GAO rips into Amtrak finances

Amtrak’s operating losses are projected to reach $1 billion and grow by 40 percent within four years because revenue is declining and the railway has had limited success controlling spending, according to a government report released yesterday.

Amtrak also must strengthen financial reporting and management so it has more reliable financial data, the Government Accountability Office (GAO) concluded.

Meanwhile, the Senate approved a $1.9 billion subsidy for each of the next six years. The House has approved $1.18 billion, and the bills must be reconciled.

The Senate bill requires Amtrak to cut operating costs 40 percent over six years.

The Bush administration had threatened to shrink the federal subsidy possibly to $360 million.

Amtrak’s efforts to contain costs have shown little success because there is no corporatewide program to keep spending in check, the GAO report said.

The national passenger railroad has made efforts to cut costs and has reduced expenses by 9 percent from fiscal 2002 to 2004, partly by reducing its work force by 3,500 employees. That saved about $200 million, the report said. But the rail service will have difficulty reducing costs in the future without proper controls, the GAO concluded.

In addition, labor costs, which account for 50 percent of total expenses, will rise over the next five years and force Amtrak to cut costs elsewhere.

Amtrak’s financial reporting practices also must be improved, the GAO said. The railroad substantially underreported expenses by omitting depreciation from each train route and business line, which amounted to $606 million in fiscal 2003 and $479 million in fiscal 2002.

Revenue is declining faster than costs of the rail service, and the absence of adequate data on spending for goods and services makes it difficult to determine where Amtrak can cut costs.

Amtrak Chairman David Laney said the rail service has begun to make many of the changes the GAO suggested.

“I think a lot of the information in the report could be constructive. I also think some of the criticism maybe outdated and stale. We’re making progress. We’re pretty ambitious in what we think we can do to contain costs,” Mr. Laney said.

The government report gave Amtrak President and Chief Executive Officer David L. Gunn credit for beginning efforts to improve efficiency, but concluded that the national passenger rail service remains in precarious financial health.

Mr. Gunn, who took over Amtrak three years ago, argued that its financial performance has improved dramatically since the beginning of his tenure and said fixing the rail service won’t be easy.

“There is no silver bullet to fixing Amtrak, nor is there a certain cookie-cutter approach that can be taken. I, and my managers, feel that steady incremental improvement is best,” Mr. Gunn wrote to the GAO in response to its report.

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