to Amtrak-owned tunnels in the
Northeast Corridor, including improved emergency access, ventilation and communication
systems.
19 Office of the Inspector General, Department of Transportation, Amtrak’s Performance,
Budget and Passenger Rail Service Issues, March 14, 2002.
20 The cost savings in the first year would be partially offset by labor protection obligations
of $250-$300 million to employees adversely affected by route closures.
21 Amtrak, FY02-03 Business Plan/FY03 Legislative & Grant Request, February 15, 2002,
26-27.
22 Long-distance trains are included in “Intercity Total Ridership,” which also include short-
distance trains in the Midwest, so the percentage of Amtrak’s total ridership on all long-
distance trains was less than the 21% of Intercity ridership, since that ridership included all
Amtrak’s long-distance trains and some short-distance trains.

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Utt of the Heritage Foundation,23 and Joseph Vranich and Edward Hudgins of the
Cato Institute24) to propose that Amtrak eliminate its long-distance train service.
Table 2: Distribution of Amtrak Ridership, FY2002
Train(s)25
FY2002
Percentage of Total Amtrak
Ridership (000s)
National Ridership
NEC Total Ridership, all trains
13,834
59%
West Total Ridership, all trains
4,610
20%
Intercity Total Ridership, all trains
4,963
21%
Amtrak Total Ridership, all trains
23,407
100%
Source: Amtrak, Monthly Performance Report to Congress, September 2002, untitled
table showing FY2002 ridership by train, p. 5.
Defenders of Amtrak’s long-distance services (for example, the National
Association of Rail Passengers) note that current federal passenger rail policy
requires the operation of a national system.26 They also argue that the long-distance
trains are important because they serve regions of the country that otherwise are little
served by public transportation (for example, air travel), and then at high cost and
inconvenience (although intercity buses serve more communities than does intercity
rail). Some say that the long-distance trains are symbolically important to the
communities they serve, especially to small towns that have lost jobs and residents;
for these communities, Amtrak looms large because it represents a connection to the
rest of the country, and they do not want to lose that connection–even if it is little
used. Whatever their reasons, many communities value Amtrak service and press
Congress to get Amtrak service or keep their Amtrak service.
Some Members of Congress have said proposals to eliminate long-distance
trains would upset the political balance required for support of Amtrak. Most of
Amtrak’s capital spending goes to the Northeast Corridor, which also receives the
highest level of service; without the long-distance trains providing service to much
of the rest of the country, there would be little reason for other states to support
federal spending on Amtrak.27 And indeed several Members of Congress have
23 Ronald D. Utt, “Opportunities to Improve Passenger Rail Service,” Testimony before the
Senate Committee on Appropriations Transportation Subcommittee, March 7, 2002.
24 Joseph Vranich and Edward L. Hudgins, Help Passenger Rail by Privatizing Amtrak, Cato
Institute, Policy Analysis #419, November 1, 200.
25 Through FY2002, Amtrak divided its trains into three categories: NEC and West (short-
distance, or corridor trains), and Intercity (long-distance trains, plus corridor trains in
Midwest).
26 49 U.S.C. 24701.
27 U.S. Congress, House of Representatives, Committee on Transportation and
Infrastructure, Working Group on Intercity Passenger Rail, A New Vision for America’s
Passenger Rail, “Minority Statement,” June 1997.

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intimated that if the Amtrak trains through their districts were eliminated, they would
no longer support Amtrak funding.28
Some observers suggest the issue of political considerations in Amtrak’s
business decisions is Amtrak’s fundamental problem: with the single corporation
providing passenger rail service dependent on Congressional support for its survival,
it is (they say) necessarily managed more for political than economic success. To
address this, they advocate measures to insulate Amtrak from political interference:
for example, creating the equivalent of the federal military base-closing commission
to select Amtrak routes to discontinue. But as long as Amtrak is dependent on
federal funding, it cannot be insulated from political considerations.29
The Administration has not proposed eliminating long-distance routes per se,
but eliminating federal operating support for those routes. They would leave it to the
states to fund the operations of long-distance trains, if the states valued that service.
