February 1, 2006

White House backs off wholesale Amtrak budget cut

By John Crawley and Caren Bohan

WASHINGTON (Reuters) - The Bush administration is backing
off its push to cut all subsidies for Amtrak and plans to offer
some assistance for the struggling passenger railroad in the
upcoming budget, government sources say.

Administration officials declined to disclose the request
ahead of its announcement on the federal budget next week. But
congressional and other government sources familiar with the
funding process said the proposed Amtrak figure for fiscal 2007
would total $900 million, which was the amount proposed two
years ago.

Much of the money would be tightly controlled by
administration transportation planners, who would release
funding through grants when certain cost-saving goals or
business reforms are met.

An Amtrak spokesman declined to comment as did a spokesman
for the White House Office of Management and Budget.

Amtrak, created by Congress 35 years ago as a for-profit
corporation after private railroads gave up service, depends on
an annual subsidy to survive. Its operating losses have grown
to more than $1 billion over the past three years, prompting
pressure from budget and transportation planners for Amtrak to
eliminate unprofitable routes and change core business

But Congress has long been reluctant to cut Amtrak spending
because many members have constituents who benefit from train
service and jobs.

While Amtrak said in 2004 that $900 million would not be
enough to run the railroad, the proposal served as a starting
point for negotiations that eventually produced a $1.2 billion
subsidy for fiscal 2005.


But in an unexpected shift, the White House proposed in its
budget for fiscal 2006 to eliminate the annual operating
subsidy -- save some commuter rail and maintenance support.

Amtrak supporters and other rail advocates accused the
Transportation Department of trying to dismantle Amtrak through
bankruptcy. Critics included respected railroad executive David
Gunn, who was fired as Amtrak's president last fall.

Gunn said he was an obstacle to change and clashed with the
board over the administration's reform agenda.

The move also shocked railroad executives and annoyed
lawmakers, who dug in during budget talks and eventually
approved $1.3 billion in aid for the fiscal year that began on
October 1.

Nevertheless, the administration believes its zero-funding
strategy created momentum for change and permits a less
confrontational approach this year. "The board of Amtrak has
blessed what the administration wanted," one government source

Congress, responding to a presidential veto threat of
crucial transportation legislation late last year, approved
other modifications.

Changes included steps by Amtrak to move toward deeper
involvement by states in service and funding decisions, an
internal review of money losing routes and possible
privatization of some service.

Amtrak is also required by law to reduce its annual subsidy
by saving money on food sales and first class service. It must
limit discounts on peak fares. The Transportation Department
controls financing for priority capital improvements that are
projected to yield savings.

An administration plan to separate Amtrak from the
responsibility of managing its flagship Northeast Corridor
between Boston, New York and Washington -- and possibly selling
it -- was criticized sharply by rail experts and some in
Congress. It remains unclear if the administration will pursue
that initiative again with Congress moving forward on its own
rail funding and capital improvement proposals.