Amtrak to cut some 1,000 jobs

Demands more congressional funding for longer runs

WASHINGTON (CNN) -- With a government report concluding that Amtrak cannot become self-sufficient by the December deadline set by Congress, the passenger rail service has announced that it's slashing jobs and deferring capital improvements to save $285 million in the coming fiscal year.

It also warns that if Congress doesn't allocate more funding to it, Amtrak will begin cutting its long-distance service by the fall.

The company said Friday that it's asking lawmakers for $1.2 billion for "basic needs to manage and operate today's system in (fiscal year) 2003." Without at least that much money, said Amtrak officials, the rail line will be required to "eliminate unprofitable long-distance service as early as October 1, 2002."

Amtrak president and CEO George D. Warrington said on Amtrak's Web site that in addition to the cuts announced Friday, $258 million will be saved in 2002-'03 through measures already taken.

"Everyone knows that you can't make a profit while running a network of unprofitable trains, but that is exactly what we're expected to do," Warrington said in his statement. "On top of that, several recent events -- including the recession, September 11 and the Amtrak Reform Council decision -- have created new uncertainties in our business."

Heat on the rails

Congress mandated in 1997 that Amtrak was to become self-sufficient by December 2, 2002.

But the Department of Transportation (DOT) report said, "It is not clear whether Amtrak or any other entity could ever operate a linked national system such as that in place today without operating subsidies. Congress will need to weigh the likely costs of subsidizing a linked national system against the merits of preserving such a system."

Some 1,000 jobs are to be eliminated, or about 4 percent of Amtrak's work force of 24,600, the company said. Amtrak said 10 percent of its management positions will be cut, and 3 percent of union jobs.

Cuts in operating expenses, which are aimed at saving $110 million in fiscal 2002, also will include freezing or reducing spending "in numerous categories such as hiring, travel, vehicles, discretionary training, marketing and advertising, computers, materials and supplies," Amtrak said in the statement released on its Web site.

In addition, the company's officials say they will defer about $175 million in capital investments in fiscal year 2002, amounting to about 23 percent of its capital program.

"Deferred projects will include equipment refurbishment and overhauls, capacity and reliability improvements, as well as technology, station and facility upgrades," Amtrak said. "However, there will be no deferral of projects for required safety, environmental or reliability purposes, including fire- and life-safety improvements in New York City-area tunnels."

Poor prognosis

The government's report, issued by the DOT's inspector general, said Amtrak is no closer today to achieving operational self-sufficiency than it was in 1997. Although revenue and ridership have grown, "expense growth has more than kept pace."

The report also said:

- Amtrak will likely need additional funding this year to continue operating. Additional borrowing against assets -- such as the 2001 mortgaging of Penn Station -- would damage the railroad's long-term prospects.

- Even if Amtrak becomes operationally self-sufficient this year, it will still need substantial federal funds for capital improvements.

- Deferral of routine maintenance is starting to catch up with Amtrak.

"By 2003, Amtrak must reduce its cash losses by more than $300 million in order to meet its deadline for achieving self-sufficiency. There simply is not sufficient time," the report said.

It said that in an attempt to save money, Amtrak could take "draconian measures, such as widespread employee or service cuts." But it called such steps questionable.

In its Web site statement, Amtrak said that even if Congress grants it the $1.2 billion it is asking for fiscal year 2003, it will still not have enough "to address the system's $5.8 billion capital investment backlog, improve service or reduce trip times. Moreover, an appropriation below this level will require the elimination of unprofitable long-distance service as early as October 1, 2002."

Amtrak said it had $120 million less revenue than expected in 2001-2002 because of the recession. It also reports losing $52 million in financing because of the Amtrak Reform Council action, and says it has had to undertake additional security costs since September 11.