Time to Rethink Amtrak Subsidies

Amtrak will celebrate the 50th anniversary of the start of its operations in May. There’s not much to celebrate, however, as an audited financial statement recently posted on the company’s web site reveals that it lost $1.7 billion in 2020, up from $0.9 billion in 2019. Even that is deceptive, however, as the auditors bought into Amtrak’s claim that subsidies from the states are “revenues” and don’t distinguish such subsidies from ticket sales and food and beverage income.

Amtrak’s unaudited year-end results indicate that the company received $342 million from the states in fiscal year 2020 (which ended September 30). If these are counted as subsidies from the states, rather than passenger revenues, then the real losses were almost $2.3 billion in 2020, up from $1.1 billion in 2019.

Actually, the audited statement reveals in notes on page 10, most of that $342 million didn’t come from the states but was funded by Congress “to support the Company’s state partners in making their State Supported route subsidy payments due to Amtrak.” This means even the auditors admit that it is a subsidy, but they don’t disclose even in the notes that this subsidy was included in the revenues in the statement of operations on page 5.

That statement groups both ticket revenues and state subsidies in a category called “revenue from contracts with customers.” The 2019 audit simply called this “passenger related” revenues. I wonder if this change in terms is the auditor’s way of protesting Amtrak’s insistence that state subsidies are not subsidies but are “contracts” for services rendered. They may be contracts, the auditors seem to be saying, but they aren’t passenger revenues.
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The other interesting part of the financial statement is the expense side. In response to losing more than 95 percent of its customers at the beginning of the pandemic, Amtrak cut train services throughout the country. The statement reveals that such cuts ended up saving Amtrak a whopping 6 percent of its expenses, compared with 2019. The actual savings was a little more because, as the unaudited statement reveals, Amtrak had planned to increase spending in 2020, but the service cuts still represented a mere 10 percent savings. Since the pandemic only affected about half the fiscal year, it was really a 20 percent cut for that half of the year.

Amtrak was able to get away with reducing its spending by just 20 percent despite an 80 to 95 percent loss of customers because, the audited statement notes, Congress gave it more than a billion dollars as part of the CARES Act. The statement makes it clear that Amtrak expects further bailouts in 2021.

Amtrak was the hardest-hit portion of the nation’s transportation network. While November driving was down 11 percent and transit and the airlines were down 62 percent, Amtrak ridership was down 78 percent. Unlike transit, whose ridership as a share of 2019 ridership has been stable since September, Amtrak has been declining. Like transit, Amtrak may never fully recover its prepandemic ridership. That means it’s time to rethink the subsidies that have kept it going for almost 50 years.