One difficulty with this proposal is that it would require currently cash-strapped
states to cooperate in funding trains that traverse many states, with no mechanism to
encourage all relevant states to cooperate.30
Implement High-Speed Rail. There is debate over the merits of high-speed
rail service in the United States, with its large area and relatively low population
densities. But even if a decision was made to develop high-speed–or even just
higher-speed–rail service, that long-term project would not address the basic problem
of Amtrak’s current physical or financial situation: it does not earn enough revenue,
or receive enough assistance, to cover the operating costs and capital needs of its
existing system. Of course, developing higher-speed rail infrastructure could be done
independently of Amtrak, and when that infrastructure was in place the service could
conceivably be provided by some entity other than Amtrak. But that would imply a
restructuring of the current federal passenger rail policy, which returns to the issues
around Amtrak reauthorization; some way of addressing those issues would seem
necessary before introducing an entirely new dimension of expense into passenger
rail policy. Finally, Congress would have to authorize additional billions to make
high-speed rail–or even higher-speed rail–a reality.
Separate Amtrak’s Infrastructure From Operations. Many, including
the House Transportation and Infrastructure Committee’s Working Group on
Intercity Passenger Rail, the Amtrak Reform Council, and the Bush Administration,
have proposed separating passenger rail operations from rail infrastructure
28 For example, Senator Kay Bailey Hutchison, in Machalaba, Daniel, “The Texas Eagle Fan
Club–This Amtrak Route Loses $1.70 for Every $1 in Revenue But It Has Powerful
Friends,” Wall Street Journal (Eastern Edition), January 16, 2003, B1.
29 Joseph H. Boardman, Commissioner of New York State Department of Transportation,
Successes and Failures of Amtrak and the Amtrak Reform and Accountability Act of 1997,
Testimony before the House Transportation and Infrastructure Committee, Subcommittee
on Railroads, March 6, 2002, p. 3.
30 The Interstate Highway Program, which faced a similar problem in getting states to
cooperate in funding multi-state transportation projects, provided a 90% federal match to
induce states to cooperate in funding the Interstate Highway system.

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investment and maintenance. They argue that this change would more closely align
passenger rail policy with other federal transportation mode policies; also that it
would support passenger rail by freeing Amtrak from the financial burden of
maintaining the Northeast Corridor. Also, since Amtrak often postpones
maintenance expenditures in order to cover operating losses, proponents argue that
this separation would promote proper maintenance of the Northeast Corridor
infrastructure–assuming that sufficient funding was provided. Estimates are that
properly maintaining the Northeast Corridor will cost a billion dollars or more a year,
in part to make up a multi-billion dollar backlog of deferred maintenance.31 Another
argument is that having the Northeast Corridor infrastructure under the control of
some other organization would protect the interests of other users of the Northeast
Corridor in the event of an Amtrak shutdown.
The issue of separating infrastructure from operations affects only a fraction of
Amtrak’s route network. On 97% of it, the infrastructure is already separated from
(passenger) operations, since the vast majority of the infrastructure over which
Amtrak operates is owned by freight railroad companies; Amtrak owns only about
740 of the 22,000 miles or so of track that its operates over. The primary
infrastructure Amtrak owns is the Northeast Corridor; it was given to Amtrak in 1976
out of the bankruptcy of northeastern railroads on the principle that the primary user
of the corridor should own it. Due to chronic financial problems, Amtrak has
underinvested in this corridor and in recent years has deferred even routine
maintenance. The Amtrak Reform Council argues that Amtrak is not even the
primary user of the Northeast Corridor; commuter agencies are responsible for more
than 90% of all train movements on the Corridor.32 However, Amtrak is the primary
user of the Corridor as a whole, and Amtrak requires higher maintenance standards
on the Corridor–because of its high-speed train service–than any of its other users.
