The Amtrak Funding Debate:Why Amtrak Should Continue to Receive Federal Subsidies
The Amtrak Funding Debate:
Why Amtrak Should Continue To
Receive Federal Subsidies
Adam R. Schott
Amtrak Funding Debate 2
In February 2005, President George W. Bush announced that his Fiscal Year 2006
Budget for the United States would include no funding for Amtrak - the only intercity
passenger railroad in the nation. This paper will analyze the implications of eliminating
federal subsidization of Amtrak from the perspective of the business-government-society
Amtrak’s official name is the National Railroad Passenger Corporation; it was
created by Congress in 1970 “to take over the money-losing passenger rail service
previously operated by private freight railroad companies” (Amtrak Website, 2005). The
idea was that “it would rapidly become a for-profit, self-sustaining entity” (“No Way to
Run a Railroad”, 2005). In its thirty-year life, Amtrak has received over $30 billion in
federal subsidies, compared to $1.89 trillion to air and highway modes. Amtrak is
dependent on these subsidies and “is constantly threatened by under-investment, lack of a
clearly articulated federal rail policy, and an uncertain future” (Amtrak Website, 2005).
Business – Government Relationship
No intercity passenger rail system in the world operates without some form of
government subsidization (Amtrak Website, 2005). European passenger rail systems,
though much smaller, receive much more government support. The British government
invests over $14.5 billion in the British Rail System (“The Amtrak Funding Scandal”,
2005). The most Amtrak has ever received from the government is $1.6 billion in fiscal
years 1998 through 2000 (“No Way to Run a Railroad”, 2005). See Appendix A
Amtrak Funding Debate 3
Congress created the National Railroad Passenger Corporation to ensure that there
would be an intercity passenger railroad; yet it does not commit the necessary resources to
allow it to succeed. Now the President wants t intentionally send it into bankruptcy.
As Sarkar states, “federal subsidies account for $1.2 billion of Amtrak’s overall
budget of $3 billion this fiscal year. Without it, the company – already saddled with $3.8
billion in debt – would be forced into bankruptcy, leaving courts to decide how to
restructure it” (2005).
President Bush and Norman Y. Mineta, the United States Secretary of
Transportation, allege that Amtrak has not made significant progress towards financial
independence and stability and has not kept up with the times (Mineta, 2005). In Railway
Age, Mineta is quoted as calling the zero-funding proposal “a wake-up call” for Congress
to address a system that “cannot even support the existing service, much less expand in the
way that it needs to.” He also said that Amtrak is “dying, and everyone knows it”
(“Amtrak under siege”, 2005).
In his February 2005 Annual Report to Congress, David M. Laney, the Chairman of
the Board of Directors of the National Railroad Passenger Corporation, rebuts that Amtrak
has made significant progress in recent years.
Under the leadership of David Gunn, Amtrak is finally headed toward greater
financial independence and profitability. Since May 2002, when he took over as President
and CEO of Amtrak, Gunn has made the following changes:
The development of accounting and financial reporting systems
A reduction in personnel by almost 5,000
The development of a detailed and prioritized five-year capital plan focused
on restoring the Northeast Corridor to necessary levels of reliability and
safety, and on restoration of an aging fleet of rolling stock used throughout
Termination of the mail and express operatio n
Elimination or truncation of three long-distance routes
Amtrak Funding Debate 4
No new borrowings, and the scheduled repayment of the $100 million
Department of Transportation loan over a five year period begun in 2004
Increased ridership from 22.5 million in 2000 to 25.1 million in 2004
Containment of the cash operating requirement at or below $570 million
Laney also points out that sending Amtrak into bankruptcy will have the exact
opposite effect that Bush and Mineta desire. He states:
Needed reforms will likely result in higher front-end restructuring costs.
(Route elimination, for instance, will often incur substantially greater labor-
related costs in the early years than would route continuation; but such costs
can be carefully phased and managed.) And for passenger rail to have any
chance of succeeding under Amtrak’s auspices or in others’ hands,
legislative action is essential to remove constraints that will otherwise
permanently undercut its performance in an increasingly competitive
Progress at Amtrak
The five-year capital investment program has been instrumental in reducing
operating costs and making Amtrak more efficient and is the key to Amtrak’s future
progress; but it cannot continue without adequate funding. The following excerpts from
David L. Gunn’s memo to David M. Laney highlight how the plan has Amtrak heading on
the track to success:
The capital program is grounded in a “production line” approach to ensure
plant and equipment are rebuilt making the most efficient use of labor and
materials, rather than the previous approach of repairing assets as they fail. In
spite of the challenges inherent in ramping up such a program from essentially
nothing and with less federal funding than needed to meet the plan, we have
made steady progress in rebuilding plant and equipment …
…Amtrak has contained its operating costs and operating cash subsidy
requirements for two straight years – in spite of inflationary pressures in health
care, fuel prices and other areas. In fact, our core operating expenses were
slightly lower in FY04 than they were in FY00. We have done this while
covering over $250 million per year in debt service from earlier borrowing and
without assuming any new debt…
Amtrak’s decision to exit the mail and express business … removed a number
of road locomotives and switch engines from service, thus lowering
maintenance costs. (2005)
Amtrak Funding Debate 5
National Outcry: The Government – Society Relationship
The Bush Administration plans on reintroducing the Passenger Rail Investment
Reform Act, which Congress voted down in 2003 (“Amtrak under siege”, 2005). This act
transfers Amtrak funding from the federal government to the states. Under the plan, the
federal government would help out state governments – up to 50% of the funding – but
only to states that come up with their share (“Amtrak under siege”, 2005).
