Deteriorated Financial Condition and Costly Future Challenges Gao ID: T-RCED-94-145 March 23, 1994

Amtrak, which has always relied heavily on federal subsidies, has been under increasing pressure to reduce its dependence on federal money. Several indicators suggest that Amtrak's financial condition has deteriorated in recent years. Amtrak has dealt with its passenger revenues shortfall by increasing other revenues, such as those from its commuter rail business and shipments of U.S. mail, and by reducing expenses, including staff cuts and deterring maintenance on some routes. Over the next few years, Amtrak will face difficult and costly challenges that Amtrak must meet if it is to run a viable intercity network. These range from modernizing its locomotive and passenger rail fleet to negotiating new operating agreements with the freight railroads, which own about 97 percent of the track over which Amtrak operates. The President's proposed fiscal year 1995 budget for Amtrak of $987.6 million--a nine-percent increase over 1994--should help Amtrak address its growing operating deficit but will not resolve its short and long-term cost challenges. Only a handful of Amtrak's routes may ever generate enough revenue to cover all operating costs. Even in Europe, where economic conditions are more conducive to rail travel, intercity passenger service has required substantial public support. Amtrak and the federal and state governments must decide whether Amtrak is to continue its present course, expand into new areas such as high-speed rail service, or pare back its network to a few relatively well-traveled corridors where losses can be minimized.

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