The separation of Amtrak’s rail infrastructure from its operations would not, by
itself, save the Federal government any money; it would simply divide the current
expense of supporting passenger rail among two organizations, one for infrastructure
and one for operations. The Office of the Inspector General of the DOT notes that
the $1+ billion annual capital needs of the passenger rail infrastructure are inherent,
regardless of who is running the trains, and that the debate over how the
infrastructure should be administered is irrelevant without an assurance that adequate
capital funding is available for it.33 The Inspector General also notes a fundamental
conflict of interest between infrastructure maintenance and train operations–an
infrastructure company’s interest is to economize on track maintenance and
improvement costs, while an operating company’s interest is to have the track
31 Department of Transportation Inspector General, 2001 Assessment of Amtrak’s
Financial Performance and Requirements, CR-2002-075, January 24, 2002, p. iii.
32 Amtrak, FY02-03 Business Plan/FY03 Legislative & Grant Request, February 15, 2002,
p. 22, note 16.
33 Office of the Inspector General, United States Department of Transportation, Amtrak’s
Performance, Budget and Passenger Rail Service Issues, March 14, 2002, p. 5-6.

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maintained at a level that permits maximum operational performance.34 Some of the
most successful rail companies in the world–for example, the freight railroad
companies of the U.S. and the large passenger railroad companies of Japan–combine
responsibility for infrastructure and operations in the same firm, and Amtrak’s best
on-time performance comes on the routes whose infrastructure it owns. Conversely,
in 2002 Amtrak experienced several significant train derailments, all of which
occurred on track owned and maintained by other companies. Some critics of
separation–for example, Charles Moneypenny, the labor representative on the
Amtrak Reform Council35–have charged that the real purpose of separation is to
make it easier to privatize Amtrak; Vranich and Hudgins, of the Cato Institute, note
that separation should make privatization, which they support, easier.36
Privatize Amtrak. While Amtrak’s revenues increased during the last few
years, its costs increased even more. Its trains are slow, often late, and often not in
good condition. The Bush Administration, among many others, points to Amtrak’s
need for operating assistance as evidence of its inefficiency. They say that companies
competing for contracts to offer rail service would operate more efficiently.
Suggestions by privatization advocates, such as the Amtrak Reform Council, range
from requiring Amtrak to contract out some of its support functions, to requiring
Amtrak to contract out the operation of some of its routes to other providers, to
requiring Amtrak to contract with some federal agency to provide passenger services
(as it does with local governments to operate commuter services), to abolishing
Amtrak and letting private providers bid for the operation of all routes.37 Having
Amtrak contract out the operation and maintenance of its trains would be a return to
its roots; in its early years, Amtrak contracted with other railroad companies to staff,
operate and maintain its trains.
Privatization advocates–for example, Robert Poole of the Reason
Foundation–note that other countries have seen improvements after privatizing their
passenger rail services38: in Britain, after privatization in the mid-1990s, the private
companies acquired new train cars and made other efforts to upgrade the standards
34 Ibid, p. 6.
35 Charles Moneypenny, “Dissenting Opinion”, in Amtrak Reform Council, An Action Plan
for the Restructuring and Rationalization of the National Intercity Rail Passenger System,
February 7, 2002, p. 75.
36Vranich and Hudgins, op. cit., p. 31.
37 At present, any would-be competitor would be at a disadvantage to Amtrak, because of
Amtrak’s statutory right to operate trains over the tracks of freight railroads at minimum
cost. To make competition for routes possible, Congress would either have to eliminate that
right (which would lead to higher costs for Amtrak over most of its routes), or extend that
right to other passenger rail service providers (an idea which is opposed by the freight
railroad companies–and which may pose questions of taking of property rights from the
freight railroad companies).
38 Robert W. Poole, Jr., Replacing Amtrak, Testimony before the Senate Committee on
Appropriations Subcommittee on Transportation, March 24, 1998.

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of service, and ridership in Britain increased by 25%39; Japan privatized its rail
service in the late 1980s, and now its private rail companies operate at a profit
(according to some privatization advocates); and Mexico has also been cited as a
country whose rail privatization has been successful.40
On closer examination, the lessons provided by these examples are more
complex. In Britain privatization of train operations seems to have produced
improvements in service, but not necessarily in financial performance. After
privatization, the British government had to provide subsidies to the private
companies operating trains, because they were not able to operate at a profit. The
plan was that the private train operating companies would become more efficient
with experience, so that the subsidies could be reduced over time. But the operating
companies have instead asked for an increase in their subsidies.41 According to a
report in the Financial Times newspaper, the private rail infrastructure company,
RailTrack, experienced cost overruns on track improvement projects that exceeded
any seen under British Rail before privatization.42
There is disagreement over the degree of government support for Japan’s now
privatized rail system, but more centrally, there is the question of comparability.
