United States Government Accountability Office

Washington, DC 20548 

January 18, 2007 

The Honorable Mary Peters 

Chairperson 

National Surface Transportation Policy 

 and Revenue Study Commission

Subject: Intercity Passenger Rail: Highlights of GAO Report on Need for National 

Policy and Strategies to Maximize Public Benefits from Federal Expenditures 

Dear Madam Chairperson: 

The future of intercity passenger rail service in the United States has come to a critical 

juncture. The National Railroad Passenger Corporation (Amtrak) continues to rely 

heavily on federal subsidies—over $1 billion annually in recent years—and operating 

losses have remained high. In addition, Amtrak will require billions of dollars to address 

deferred maintenance and achieve a “state of good repair.”1

 These needs for Amtrak 

come at a time when the nation faces long-term fiscal challenges. As we reported in 

February 2005, the federal government’s financial condition and long-term fiscal outlook 

present enormous challenges to the nation’s ability to respond to emerging forces 

reshaping American society, the United States’ place in the world, and the future role of 

the federal government.2

 Addressing the projected fiscal gaps will require policy makers 

to examine the affordability and sustainability of all existing programs, policies, 

functions, and activities throughout the federal budget. 

Reexamining the federal role and expenditures on intercity passenger rail service will be 

particularly difficult because opinions differ about what this service should be. Some 

advocate a greatly expanded federal role and the expansion of intercity passenger rail to 

relieve growing congestion on highways and airways and (as energy prices increase) to 

provide more fuel-efficient transport; others believe the federal role should be scaled 

back, and that at least some federal operating subsidies should be eliminated. Specific 

proposals vary—while one proposal would keep Amtrak largely intact and provide more 

funding for capital and other improvements, another proposal would significantly 

restructure the management and accountability for intercity passenger rail with regional, 

 1

“State of good repair” is the outcome expected from the capital investment needed to restore Amtrak’s 

right-of-way (track, signals, and auxiliary structures), other infrastructure (e.g., stations), and equipment to 

a condition that requires only routine maintenance. 

2

GAO, 21st Century Challenges: Reexamining the Base of the Federal Government, GAO-05-325SP

(Washington, D.C.: Feb. 2005). 

GAO-07-382R Intercity Passenger Rail 
state, and local entities making fundamental decisions about what intercity passenger 

rail services are justified and will receive public financial support. Amtrak itself has 

proposed a new vision for intercity passenger rail service that would include a greater 

role for states in planning and developing passenger rail corridors. The former acting 

president of Amtrak told us that, in his view, Amtrak itself is not a substitute for a 

national intercity passenger rail policy and that Congress needs to develop such a policy. 

One of the primary difficulties in reexamining the federal role and expenditures on 

intercity passenger rail service and developing a clear national intercity passenger rail 

policy will be reconciling the wide diversity of views about what this service should be 

and what it should achieve. 

On November 13, 2006, we issued our most recent report on intercity passenger rail.3

 

The objectives of this report were to determine: (1) the characteristics of the current U.S. 

intercity passenger rail system and the potential benefits obtained from this system, (2) 

foreign experiences with passenger rail reform and observations for the United States, 

(3) how well the United States is positioned for reforming4 its intercity passenger rail 

system, (4) challenges the United States faces in overcoming obstacles to reform, and (5) 

potential options for the future of intercity passenger rail service. In general, we found 

that the current system is in poor financial condition and does not target federal funds to 

where they provide the greatest public benefits, such as transportation congestion relief. 

We also found that foreign experience with reform shows that the United States needs to 

consider three key elements in attempting any reform: (1) defining national policy goals, 

(2) defining the roles of government and other participants, and (3) establishing stable 

funding. The U.S. is currently not well positioned to address these reform elements and 

there are a number of challenges to be overcome in addressing the key reform elements, 

including the wide diversity of views in determining the overall goal for passenger rail in 

the United States and the federal role in achieving this goal. There are four primary 

options for the future federal role in intercity passenger rail. These are keeping the 

existing structure and funding of intercity passenger rail, making incremental changes 

within the existing structure, discontinuing the federal role in intercity passenger rail, 

and restructuring intercity passenger rail. Our report recommends that Congress 

consider restructuring the approach for providing intercity passenger rail service in the 

United States. 

 3

GAO, Intercity Passenger Rail: National Policy and Strategies Needed to Maximize Public Benefits 

from Federal Expenditures, GAO-07-15 (Washington, D.C.: Nov. 13, 2006).

4

For purposes of this report, the word reform is intended to cover both incremental changes that might be

made within the current structure of intercity passenger rail, as well as more significant changes that could 

be made, including wholesale restructuring in how intercity passenger rail service is provided.

Page 2 GAO-07-382R Intercity Passenger Rail 
- - - - - 

In light of these findings, you asked us to testify before the National Surface 

Transportation Policy and Revenue Study Commission on January 17, 2007, about issues 

in our recent report. The enclosure is my presentation to the Commission. A copy of our 

November 13, 2006, report (GAO-07-15) can be found at www.gao.gov. 

