Murray Responds to Mineta Letter on Amtrak Funding

May 26 2005

Senator calls on Administration to rethink short-sighted funding policy

(WASHINGTON, D.C.) – U.S. Senator Patty Murray (D-Wash.), Ranking Member of the Senate Transportation Appropriations Subcommittee, today responded to a letter by Transportation Secretary Norm Mineta to Amtrak President David Gunn urging immediate cost-cutting measures to address the company's declining cash position.

“Secretary Mineta shouldn’t be surprised that Amtrak is facing a financial crisis. His own Administration’s budget policies have been one of the largest contributors to it,” Murray said today.

Mineta’s letter references Gunn’s testimony before the Transportation Appropriations subcommittee on May 12th. In response to a question by Murray, Gunn testified that the Bush Administration’s stated goal to put Amtrak into bankruptcy and the failure of a Senate amendment to restore Amtrak’s funding has had a significant negative impact on Amtrak’s cash position. Gunn testified that, as a result of those events, Amtrak’s bond rating was downgraded, the railroad’s insurance costs and accounting costs increased, and the financial requirements by Amtrak’s suppliers were tightened.

“After starving the patient for the last four years, Secretary Mineta is now complaining that the patient is malnourished. Secretary Mineta and the Bush Administration should have been thinking about Amtrak’s ability to sell tickets and control other costs before they proposed zeroing out Amtrak’s budget and pushing the railroad into bankruptcy.”

Over the life of the Bush Administration, President Bush has requested more than $4 billion less than Amtrak has said it needed. As a result, annual funding has been almost a third less than the levels Amtrak said it required.

“The Bush Administration’s budget policies have been severely detrimental to Amtrak’s financial condition,” Murray said. “If they really care about Amtrak’s ability to stay solvent, they should abandon their proposal to eliminate their Federal support and provide some certainty to Amtrak’s 25 million riders that there will still be rail service at the end of this year.”

The text of Secretary Mineta’s letter to David Gunn follows:

Mr. David L. Gunn
President and Chief Executive Officer
National Railroad Passenger Corporation
60 Massachusetts Avenue, NE
Washington, DC 20002

Dear Mr. Gunn:

In view of Amtrak's declining cash position as we approach the last quarter of FY 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.

I noted with concern your May 12 testimony before the Senate Appropriations Subcommittee on Transportation, Treasury, the Judiciary, Housing and Urban Development, and Related Agencies regarding FY 2006 Appropriations. When responding to a question about whether Amtrak will end FY 2005 with a positive cash balance, you said, "... we'll have like $20 million left in the bank, something in that neighborhood." I am concerned that your projection assumes the release of $60 million set aside by law to pay for directed service in the event Amtrak ceases operations. My review of your cash projections indicates you are counting on that money even though the law clearly requires the Department to hold those funds in reserve until we are certain they will not be needed to maintain commuter operations at year's end. Given your recent Senate testimony, it is irresponsible to project a positive cash balance based on an assumption about reserve funds, when without those dollars, Amtrak's cash position before September 30th could be as much as $40 million in the red.

You cannot continue to spend at current levels when, according to your own estimates, the recent interruption of Acela Express Service due to cracks in the brake systems, is itself costing the company roughly $1.25 million per week. Management of Amtrak's FY 2005 budget must be based on existing revenue streams and not on hopes for yet another taxpayer bailout. It is imperative that you take meaningful steps to reduce costs as soon as possible. As the President of the corporation, you have a responsibility to identify and implement all available operating expense reduction options necessary to ensure that Amtrak's cash position does not deteriorate to the dangerously low level you predicted before the Senate Subcommittee.

I have directed my designee to the Amtrak Board, Jeffrey A. Rosen, to raise this issue at tomorrow's Board meeting and I look forward to hearing from you about your specific plans to reduce operating expenses in order to protect Amtrak's cash position and viability through the end of this fiscal year.


Norman Y. Mineta

cc: David M. Laney, Chairman, Amtrak Board of Directors