Fred Frailey Blog

Amtrak side-steps the fiscal cliff

  • Comments 19

It’s increasingly likely that come March 1, Amtrak and every other federally supported agency, including the military, are going to collectively share $85 billion in non-negotiable budget cuts for the ensuing seven months. Sequestration is the awkward term used in Washington to describe what is about to happen; TV newscasters simply call it the fiscal cliff.

To cut to the quick: Amtrak tells me that it can survive such a budgetary whacking without curtailing any train services. That’s a remarkable outcome when you consider the size of the cuts in federal support it will undergo if this comes to pass: an expected reduction of $38 million from an operating grant for fiscal 2013 of $466 million and a $78 million cut in its grant for capital spending and debt service. And remember, these cuts would all have to be absorbed, not slowly over the entire fiscal year (which ends September 30) but quickly during just the final seven months of it.

If you haven’t been paying attention to this issue that has we Washingtonians all wringing our hands, I congratulate you for exercising good judgment. I will summarize it in the fewest possible words. Conservative Republicans are aghast at what they call out-of-control government spending that is creating a Mount Everest of federal debt. Liberal Democrats are aghast that the rich are getting richer and want to tie any cuts in federal spending to a similar amount of tax increases. Meanwhile, the ticking time bomb is the Budget Act of 2011, which decreed that if cuts in deficit spending totaling $1.2 trillion over the next decade could not be agreed upon by Congress before the end of 2012, they would automatically occur — sequestration, in other words, with every federal recipient’s budget being chopped by 8 to 10 percent. The drop-dead date was postponed in a rare congressional accord until March 1.

What makes me feel that sequestration will occur is this: The Republican-controlled House passed the specified budget cuts and sent the legislation to the Senate. The Democrat-controlled Senate, seeing no tax increases in the House bill, won’t take it up. So there’s a political standoff, and both parties seem resigned to the inevitable.

Getting back to Amtrak: In response to questions I put to spokesman Steve Kulm, the corporation today said that so far in fiscal 2013, “Amtrak has been controlling costs and managing its budget at a spend rate less than the federal appropriated amounts. . . . Amtrak is also experiencing solid revenue growth so far this fiscal year.”

The statement added: “While Amtrak is confident we can withstand a funding cut without cutting service, the continued lack of predictable federal appropriations makes proper budgeting and future planning extremely difficult.”

You and I cannot peer over the shoulder of the bean counters at Amtrak, but the latest financial reports (covering just the first two months of fiscal 2013) provide some hints of how it could dodge bullets. In those two months alone, Amtrak spent $67 million less than budgeted for capital programs, mostly due to delays in engineering programs (a saving of $42 million) and the timing of payments for new electric locomotives and long-distance passenger cars (a saving of $20 million). In other words, delays in spending can have the same effect as cuts in spending. And here’s another budget line that begs close attention: Salaries, wages, and benefits were $25 million over budget during October-November, which comes to a startling $150 million at an annual rate. However, I am told that this has a lot to do with recovery from Hurricane Sandy and the salary overages are trending down. My point is that there are plenty of branches to bend or trim before dropping trains, and Amtrak’s statement seems to acknowledge that.

It’s always possible that dogs will learn how to meow, cats to bark, and politicians of different parties to compromise before or soon after March 1 and do a wiser and more judicial job of cutting the federal deficit than sequestration will accomplish. But right now, that doesn’t seem likely. Plus, I am not comfortable knowing that Amtrak is facing financial stress without a chief financial officer (the post was recently advertised in The Economist). After all, Amtrak has a history of walking off its own fiscal cliff, as occurred in the last years of George Warrington’s presidency (1998-2002), when money was moved around and moved around — this trick, that trick, loans here, loans there — until oops, there was none left and payrolls almost didn’t get met. — Fred W. Frailey

|
  • More interesting Amtrak info.  Not that I have any illusion of profitability, but I continue to wonder just how good Amtrak could be if they really got after service and cost control.  For better or worse, it seems to me that the path better passenger service in the US leads straight through Amtrak.  We need a better Amtrak.

  • Ask Prime Minister Cameron how well austerity during/after a global financial crisis and a "Great Recession" works...

    Great Britain has tried austerity under the current Conservative/LiberalDem coalition government, cutting deep many things from social programs to the Royal Navy. The idea was that this would reduce the deficit and create confidence in the the nation, leading to growing business investment and economic growth.

    Instead the result has been weaker national defense, following tax revenues, a growing national debt, and perhaps a on coming "triple-dip recession". In contrast to the the US economy, the GDP of the United Kingdom is still lower than before the 2008 crisis.

    But with this said the Conservatives in the UK are not delusional dogmatic ideologues like are TeaPot Congress, they even support high-speed rail and are moving to address global warming with big policy changes like building more nuclear power plants.  

    I wish that Republicans where more like David Cameron and George Osborn and less like Paul Ryan and Rand Paul!

  • I really dont care what kind of Republicans (or Democrats) we should have anymore....I just want a balanced budget.  No one at this point wants to give up anything significant, either on spending or revenue sides.

