Testimony by Amtrak President George Warrington
Amtrak President and CEO George D. Warrington Testimony
Before the House Appropriations Subcommittee on Transportation
on Wednesday, February 28, 2002.
Mr. Chairman, thank you for the opportunity to appear before the Subcommittee
this morning. With your permission, I will submit for the record a copy of our
Business Plan and Legislative Grant Request, which was sent to Congress on
February 15. In my statement this morning, I will summarize the major points of
that document and how they relate to our FY03 needs.
Over the last few years, we have worked hard to manage the business within the
context of conflicting policy mandates. We have been expected to run a national
public service network, and drive toward commercial self-sufficiency, while also
coping with inadequate levels of federal capital investment. And many of our
key indicators have moved in the right direction. Since the start of 1997, we
have boosted ridership by 19 percent and overall revenues by 38 percent. We
have diversified our sources of revenue and forged more partnerships with the
states, commuter agencies and the private sector.
We have also worked very hard on the cost side. Over the last four years, a
substantial portion of cost growth has been attributable to depreciation - which
is a non-cash expense -- and interest, which is the result of inadequate federal
capital investment. Excluding depreciation, our costs have actually fallen over
the past year.
However, despite our best efforts and these tangible signs of progress, the
national passenger rail system has reached a critical crossroads. On top of the
long-term constraints that we were already dealing with, we have had to face
several short-term challenges beyond our control: the weakened economy;
September 11; and the Amtrak Reform Council's finding.
Once again, we have done everything we can through self-help to confront these
latest challenges. Last year as the recession began to take its toll, we
intensified our cost management effort, executing $258 million in expense
reductions. More recently, in response to rising security costs and the impact
of the ARC finding, we announced another $285 million in spending cuts and
capital investment deferrals. That's a combined total of $543 million in
spending cuts or capital deferrals over two fiscal years. So as you can see,
Mr. Chairman, we're running out of tools.
Going forward, the minimum federal funding that is needed to manage the
passenger rail network in FY03 - without route reduction, or adding to our
capital backlog or debt -- is $1.2 billion. An appropriation at this level
would cover the following needs:
· First, $160 million is needed to cover the cost of excess railroad retirement
payments - the amount of Amtrak payroll taxes that are contributed to the
industry retirement fund in excess of that paid out to Amtrak retirees. This
item is essentially a "pass through" responsibility that Amtrak has inherited,
and which is funded through the annual appropriations process.
· Second, $840 million is the minimum capital need for the current network, and
· Mandatory investments, such as environmental, life safety, ADA and debt
· Basic infrastructure investments to maintain current schedules and levels of
safety across the entire network; and
· Fleet overhauls and upgrades of facilities and technology to ensure efficient,
· And third, $200 million is needed to cover the net operating losses of
unprofitable long-distance trains. Please note that these are not the total
losses from running these trains -- this is what's left after internal
cross-subsidies from profitable routes and other lines of business.
As you examine our request, it is important to note that it does not cover three
items that are critical to the future of passenger rail in America:
· First, it does not cover any of the capital backlog that has developed over 30
years of under-investment. The current estimate of the capital backlog is about
$5.8 billion - of which $3.8 billion is for the Northeast Corridor
infrastructure and thus affects the capacity and reliability of commuter and
freight services, as well as Amtrak. One reason this is so high is because
Amtrak, over the last 31 years, on average, has received less than $325 million
a year for capital investment purposes. The DOT Inspector General has reported
that Amtrak needs at least $1 billion a year for capital investment. In short,
our grant request would help prevent the capital backlog from growing any larger
in 2003, but it would not reduce the backlog.
· Second, our request does not include any money for development of
higher-speed, higher-capacity corridors - which are sought by 38 states and
mayors and business leaders across America as an essential component of our
future transportation system. Preliminary estimates of the cost to develop the
11 federally designated high-speed corridors are in the range of $50 billion
over 20 years.
