Amtrak Expects to Need $1B in Annual Federal Funding for the Next Decade

Back in 2019 when the much reviled Richard Anderson was president of Amtrak, the nation’s passenger railroad talked a lot about how it was on the cusp of breaking even.

A budget estimate that Amtrak sent to Congress in March 2020 even predicted operating profits by 2025. Those profits were expected to grow over the next decade.

But that same month the COVID-19 pandemic took hold and the bottom fell out for Amtrak and other transportation providers.

America’s Railroad, as Amtrak likes to call itself, lost 97 percent of its ridership and Congress responded by providing Amtrak $3.7 billion in emergency funding in federal fiscal years 2020 and 2021 to stave off bankruptcy.

Although COVID-19 and its variants is still around, the pandemic fears have been waning and passengers are returning to the rails.

Amtrak now projects that it will reach pre-COVID ridership and revenue by FY2024, which begins Oct. 1, 2023.

Yet the passenger carrier’s most recent budget estimates submitted to Congress show a shift in the thinking of Amtrak management about its finances.

Gone are the rosy projections of operating profits. Those have been replaced with an acknowledgement that Amtrak will need federal funding of $1 billion a year over the next decade.

The Eno Center for Transportation has published an analysis of Amtrak’s latest budget estimates that provides an overview of how Amtrak sees its finances playing out in the next several years.

That analysis can be read at https://www.enotrans.org/article/amtrak-concedes-perpetual-1-billion-year-operating-losses/

From my perspective, the most interesting and important points in the analysis written by Jeff Davis are made toward the end because they hint at a coming battle in Congress that some rail passenger advocates may not see coming.

In the past several months Amtrak supporters have been talking up the benefits to intercity rail passenger service of the infusion of money from the Infrastructure Investment and Jobs Act.

The Rail Passengers Association has touted IIJA as an unprecedented if not a once in a lifetime $36 billion investment in passenger rail.

In talking about how transformative this funding will be, RPA has oversold what IIJA is likely to produce. That could be setting up some of its members for future shock.

There is, of course, some truth to the rhetoric being espoused by RPA and other rail passenger advocates. And to his credit RPA head Jim Mathews has hinted that the gains of IIJA could be more fragile than many of his members want to believe.

IIJA has created the potential for expansion of the nation’s rail passenger network. That in turn has led to expectations that have been fed by Amtrak itself proposing an expansive plan known as Amtrak ConnectsUS that would create more than 30 new corridor services.

But expectations are not reality nor do they always become reality.

It is true that the IIJA contains funding that could help launch some of those new services envisioned in Amtrak ConnectsUS.

But what some may not recognize unless they have paid close attention is that IIJA is a capital funding program. It provides not a dime for operating expenses of a single Amtrak train.

Those expenses will be paid for by ticket revenue, public money or both.

Now Amtrak has said that it will not make enough in ticket revenue to pay the expenses of its trains.

For most rail passenger advocates that is no big deal. They have long acknowledged that passenger trains need public funding and have sought to explain that away by saying that all forms of transportation are funded at some level with public funding.

There is some truth to that if you consider that the infrastructure used by airlines and bus companies is paid for in part with public money.

Airlines and bus companies will counter that they pay their “fair share” through user fees and taxes of the cost of that infrastructure, but that’s a debatable proposition that is at best a half truth.

The public funding of airline and bus operations does not stand out as a line item in a budget as does funding of Amtrak operations.

In his analysis, Davis makes a valid point in writing, “Amtrak can claim with some credibility that Congress, through the IIJA, chose to de-emphasize the issue of operating losses.”

He then makes a side-by-side comparison of what the federal code says about Amtrak operations before and after passage of the IIJA.

At first glance, those changes appear to put to rest the notion that Amtrak is expected to be profitable.

But read the language again. Whereas before passage of the IIJA Section  C of 49 U.S.C. §24101 said “Amtrak shall . . . use its best business judgment in acting to minimize United States Government subsidies . . .” the IIJA changed the phrasing to Amtrak shall “maximize the benefits of Federal investments.”

Nothing in the federal code requires Congress to spend money on intercity rail passenger service at all. Likewise, the federal code does not require Congress to spend whatever it takes to maintain the existing Amtrak network forever let alone spend money to expand that network.

That is a significant point because the debate in Congress is not so much about whether Amtrak trains lose money – even if some members try to frame it that way – as it is how much to spend to underwrite those losses.

Since Amtrak’s inception in 1971, some members of Congress have sought to end federal funding of intercity rail passenger service if not put Amtrak out of business.

Those efforts have uniformly failed although at times Congress has reduced its financial support of Amtrak, which in turn led to the discontinuance of some routes and trains.

The last significant shrinkage of routes and services occurred in the early 2000s, the service suspensions that occurred during the COVID-19 pandemic notwithstanding.

It is also noteworthy that those early 2000s service reductions came as a coda to the last time Amtrak proposed major service expansions, many of which never occurred.

In the Eno analysis, Davis notes that when the IIJA was adopted deficit spending was not considered by a majority of members of Congress to be a problem because the nation was still recovering from the fallout of the COVID-19 pandemic.

But now the nation is facing large scale inflation and budget deficits are one factor that drives inflation.

If as many political pundits predict Republicans gain control of one or both chambers of Congress in the November elections Amtrak funding requests may face a more hostile environment.

It may be that federal law doesn’t require Amtrak trains to make a profit, but that means nothing to deficit hawks. It never has and it never will. They have beliefs about what is a legitimate purpose on which to spend public money and what is not. Intercity rail passenger service is among the latter.

And some Republicans have already signaled what they hope to do about Amtrak.

Rep. Rick Crawford (R-Arkansas) introduced the Returning Amtrak to Economic Sustainability Act, which calls for changing the language of 49 USC 24101 to replace  the word “modern in the phrase “intercity passenger and commuter rail passenger transportation” with “economically sustainable.”

The RATES act would also add the phrase “while ensuring route profitability proportional to the Federal share of investment” as well.

It is uncertain if the RATES Act would make it through a GOP-controlled Congress although it likely would receive a more favorable reception than it has in the current Congress controlled by Democrats.

But even if Democrats maintain control of Congress, lawmakers must still deal with the prospect of having to, as Davis put it, “either write the checks for the billion-per-year operating losses over the coming decade, or else use their annual platform to encourage (or require) Amtrak to pay attention to operating losses if they want to avoid writing those checks.”

That could easily lead to environments such as existed in the late 1970s, in the early 1980s and in the late 1990s when Amtrak budget cuts resulted in service reductions.

Rather than enjoying the fruits of a second passenger rail renaissance in which the nation’s passenger train network expands, passenger train advocates will be faced with fighting to save as much existing service as they can if not having to save Amtrak itself.

Amtrak’s budget projections are filled with figures that show how much money long-distance passenger trains lose per passenger.

Those numbers have been used in the past to argue in favor of reducing if not ending federal spending on passenger trains. Don’t be surprised if those arguments surface again.

Richard Anderson is unlikely to return as Amtrak’s president but the political climate could lead to another Amtrak CEO who thinks as Anderson did and behaves as Anderson did in taking aim at long-distance trains for reduction.

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