Senators from all over the nation are outraged at the Bush Administration’s Amtrak
plans. Senator Dick Durbin of Illinois told the Chicago Tribune “The most basic inquiry
would have told the Administration that the State of Illinois is not in a position to pickup
the subsidy of Amtrak: (“Amtrak under siege”, 2005). New Jersey Senator Frank
Lautenberg decried “President Bush is willing to spend billions to send a couple of people
to Mars, but not one dime for Amtrak’s 25 million annual travelers, who want better rail
service to destinations on this planet” (“Amtrak under siege”, 2005).
Minnesota Representative Jim Oberstar said of the budget: “Never have I seen one
so harsh or crass as this…It would cause widespread disruption and hardship” (“US
Senators Robert Byrd, Hillary Clinton, Edward M. Kennedy, and John F. Kennedy
co-sponsored an amendment to the 2006 budget bill that would provide Amtrak with $1.4
billion to save it from bankruptcy (“Senator Clinton”, 2005 / Wirzbicki, 2005).
Unfortunately the amendment failed in a 52-46 vote (Bush, 2005). It is now up to the
House of Representatives to restore this crucial funding.
Amtrak Funding Debate 6
Business – Society Relationship
Amtrak provides a valuable service to many states and communities. The railroad
provides jobs and tourist revenue to the cities it serves. It also allows citizens to travel from
city-to-city for much less than an airline and in less time than a bus service.
Over twenty-five million passengers rode on Amtrak in 2003 and 2004.
Approximately sixty-eight thousand passengers travel on Amtrak daily (Amtrak Website).
Appendix B shows how many people used the twenty busiest Amtrak stations in fiscal year
Senator Hillary Clinton points out that losing Amtrak would have a devastating
effect on New York. “Amtrak is an essential component of our transportation network that
provides irreplaceable capacity and mobility to New York and the nation. / Slashing
Amtrak’s federal funding would eliminate critical rail service to millions of New Yorkers
and others who ride our rails. It would throw our commuter rail lines into chaos and would
have catastrophic economic consequences for the state and the region” (“Senator Clinton”,
Massachusetts residents are also concerned about the fate of Amtrak - they depend
on the high-speed Acella Express for travel to New York and Washington (Ross, 2005).
As Ross states: “Despite troubles with delays, millions of people use the services every
year and would be forced to rely on increasingly crowded buses and air travel” (2005).
Losing Amtrak in California would undermine the economies that have been built
around the stations that serve 9.3 million passengers a year (Sarkar, 2005).
Amtrak’s growth is not just in the major cities “but also on long-distance trains that
serve hundreds of cities and rural communities” (Parcells, 2005)
Amtrak Funding Debate 7
According to the Louisiana Association of Railroad Passengers, “Amtrak employed
a total of 363 Louisiana residents and 102 Mississippi residents over the course of the year,
with a payroll of $18,804,934, while spending a total of $5 million for Louisiana and
Mississippi goods and services” (“La. rail passenger group”, 2005). If Amtrak is forced
into bankruptcy these jobs, and the revenue generated as a result of rail travel in
Mississippi and Louisiana will likely be lost.
Eliminating federal funding for Amtrak would severely hurt communities in
Arkansas, Louisiana, and Mississippi. Arkansas Representative Marion Berry states that
“Infrastructure is the lifeblood of rural America. We cannot expect to eliminate
transportation options for growing areas of this country and expect their economies to
continue to expand” (“Proposed Cut”, 2005).
The job of the federal government is “to promote the general Welfare”
(Constitution of the United States of America, Preamble, 1787) – that is, to ensure that the
needs of its citizens are met. In the case of intercity rail transit this is done through the
National Railroad Passenger Corporation, a government agency that took over for private
railroads that were losing money. Congress had hoped that Amtrak could be completely
privatized but this is not the case: It depends on government subsidies to continue
The job of private business is to make a profit, to increase shareholder wealth, and
to act in the best interest of stakeholders. There is no privately owned intercity passenger
railroad system any more because none could be operated profitably.
It is very clear that this country needs a national intercity rail system. If the federal
government does cut all funding for Amtrak, it will not be serving the best interests of its
citizens and will jeopardize the welfare of many communities and regions.