· Third, our FY03 request does not include funding for additional security
measures. Mr. Chairman, as you know, following the tragic events of September
11, we were asked to propose a package of safety and security investments. That
package, including infrastructure hardening, equipment security, and tunnel
safety improvements, totals about $1.5 billion - of which $105 million was
funded by the DOD appropriations act in December. Pending legislation to
address these issues includes S. 1550, the Rail Security Act of 2001. In order
to achieve a higher level of safety and security in the passenger rail system, I
encourage you and your colleagues to act as soon as possible on this or similar
legislation, and provide an adequate appropriation to back it up.
Each of these unmet needs - the capital backlog, high-speed corridors and
security -- are central to the future of transportation in America. These needs
should be addressed in Amtrak's upcoming reauthorization, and they will have an
impact on the system's future appropriation needs.
It's also important to understand that a $1.2 billion request is not
significantly higher than the total amount of federal appropriations in the
current fiscal year. In FY02, total federal funding for Amtrak was $939
million, not just $521 million as some have reported. The total figure
· 60 percent of our FY01 appropriation, which was deferred until the first day
of FY02 for budget scoring purposes ($313 million);
· 100 percent of our FY02 appropriations ($521 million);
· $100 million provided for life-safety upgrades of the New York City tunnels;
· $5 million provided for additional security after September 11.
While this level of funding might have been adequate for Amtrak's minimum needs
before unforeseen circumstances such as the economic slow-down, September 11,
and the November ARC finding, these recent events have had significant financial
impacts, and this is why we have had to defer capital investment, cut operating
expenses and cover some of our needs through private financing.
Another way of restating this issue is to recognize that if we are level-funded
in FY03 at $521 million, the entire appropriation would be consumed by excess
RRTA and mandatory capital investments - before even a single dollar is invested
in other capital needs, or in long-distance trains, or in modernization.
Mr. Chairman and members of the subcommittee, those are the highlights of our
FY03 request. I'd like to leave you with two additional, vital points.
First, by any standard, intercity passenger rail in this country has been
under-funded for decades. The GAO, the DOT Inspector General, international
comparisons all agree on this point. We have worked hard to maintain and
improve the current system, despite under-funding, by increasing revenues from
various sources and controlling discretionary spending. But as I have
explained, we simply cannot continue to manage the current system unless we
receive $1.2 billion in FY03. A lesser appropriation will require a series of
business plan actions that, depending on the shortfall, could include one or a
combination of steps such as deferring capital investment and eliminating
services. Since our FY03 funding level is uncertain, as a contingency, on March
29 we will regrettably provide the legally required 180-day cancellation notice
of possible service discontinuance to maintain flexibility as we construct our
budget for FY03. I hope we will not have to take capital deferral or service
elimination actions later this year, but I have to have this flexibility in the
face of uncertain funding levels.
Second, there is a critical need for Congress and the Administration to look
beyond the FY03 appropriations cycle and fix the underlying policy model for
passenger rail, which is clearly broken. Neither Amtrak nor any other entity
can operate unprofitable public service trains and be expected to generate a
commercial profit - particularly in the context of significant
undercapitalization. Yet that is exactly what we are required to do today.
Thus, we urge the Congress and the Administration -- working with governors,
mayors and all interested parties - to make Amtrak's reauthorization an urgent
priority this year. During that debate, we need to find the answers to three
§ First, what kind of intercity passenger rail system does America need and
§ Second, how much capital and operating support is required to support such a
§ And third, what will be the sustainable sources of government funding to meet
Until these questions are answered, any policy that relies primarily on
short-term business actions or structural reorganization and which does not
provide adequate or reliable funding sources will only perpetuate the current
Mr. Chairman, with the actions we have taken this year internally and the level
of funding requested in next year's budget, we will be able to maintain the
current level of services and give Congress time to adequately deal with the
fundamental issues that need to be addressed. However, it is important to
reiterate that we are running out of time.
As Congress moves forward with the reauthorization debate, I want to assure you
that we are prepared to inform that discussion and provide the expertise which
we have developed over the past 30 years of operating America's passenger rail
system. I want to assure you that we have given a significant amount of thought
to these questions. There is no doubt that we can build a national system of
rail passenger service which our nation can be proud of and one that will help
address our national transportation crisis. I know this won't be easy. I know
it will take time, but all of us at Amtrak are ready to roll up our sleeves and
get the job done.
That concludes my presentation; I'll be happy to answer questions.