Japan is uniquely suited, geographically, for passenger rail–the main island is long
and narrow, with 100 million people living in a 900-mile corridor–and government
policies encourage rail ridership (owning a car in Japan is expensive; the rate of car
ownership is much lower than in the U.S.; and gasoline costs several dollars a gallon
there). As for the example of Mexico, the success of Mexico’s rail privatization has
been entirely in the realm of freight service; passenger rail services have been sharply
cut back.43 This suggests that for rail services that are potentially profitable–i.e.,
freight–privatization can help achieve that potential, but for rail services that may
have no profit potential–i.e., passenger service–privatization may not offer the
expected benefits.
Critics of privatization, including the National Association of Rail Passengers,
note that Amtrak exists because private rail companies could not make a profit on
passenger rail service, and wanted out of the money-losing business. Considering
that passenger rail service in the United States has run a deficit for over 50 years,
under both private and quasi-governmental management, they say Amtrak’s perpetual
need for operating assistance may have more to do with the fundamental economics
39 The Railway Forum, Factsheet #1: Britain’s Growing Railways, 13 January 2001.
Available at [www.railwayforum.com]
40William Rennicke, Vice-President, Mercer Management Consulting, Testimony before
the House Committee on Transportation and Infrastructure, Subcommittee on Railroads,
April 11, 2002.
41 “Making a Big Number Out of an Upgrade: France’s TGV High-Speed Line Costs Half
the Price of Britain’s Not Substantially Enhanced West Coast Line,” Financial Times, July
29, 2002, p. 4.
42 Ibid.
43“The Great Railway Sale,” Magazine of the NAFTA Marketplace,
[www.mexicobusiness.com/archives/nov97/railroad.html].

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of nationwide passenger rail service than with any failings of Amtrak.44 There is
undoubtedly room for improvement in Amtrak’s operations, but the best management
in the world would probably lose money operating Amtrak as it is currently
structured. The prospect of private interests funding the multi-billion improvements,
as well as ongoing maintenance, of the Northeast Corridor seems remote, unless they
were provided with financial assistance45–which would replicate the current system,
simply replacing Amtrak with another organization as the recipient of government
assistance for capital improvements. Railtrack, the company which bought Britain’s
rail infrastructure, went bankrupt because it was unable to attract enough private
capital to make the needed improvements to the tracks, and the British government
replaced it with a not-for-profit organization.
Privatizing Amtrak may or may not offer possibilities for reducing the costs of
passenger rail service in the long run, but it is not a solution to the immediate
financial difficulties of passenger rail. The Amtrak Reform Council, an advocate of
restructuring Amtrak, notes that other rail privatizations–for example, Conrail in the
U.S. and the national systems of Japan and Britain–took many years. They
recommend that in the meantime Amtrak receive enough funding to keep it intact,
so that any restructuring can take place in an orderly fashion.
Liquidate Amtrak. Some critics advocate liquidating Amtrak. They note that
Amtrak requires a billion dollars or more of federal funding annually for a service
that provides less than 1% of all passenger trips annually. The costs of an Amtrak
liquidation may be high, they say, but at least the nation could stop throwing good
money after bad.46
The GAO estimated that, as of December 2001, Amtrak had $44 billion in
outstanding liabilities, mostly owed to the U.S. government, against an uncertain
amount of assets, since the market value of Amtrak’s primary asset, the Northeast
Corridor, is unclear.47 But it is likely that Amtrak’s assets would not cover all the
claims even of secured creditors, leaving the claims of unsecured creditors–chiefly,
about $3.5 billion in labor protection payments due for job loss, and unpaid wages,
vacation pay, and sick leave, owed to Amtrak employees–likely to be unsatisfied.
