Amtrak Warns Of Major Cuts Without Gov. Subsidy

Amtrak president and CEO George Warrington said the rail line will furlough 1,000 employees, defer $285 million in spending and may terminate most of its routes in October if Congress fails to put the company "on a solid foundation for the future."

Warrington said Amtrak needs a $1.2 billion subsidy from Congress in fiscal 2003, which begins Oct. 1. 2002, just to keep operating. The company in fiscal year 2002 received $521 million.

"Everyone knows that you can't make a profit while running a network of unprofitable trains, but that is exactly what we're expected to do," Warrington said. He pointed to the recession, Sept. 11 and the recommendation by the Amtrak Reform Council that the company be broken up, as reasons for "new uncertainties in our business." He added, "Policymakers need to decide what kind of passenger rail system America needs, how much the system requires in capital and operating support and how the government will pay for the system."

Warrington said the personnel cuts and spending deferrals are necessary to counter $120 million in less-than-anticipated revenue in 2001-2002 due to the recession, a loss of $52 million in financing as a result of the Amtrak Reform Council's recommendation, additional security costs since Sept. 11 and other factors.

Of the $285 million, $175 million will come from deferred capital investments, including equipment refurbishment and overhauls, capacity and reliability improvements, as well as technology, station and facility upgrades, he said. Further, a reduction of $110 million in operating expenses will be accomplished through several measures, including the loss of 1,000 personnel. In addition, the company will freeze or reduce spending in hiring, travel, vehicles, discretionary training, marketing and advertising, computers, materials and supplies.

Warrington said the $1.2 billion budget request for next year will cover $840 million in basic and mandatory capital investments, $200 million to subsidize unprofitable long-distance service and $160 million to cover excess railroad retirement taxes. He added that this still would be insufficient to address the system's $5.8 billion capital investment backlog, improve service or reduce trip times.

Expecting that numerous routes will be eliminated on Oct. 1 due to a revenue shortfall, Warrington said he will give the legally required six-month notice of route reductions on March 29.

Separately, the U.S. Department of Transportation's Inspector General has issued a report stating that Amtrak has run out of time to implement the kind of financial improvements needed to meet the year-end deadline to end its federal operating subsidies. In a new report to DOT secretary Norman Mineta, IG Ken Mead said that since Amtrak received its mandate in 1997 to become operationally self-sufficient at the end of this year, the rail line has "significantly improved" passenger revenues and ridership.

However, Mead said Amtrak "has not been successful in slowing its expense growth." He stated that Amtrak is "no closer to operating self-sufficiently now than it was in 1997." Further, Mead said Amtrak "will face a formidable challenge in 2002 just managing its cash revenues, be they from operating revenues or federal subsidies, to make ends meet without further borrowing." According to Mead, for every $1 Amtrak has realized in additional revenue, cash expenses have increased by $1.05.