(Reuters circulated the following article by John Crawley on May 26.)
WASHINGTON — The Bush administration urged Amtrak on Thursday to immediately find new cost cuts to shore up cash reserves, projecting the railroad could be substantially in the red by summer’s end.
The conclusion by Transportation Secretary Norman Mineta stunned Amtrak executives, who are projecting a modest cash surplus, and escalated tensions between the struggling railroad and the administration over the company’s future.
The Bush administration is demanding Amtrak enact a series of business reforms — many of which it has agreed to do — to win support for subsidies needed to survive. Amtrak received $1.2 billion in aid this year and is seeking just under $2 billion for 2006, a figure Congress is unlikely to support.
Amtrak said in a statement it is on track to have at least $30 million in cash on hand at the end of the fiscal year.
But Mineta said in a letter to Amtrak President David Gunn made public on Thursday that the railroad wrongly assumes it will receive $60 million in subsidies. Transportation officials say the subsidies are only available under certain conditions. Mineta said it was irresponsible for Amtrak to project a positive cash balance based on those funds.
“In view of Amtrak’s declining cash position as we approach the last quarter (of fiscal 2005), I am writing to strongly recommend that you immediately begin to implement cost-cutting measures with the purpose of reducing expenses and conserving cash in a manner that does not jeopardize safety,” Mineta wrote.
Transportation officials say it is up to Gunn to identify new cost savings, but note the railroad loses an estimated $100 million annually on food service.
Amtrak supporters claim the administration is simply trying to push the railroad into bankruptcy, seeing insolvency as the best way to overhaul operations and cut massive subsidies. The Transportation Department denies it wants to ruin Amtrak. But it contends the system’s business model broke years ago and rail service must be delivered more efficiently and with greater state and private sector involvement.
The administration says it will support a subsidy once Amtrak reforms are underway but has refused to give a figure.
Gunn told a Senate hearing on May 12 that Amtrak could be headed for bankruptcy if federal funding is not adequate. Congress has not committed to an amount.
Gunn also said uncertainty over subsidies is hurting operations. Insurance is more expensive, Amtrak’s credit rating has been downgraded further, and suppliers may require the company to set aside cash to pay bills, Gunn said.