    Ed

  • A balanced budget would be nice to have, but the world will not come to an end just because the U.S. has a national debt.  You own a house?  You got a mortgage on that house?  If you answered "yes" to both questions, I have another for you.  If you think it is alright to use 30-year debt for your private residence, what is wrong with using 30-year debt to fund government programs?  For those TeaParty types who take and espouse an ideological opposition to any debt, have you ever thought about paying more in taxes?  That would reduce or eliminate the need for debt, you know.

  • Oh boy, such much contempt towards the Tea Party.  The whole concept of living within our means is such a radical idea.   Perish the thought, anybody with such a verboten idea like that should be shot right?  I mean it's okay for people on the left to use such language, but God forbid the right even allude to it.  Darn, I need to be punished for using the "G" word, but I digress.

    Love the Tea Party or hate it, I could really care less what you think of them. However, we have an administration racking up record debt and all we have to show for it is -.1 GDP.  Wow, that stimulus spending and those shovel ready projects are really paying off.

    Wasn't it Biden that said in order to get out of debt, we need to keep spending?  I'm still confounded by that statement, but from the sounds of it, there's some folks on here that see eye to eye with ol' Crazy Joe.  

    Tax season is upon us, I highly recommend the true believers of deficit spending and of this administration to give a little extra when you pay your taxes.  Your government is counting on you and future generations to support the current budget...wait a minute we haven't had a budget in three or four years, but I digress...

    Now back to playing with the choo choos...

  • Okay, so what does all pro/anti Tea Party stuff have to do with Amtrak?  Lots.  Unlike a mortgage on a house, that, at worst, has a steady level of debt, the US deficit is growing - fast!  

    The party on the left turns a blind eye toward the fact that gov't spending is at all time high (as a % of GDP) They flatly refuse to fix the things that are, and will grow the debt the fastest and eventually swamp the entire budget.

    The party on the right turns a blind eye to the fact that federal tax revenue is at an all time low (as a % of GDP).  They flatly refuse to consider any plan that would restore revenue to its historic average.

    Amtrak, and all things discretionary in the budget will feel the squeeze get harder year after year.  It is interesting to me that compromises like Simpson-Bowles get rejected out of hand by both sides so easily.

    Even if Amtrak gets it's house in order, they will likely be on the outside looking in somewhere in the not too distant future.

  • One more on federal debt.  The performance of House teapartiers on the Hurricane Sandy relief bill was all the way to disgusting.  Government exists to perform tasks for citizens that they cannot do for themselves.  You on the right - or left - are free to advocate anything you wish.  I don't advocate spending.  I do advocate that government get on with its assigned tasks and that those who we send to Washington to represent our interests actually do so.  So far, I am seeing little of that from either the right or left.  Contempt towards the tea party?  You bet. You of the tea party movement have managed to put your cheapskate instincts ahead of the society's needs and/or desires.  

  • Rail Pundit wrote:

    >A balanced budget would be nice to have, but the world will not come to an end just because the U.S. >has a national debt.  You own a house?  You got a mortgage on that house?  If you answered "yes" to >both questions, I have another for you.  If you think it is alright to use 30-year debt for your private >residence, what is wrong with using 30-year debt to fund government programs?  For those TeaParty >types who take and espouse an ideological opposition to any debt, have you ever thought about paying >more in taxes?  That would reduce or eliminate the need for debt, you know.

    The difference is that the mortgage is, by contract, my problem to settle, whereas no one of us is responsible for paying off the national debt--which is to say that it will be imposed on all of us, or more accurately, those of us still alive when the bill comes due.  Or as Keynes said, "In the long run we are all dead."  Now there's responsibility for you.  Thank God for the Tea Party and all those others who worry about such things.

    They might rightly reply to you, sir, Have you ever thought of cutting spending?

    I'm ready to get back to railroading whenever you are.

  • Old Head:  I'm quite prepared to deal with any tea party adherents who choose to comment -- as you have.  Unlike many of the tea party folks, you manage to be civil - for which I thank you.  Yes, I do think cutting spending sounds like a great idea.  Where shall we start?  Shall we NOT provide aid and assistance to people who have had their homes destroyed by wild fires in the west and by hurricanes in the east?  Shall we NOT properly maintain the nation's infrastructure.  Rail looks pretty good these days because the railroads invest their own stockholders' money in most of their capital projects, while the society provides highways for the trucks that compete with the railroads.

    SNARK alert:  The best that can be said about ideology is that it allows the ideologue to not have to think very much - if at all.  Sorry, but I won't be thanking God for the tea party movement.

  • I am disappointed that none of the comments on my post have praised or damned Amtrak for navigating the fiscal cliff. Instead, you are on a Tea Party romp. This blog is about railroading, not partisan politics. C'mon folks, make me proud of you.

    Fred

  • I don't see much to praise Amtrak for here.  They are going to survive the "fiscal cliff" because they have so much "fat" they can afford to lose some weight?  Any well run company is always looking for fat to trim, not just when pushed from outside.  This is just more fuel for the fire that they are a "Soviet style" railroad that sells hamburgers to a captive audience at a loss.

