July 17, 2003

July 17, 2003 | WebMemo on Smart Growth

Istook Draws the Line on Amtrak

Under Representative Ernest Istook's (R-OK) leadership, the House Appropriations Subcommittee on Transportation passed an appropriations bill that limits Amtrak's FY 2004 federal subsidy to $560 million - about the same amount as it got in FY 2001.


While ardent fans of the failing rail system have vigorously attacked this insistence on fiscal responsibility, Istook is to be commended for rejecting Amtrak's perennial demands for escalating taxpayer subsidies to cover its worsening losses.


Amtrak's Worsening Performance
Representative John Olver (D-MA), ranking minority member of the subcommittee, says the Istook proposal would "strangle our national passenger rail." Less temperate were the remarks of Amtrak's new president, David Gunn, who said it is "physically, financially and legally impossible."


Gunn's complaint, however, should be seen for what it is: an attempt to shift blame for Amtrak's failure to improve under his leadership to a congressman who is simply demanding value for the taxpayer's money.


Gunn was once touted as Amtrak's no-nonsense savior, but during his brief tenure Amtrak's performance has gone from merely disastrous to catastrophic. Costs are still high and revenues are falling because Gunn has been unwilling to do the following:

  1. Cut back failing routes,
  2. Renegotiate costly union wage deals, and
  3. Partner with the private contractors.

With losses that doubled from $1 billion to a staggering $2.2 billion in the year Gunn took charge, Amtrak's financial performance seems likely to remain at the hemorrhage level this year as well.


For the first eight months of FY 2003, Amtrak's revenues are down substantially, reflecting a small decline in ridership even though fares have been slashed to fill seats to meet competition from lower airfares. So far this year, revenues on short-distance routes are down 6 percent on a 0.1 percent decline in passengers, while revenues on long-distance routes are off a whopping 17.7 percent on a 0.2 percent drop in passengers.


Worse yet has been the performance of the much-vaunted Acela, upon whose hoped-for success Amtrak bet the farm. During the first eight months of this fiscal year, Acela's ridership is down almost 16 percent, reflecting loss of market share to the airlines in the busy East Coast corridor.


Funding Failure?

As a consequence of these record-breaking losses, Amtrak is seeking record-breaking subsidies. Gunn says he needs $1.8 billion next year: Apparently the $1 billion Congress gave him for this year is no longer enough to maintain the poorly managed status quo. By asking for 80 percent more when the nation confronts pressing security needs and a $450 billion budget deficit, Gunn's money demands have the dubious distinction of being this year's most fiscally irresponsible request.


Representative Istook is to be commended for recognizing this and for standing up to the criticism and the threats. As he did last year, David Gunn is using the familiar ploy of hinting that he might have to shut down the system if he doesn't get his way.


Congress and the White House should show the same resolve as the subcommittee chairman and call Gunn's bluff. And if Gunn acts on his threat, they should withhold all federal subsidies until the Amtrak Board decides to install new, more fiscally responsible leadership.


Ronald D. Utt, Ph.D.,is Herbert and Joyce Morgan Senior Research Fellow in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

About the Author

Ronald D. Utt, Ph.D. Herbert and Joyce Morgan Senior Research Fellow

Related Issues: Smart Growth