States Take Larger Role in Passenger Rail

A federal law enacted in the late days of the Bush administration is starting to force states to take a closer look at local Amtrak routes that they subsidize.
by | June 24, 2015

Illinois, which sits at the center of the country's railroad network, has long promoted passenger rail. It's rebuilt track so trains could travel faster between Chicago and St. Louis, added service along preexisting routes and even began planning for expansions to new cities. Ridership on Illinois routes grew by 85 percent in the last decade. But now the talk in Springfield is about cuts to Amtrak, not expansions.

That's no surprise considering Illinois' precarious finances. Nearly every service provided by the state is under scrutiny as Republican Gov. Bruce Rauner and Democratic leaders in the legislature try to come to an agreement on the budget.

But the uncertainty over Illinois' passenger rail isn't all the doing of lawmakers in Springfield. Illinois, like many other states, recently had to start paying higher subsidies in order to continue providing local Amtrak service to its residents. The increased state costs come as a result of a 2008 federal law, called the Passenger Rail Investment and Improvement Act, that required many states to pick up a bigger part of the tab for 28 Amtrak routes that are shorter than 750 miles. Those routes cross 19 states and carry almost half of Amtrak's passengers.

The requirement for greater state subsidies took effect in October 2013. As a result, state payments to Amtrak increased from $186 million in 2013 to $238 million last year. State subsidies and fares on state-supported routes make up about 30 percent of Amtrak's revenue. Amtrak service levels, though, did not increase.

As more states pay higher subsidies to Amtrak, their scrutiny of the rail company has also increased. Lawmakers in Oregon have explored reducing its payments. Indiana officials are bringing in an outside contractor to try to improve Amtrak service there. And other state officials around the country are trying to clarify what they can expect from Amtrak going forward. "If you're making an investment in something, you have an obligation to make sure it's a certain quality," said Patricia Quinn, chair of the States for Passenger Rail Coalition. "This is a new relationship with all of the states and Amtrak."

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In Illinois, Rauner is calling for a 40 percent reduction in the state's Amtrak subsidies, from $42 million a year to $26 million a year, which would return Illinois to what it was paying before the 2013 hikes. The administration provided few other details, such as which routes might be affected or how much service would be reduced. If enacted, Rauner's cuts would be the first significant drop in state support for local routes at a time when states are already taking a greater role in providing intercity passenger rail. "We are currently in negotiations with Amtrak about the impacts to service levels on all routes in order to make decisions about the frequency and level of service that the state can afford," said Guy Tridgell, a spokesman for the Illinois Department of Transportation, in a statement.

Imposing spending cuts, though, could be more complicated than it seems at first blush. Ray Lang, senior director of national state relations for Amtrak, told members of the Illinois House that reductions along the Chicago-St. Louis line could force the state to have to pay back federal stimulus money used to improve the tracks to allow for faster trains. That means the spending cuts could fall disproportionately to other routes. Decreasing the frequency of trains would also make it more expensive to ride the routes that remain, because fixed overhead costs would be shared among fewer riders, said Richard Harnish, executive director of the Midwest High Speed Rail Association. He also predicted that ridership would drop at a steeper rate than the service cuts because "frequency and dependability are critical in making sure train service works."

Oregon lawmakers encountered similar concerns when they looked into their Amtrak subsidies this year. In a two-year budget proposal, former Oregon Gov. John Kitzhaber recommended that Oregon spend $10.4 million from general funds-on top of revenue generated from specialty license plates-to help the state meet the higher subsidy requirement for Amtrak's Cascade route.

If lawmakers fail to approve funds and completely eliminate the $10.4 million two-year subsidy, service would halt between Eugene and Portland. The state would have to repay the federal government for two train sets it bought with federal stimulus money or else give them away. If the state changed its mind after a decade, it would cost between $80 million and $200 million to get the service up and running again, the agency calculated. (Although Oregon's budget is not finalized, it now appears that legislators will likely include the full $10.4 million in the next biennial budget.)

The same 2008 law that increased the cost of subsidies also gave states more flexibility to use vendors other than Amtrak to provide rail service. Indiana officials are using that to try to improve service on the Hoosier State line, which runs from Chicago to Indianapolis.

It is working on an arrangement where a separate contractor, Iowa Pacific Holdings, would take over key functions. It would provide the train equipment, marketing and on-board services, such as food sales and Wi-Fi. But Amtrak would remain the primary operator, providing the train crews and ticketing services.