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 mtrak
is again in the news. Part of the reason is that the Amtrak Reform
Council, of which I am a member, is releasing its congressionally
required "action plan" for a restructured and rationalized
intercity passenger-rail system. Another reason is that Amtrak has
just announced that, unless it gets another $1.2 billion in federal
subsidies, it will discontinue its long-distance train network and
lay off hundreds of employees. One can only hope that Congress and
the American taxpayer will dodge this bullet.
If there is
an Enron of the public sector, it is Amtrak. Created to be a profitable
company in 1971, it has received $44 billion in federal tax subsidies.
Congress was so concerned about its deteriorating financial performance
that it enacted the Amtrak Reform and Accountability Act (ARAA)
in 1997. Under this act, Amtrak was to wean itself off operating
subsidies, and was provided with a new "reform" board
of directors to do the job. Top management was changed. And, the
Amtrak Reform Council was established, with the purpose of monitoring
Amtrak performance and notifying the president and Congress should
it ever become clear that Amtrak was not going to meet the objective
of operational self-sustainability by 2002.
But there was
nothing more foreign to the new, reformed Amtrak than reform. Now,
instead of train services being run to serve constituencies of powerful
members of Congress, reform-board members got into the act. What,
for example, could possess any rational human being to believe that
a train from Meridian, Mississippi to Dallas was a high priority
for expansion of passenger-train service? Why not Opelika to Cleveland?
Amtrak conducted itself as if it were operating under the Amtrak
Business as Usual and Unaccountability Act. The company specifically
ignored congressional reforms that would have improved cost efficiency,
such as contracting-out services and using more efficient private
companies to provide some train services. Instead, Amtrak set about
to increase its revenues, apparently on the assumption that the
answer to every problem is more money. It went so far as to mortgage
Penn Station to pay its day-to-day operating expenses. For Amtrak,
the profit-and-loss statement has no expense side, just a revenue
side. And, while Amtrak increased its revenue somewhat, its costs
rose even faster.
This didn't
keep Amtrak from pretending that things were going well. Right up
to the September 11 terrorist attacks, Amtrak contended that it
was on a "glide path" to operational sustainability. Then,
Amtrak's strategy changed. September 11 created all sorts of new
demands for train services, or at least we were led to believe.
Then even pro-Amtrak reporters like Larry Sandler of the Milwaukee
Journal-Sentinel began to look more closely and found that Amtrak
ridership had not substantially increased. The Amtrak Reform Council
and everyone who cared to look more than casually knew that Amtrak
was in real trouble.
So it was in
October, that Amtrak Reform Council member Paul Weyrich tabled a
motion to make the finding that Amtrak would not achieve operational
self-sustainability. Under intense political pressure to not act,
the council made the finding by a 6-5 margin in November, with Milwaukee
Mayor John Norquist seconding the motion, which I was pleased to
support. Upon making the finding, ARC was required to publish an
action plan within 90 days.
The action
plan, which will be released February 7, would make it possible
to use competition to achieve a market-based cost structure. It
would separate the Northeast Corridor infrastructure from the rest
of the system, so that the unique requirements of that important
facility can be addressed outside the politics that have made it
more important to operate trains through Havre, Montana than to
undertake critically needed safety improvements that put hundreds
of thousands of daily commuters in peril in the New York area. The
plan also makes it possible to transfer service oversight for corridor
services to the states, which are inherently more responsive to
local needs than Washington's bureaucrats. But there are problems
with the plan too. It would extend the already overly generous labor
protections that require severance pay of up to five years. In this
environment, needed efficiencies cannot be achieved. And, it buys
onto the wrongheaded assumption that passenger-rail services are
an end in themselves. In fact, all intercity transportation operations
and infrastructure in this country, except for passenger rail, are
paid for by fees and charges on users. Amtrak should be no different.
Amtrak's recently
announced service cancellations and layoffs demonstrate that it
has learned little. Faced with obesity, Amtrak prefers to cut off
appendages rather than going on a diet. Amtrak's fundamental problem
is costs, not lack of revenues. Amtrak's revenue per passenger mile
is higher than that of either airlines or intercity buses. That
means that if Amtrak's costs were competitive with airlines and
buses, it would need no subsidy whatsoever. Yet, how often
do we hear Amtrak proponents rail on about costs? It is time to
focus on the problem, Amtrak's excessive costs.
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