    I'm glad that Fred and Don Phillips are not blind cheerleaders for Amtrak.  For those of us who care and believe the passenger trains can be a good thing, holding Amtrak accountable and being a constructive critic is a good thing.

    We need a better Amtrak.

  • For some, Amtrak is government viewed through the microscope.  Where you choose to focus your look has a lot to do with your personal politics, unfortunately and in turn what problems you find.

  • Amtrak has its problems, but yes they seemed to be planning ahead for the new "fiscal cliff", and that's very good news!

    As for the political talk this is probably my fault with my post on the British so I apologize.  

    Transport needs not to be partisan, at least not in the sense of liberals love trains and conservatives don't, after all my understanding is that the Jimmy Carter Administration was a very bad time for Amtrak, and today while three GOP govs throw back the stimulus money, the GOP govs in Michigan and Virginia have said yes to rail in a big way.

    On Wednesday I meant with the Republican mayor of Saratoga Springs and the head of the local chamber of commerce another Republican to promote passenger rail, my partner in this effort was the former chairman of New York State's Conservative Party.

    On Tuesday I will be giving a short presentation to the Saratoga City Council, a city sharply divided by party and politics but together seemingly supportive of our local Amtrak service.

    Well if the government shuts down but Amtrak keeps running, that a big plus, we'll know which is run better!

  • Fred:  Bridging the Tea Party and Amtrak subjects--I think back to the 3R Act, which required Congress to pass, in an up-or-down vote, without amendment, the implementation plan recommended by USRA.  That vote was the 4R Act.  It was modeled after, IIRC, the legislation that created the military base closing commission, which faced the familiar problem that every base (like every branch line) has a Congresscritter who sees it as his(her) duty to defend it--a defect in democracy that Madison recognized.  

    We see something similar in the current sequestration requirement that some are beginning to take seriously.  That requirement similarly is the result of a law passed to solve an intractable inability to agree on the details.  It concededly is witless, but in the opinion of some of us beats doing nothing.

    I agree with the poster above:  The fact that Amtrak can find something to cut is not news.  And as with all other bureaucracies governmental and corporate, that leaves the real fat for another day.  The notion that this organization has been struggling along on nothing is nonsense.  The situation is comparable to a Conrail-operated branchline in 1976 vs. the short line that revived it fifteen years later.  

    This is not to deny that a great many actual needs have gone begging at Amtrak.  But again, it is a familiar phenomenon.  When local school districts' budgets are disapproved by the voters in New York State, the first thing they do is put forth an "austerity budget" that eliminates funding for all sports and all buses.  The kids will have to walk to school (in my time they also had to listen to their parents yammer about how they walked seven miles in the snow to school each day and how it wasn't so bad) and worse, they will be a burden on their parents from 3:30 pm onward.  Employee compensation remains untouchable and no one questions work rules, which most railroaders who graduate from operations to senior management might tell you is the crucial area; i.e. we can afford to pay the employees way above average but we need to have the flexibility to put them to work without senseless restrictions.

    I have met Joe Boardman on a few occasions and had a few interesting, friendly conversations with him.  I think he is a decent and well-intentioned man.  He tried to reorganize NYSDOT, which needed it, but many of us concluded that the medicine was worse than the disease.  About the time that was becoming apparent he went to Washington.  While he was in Albany it was said that he was driven (or perhaps drove himself) to work each day from the family farm at Rome, NY--not exactly a short haul.  I do not, therefore, expect him to remain in Washington forever.  But I was tempted to apply to join him when he went to Amtrak because he seemed like a good man who had the balls to shake things up and make changes where necessary.  I'm glad now that I didn't.  Maybe someday we'll hear the story of how he was beaten down.  Politics and bureaucracy are relentless.

  • As long as Amtrak must suckle at the public teat for its susenance, transportation is and will remain inextricably intertwined with government.  That means politics is a factor whether we like it or not. All government activity is political.  As long as truckers do not come close to paying their allocable share of construction and maintenance of highways and bridges, for example, that effectively caps the amounts railroads can generate commercially.  Remember, it was the loss of freight profit that caused the real demise of rail passenger service.  Railroads had subsidized the one with profit from the other.  So, one solution is for Congress to fund the proper spending on highways rather than simply, mindlessly appropriate money as the most recent Congress did and the current one will have to do in 2014.  Old Head iscorrect in his thoughtful comment.  Transportation never was a partisan political issue.  Nor should it be now.  But as long as we have a cadre of ideologues in control of one house of Congress, it is a partisan issue whether we like it or not.  If sequestration does occur and federal budgets are slashed by formula rather than by thought, the United States stands to be the one developed nation that cannot or chooses not to provide government services to the citizens who pay the taxes.  Amtrak is just a tiny part of this, but do not think for a second, just because Amtrak officials have told Fred that they know how they will handle the cuts, that the cuts will not hurt.  Some people do not like the political comments of Rail Pundit.  Too bad.  Remember, please, that the best that can be said for ideology is that it allows ideologues to not think very much - if at all.

Amtrak side-steps the fiscal cliff