Amtrak Funding Debate 8
As Liz Boyd, spokeswoman for Michigan Governor Jennifer Granholm, states “our
hope is that Congress would also recognize the economic and quality-of-life value of
interstate rail” (Heming, 2005). It is very doubtful that a private business will take over
intercity passenger rail service should Amtrak disappear. Congress must commit to
funding Amtrak – it is the socially responsible thing to do.
Amtrak Funding Debate 9
(Graph taken from “No Way To Run A Railroad)
Amtrak Funding Debate 10
Top Twenty Busiest Amtrak Stations, 2004
Rank Code City/Station Boardings Alightings Total
1 NYP New York, NY 4,367,553 4,356,679 8,724,232
2 WAS Washington, DC 1,888,459 1,856,251 3,744,710
3 PHL Philadelphia, PA 1,844,887 1,845,733 3,690,620
4 CHI Chicago, IL 1,179,955 1,166,793 2,346,748
5 NWK Newark, NJ 684,050 693,004 1,377,054
6 LAX Los Angeles, CA 644,845 641,077 1,285,922
7 TRE Trenton, NJ 499,399 519,388 1,108,787
8 BOS Boston, MA 488,912 498,000 986,912
9 PJC Princeton Jct., NJ 449,608 482,653 932,261
10 BAL Baltimore, MD 455,059 463,565 918,624
11 SAC Sacramento, CA 443,827 427,571 871,398
12 SAN San Diego, CA 398,720 381,575 780,295
13 WIL Wilmington, DE 372,104 376,275 748,379
14 ALB Albany-Rensselaer, NY 323,160 325,579 648,739
15 NHV New Haven, CT 309,268 308,370 617,638
16 BWI BWI Airport, MD 296,466 293,854 590,610
17 SEA Seattle, WA 299,466 290,575 590,610
18 PVD Providence, RI 239,209 245,305 484,514
19 IRV Irvine, CA 236,090 238,035 474,125
20 EMY Emeryville, CA 237,766 233,545 471,311
(Source: Amtrak Website)
Amtrak Funding Debate 11
“Amtrak: Background & Facts.” Amtrak Website. Accessed 28 March, 2005.
“Amtrak Facts.” Amtrak Website. <http://www.amtrak.com> Accessed 28 March, 2005.
“The Amtrak Funding Scandal.” The Travel Insider.
<http://www.thetravelinsider.info/2002/0628.htm> Accessed 6 April, 2005
“Amtrak Under Siege – Again.” Railway Age. March 2005, 19.
Bush, Rudolf. “Senate Blocks $1 Billion To Fund Amtrak.” Chicago Tribune. 17 Mar.
2005 <http://www.chicagotribune.com/news/nationworld/>. Accessed 4/9/2005.
Heming, Julia. “Bush wants to shift Amtrak funding to states.” The Michigan Daily. 22
Feb. 2005. <http://www.michigandaily.com> Accessed 25 Mar. 2005.
“La. rail passenger group aims to halt Amtrak cuts.” BizNewOrleans:News.
<http://bizneworleans.com/109+M5 b0cc37a0dd.html> Accessed 8 April 2005.
Laney, David M. “Annual Report to Congress”. 17 Feb. 2005.
Mineta, Norman Y. “Starving Amtrak to Save It.” The New York Times. 23 Feb. 2005.
“No Way to Run a Railroad” The Wall Street Journal. 10 Feb. 2005. A12
“Unfairly, Amtrak Is Held to a Different Standard.” The Wall Street Journal. 23 Feb. 2005.
“Proposed Cut In US Funding For Amtrak Draws Arkansas Ire.” The Wall Street Journal
Online. 8 Feb. 2005.
Accessed 25 Feb. 2005
Ross, Casey. “Bush plan off track: Cuts may derail Amtrak.” BostonHerald.com. 24 Feb.
Accessed 25 Feb. 2005.
Sarkar, Pia. “Riding the rails: Amtrak has its fans, but Bush wants to cut the budget again.”
San Francisco Chronicle. 25 Feb. 2005. <http://www.sfgate.com/cgi-
bin/article.cgi?f=/c/a/2005/02/05/BUGJUBGM861.DTL> Accessed 25 Feb. 2005.
“Senator Clinton Co-Sponsors Legislation to Help Save Amtrak.” Senator Hillary Rodham
Clinton Website. <http://clinton.senate.gov/~clinton/news/2005/2005315C10.html>
Accessed 7 April 2005
“US House Democrats Vow Fight To Protect Amtrak Funding.” The Wall Street Journal
Online. 8 Feb. 2005.
Accessed 25 Feb. 2005.
Wirzbicki, Alan. “Democrats’ bid to save Amtrak funding loses steam in Senate: Effort to
restore federal dollars fails by close vote:” The Boston Globe.
id_to_save_amtrak_funding_loses_steam_in_senate/> Accessed 6 Apr. 2005.