GAO’s judgement is that the federal government would not be liable for those
debts.48
44For example, James Coston of the Amtrak Reform Council in his Concurring Opinion
on its Action Plan for the Restructuring and Rationalizing of the National Intercity
Passenger System (Appendix I:A).
45 Office of the Inspector General, United States Department of Transportation, Amtrak’s
Performance, Budget, and Passenger Rail Service Issues, CC-2002-122, March 14, 2002,
p. 6.
46 For example, Robert Samuelson, “Subsidized Nostalgia,” Washington Post, June 26,
2002, A25.
47 General Accounting Office, Potential Financial Issues in the Event that Amtrak
Undergoes Liquidation, GAO-02-871, September 2002.
48 Ibid, p. 20.

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In addition, an Amtrak liquidation would impose costs on the Railroad
Retirement and Unemployment System. It would lose the $428 million annually paid
by Amtrak into the retirement system, leading to higher charges on the remaining
railroad companies or reduced benefits, as well as $344 million paid out in
unemployment benefits to Amtrak employees over the next couple of years, which
would deplete the unemployment account and require higher contributions from the
remaining railroad companies to make up that loss.
GAO notes that Amtrak estimates increased operating and capital costs of up to
$600 million annually on commuter and freight railroads as a result of an Amtrak
liquidation.49 There would also be the cost of lost service to the 60,000 or so
passengers who ride Amtrak trains every day, particularly in the NEC, where Amtrak
represents over 60% of the common carrier market between Washington D.C. and
New York City.
In addition, one significant aspect of liquidating Amtrak is that control over
Amtrak would shift from the corporation itself and Congress to the Bankruptcy Court
and the trustee it appoints. It is not clear how an Amtrak bankruptcy would unfold:
while Amtrak’s President talks firmly of shutting the company down, “bankruptcy
law seeks, among other things, to protect the public interest in maintaining continued
rail service.”50 Moreover, only one large railroad has been liquidated as a result of
bankruptcy in the past 25 years, so there has been little recent experience with this
option.
Finally, there is the question of what, if anything, would replace Amtrak. While
passenger rail provides less than 1% of all passenger trips annually, that figure
obscures regional differences in usage: in some parts of the country, passenger rail
service is virtually nonexistent, while in other areas, it is an important component of
the transportation network. About 64,000 people ride Amtrak trains every day; about
30,000 of them on Northeast Corridor trains, so there is a significant demand for
passenger rail service along the Northeast Corridor and in a few other areas. But
even if service were provided by a fully-privatized successor to Amtrak, that
successor would be subject to the Railway Labor Act and other relevant statutes, and
would presumably have to contribute to the Railroad Retirement and Unemployment
System; in other words, even a private passenger rail service organization would face
many of the same costs as Amtrak. As a result, some level of federal financial
support may have to be provided to make that service feasible51–as has been the case
in Britain. So liquidating Amtrak may not necessarily get the federal government out
of the passenger rail business. However, liquidating Amtrak might lead to a rail
passenger service system significantly different than the current system.
49 GAO acknowledged increased costs to commuter and freight railroads, but did not fully
quantify them.
50 GAO, op. cit, 2. See also CRS Report RL31550, Railroad Reorganization under the U.S.
Bankruptcy Code: Implications of a Filing by Amtrak, by Robin Jeweler, August 26, 2002.
51 JayEtta Z. Hecker, Director, Physical Infrastructure Issues, General Accounting Office,
Intercity Passenger Rail: Congress Faces Critical Decisions in Developing a National
Policy, Testimony before Subcommittee on Railroads, Committee on Transportation and
Infrastructure, House of Representatives, April 11, 2002, GAO-02-522T, 2.

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Conclusion
Congress faces difficult choices in dealing with Amtrak. A policy stalemate has
maintained the status quo for a long time, but Amtrak’s growing financial difficulties
make that status quo much more expensive, and the Administration is insisting on
some sort of restructuring of Amtrak. Options exist, but each option involves a cost
to some stakeholder in the system. Amtrak has a new president, but even the best
management cannot erase the structural difficulties passenger rail service faces.
Without some change in federal passenger rail policy, Amtrak will continue to
require financial support on a scale Congress has been reluctant to provide.