Sincerely yours, 

JayEtta Z. Hecker 

Director, Physical Infrastructure Issues

Enclosure

Page 3 GAO-07-382R Intercity Passenger Rail 
Enclosure 

Intercity Passenger Rail:

Highlights of GAO Report on 

Need for National Policy and Strategies to Maximize Public 

Benefits from Federal Expenditures

National Surface Transportation

Policy and Revenue Study Commission 

January 17, 2007

Statement of JayEtta Z. Hecker

Director, Physical Infrastructure Issues

Page 4 GAO-07-382R Intercity Passenger Rail 
Enclosure 

2

Overview

• Background: Long Term Fiscal Challenges

• Objectives

• Scope and Methodology

• Findings

• Options for Reform

• Conclusions

Page 5 GAO-07-382R Intercity Passenger Rail 
Enclosure 

3

Background: Long Term Fiscal Challenges

• Imprudent and unsustainable fiscal path

• Known demographic trends and rising health care costs

• Unsustainable deficits and debt

Page 6 GAO-07-382R Intercity Passenger Rail 
Enclosure 

4

Long Term Fiscal Challenges

Composition of Spending as a Share of GDP

Assuming Discretionary Spending Grows with GDP after 2005 and All Expiring Tax Provisions are Extended

Page 7 GAO-07-382R Intercity Passenger Rail 
Enclosure 

5

Reexamining the base

GAO’s 21st Century Challenges report

A strategy for

reexamining the 

base of government

Page 8 GAO-07-382R Intercity Passenger Rail 
Enclosure 

6

Reexamining the base

Generic reexamination questions

Does the program...

1. have a clear federal role and mission?

2. have outcome-based performance measures?

3. target areas with the greatest needs and least capacity? 

4. encourage S/L governments and private sector to invest their 

own resources?

5. employ the best tools and approaches?

6. appear affordable and sustainable in the long term?

Page 9 GAO-07-382R Intercity Passenger Rail 
Enclosure 

7

Objectives of IPR Review

• Identify the characteristics of the U.S. intercity passenger rail (IPR) 

system and the potential benefits provided by this system.

• Identify foreign experiences with passenger rail reform and 

lessons learned for the United States.

• Assess how well the U.S. is positioned to reform IPR service.

• Identify the challenges that must be addressed in any reform 

efforts.

• Identify potential options for the future federal role in IPR service.

Page 10 GAO-07-382R Intercity Passenger Rail 
Enclosure 

8

Scope and Methodology

• Examined characteristics of current U.S. IPR system,

including ridership and financial characteristics of Amtrak’s 

routes.

• Collected and analyzed data on restructuring from Canada,

France, Germany, Japan, and the United Kingdom

• Interviewed Amtrak, Federal Railroad Administration, state, 

rail labor unions, freight railroad officials, and others.

• Reviewed studies on passenger rail reform and consulted 

with international rail experts.

Page 11 GAO-07-382R Intercity Passenger Rail 
Enclosure 

9

Findings: Characteristics and Value of Current 

IPR Structure

• Current structure remains in poor financial condition with

deferred capital and maintenance projects.

• Amtrak route structure exists largely as it did when it began 

over 35 years ago.

• Federal resources are being devoted to areas of comparative 

disadvantage, such as long distance routes.

• Corridor services are a comparative strength and hold the 

most promise for financial viability and potential public 

benefits.

Page 12 GAO-07-382R Intercity Passenger Rail 
Enclosure 

10

Amtrak Route Maps, 1971 and 2005

1971 2005

Page 13 GAO-07-382R Intercity Passenger Rail 
Enclosure 

11

Amtrak’s Market Share Compared to Air 

Services – Selected Origins and Destinations

Page 14 GAO-07-382R Intercity Passenger Rail 
Enclosure 

12

Trip Distance on Amtrak’s Long Distance 

Routes, Fiscal Year 2005

Page 15 GAO-07-382R Intercity Passenger Rail 
Enclosure 

13

Findings: Foreign Experiences

• Foreign countries have employed a variety of

approaches in reforming IPR, including:

• Shifting from service operator to service regulator or

customer and, in some cases, devolving decision-making 

authority to local and regional governments.

• Restructuring existing IPR organizational structure and 

introducing competition and privatization.

• Changing the public funding structure.

Page 16 GAO-07-382R Intercity Passenger Rail 
Enclosure 

14

Reform Approaches Used by Site Visit 

Countries

Page 17 GAO-07-382R Intercity Passenger Rail 
Enclosure 

15

Findings: Foreign Experiences

• Foreign countries addressed key reform elements in

implementing new approaches:

• Established clearly defined national policy goals.

• Clearly defined government and stakeholder roles.

• Established consistent; committed funding.

Page 18 GAO-07-382R Intercity Passenger Rail 
Enclosure 

16

Findings: How Well U.S. is Positioned for 

Reform

• U.S. not well positioned to reform IPR:

• Goals and expected outcomes of current passenger rail 

policy are ambiguous.

• Stakeholder roles are unclear.

• Funding difficulties due to other priorities or lack of

consensus.

• Amtrak can and has taken action to reduce costs but is

not positioned to address broader goals, roles, and 

funding issues.

Page 19 GAO-07-382R Intercity Passenger Rail 
Enclosure 

17

Findings: Challenges That Must be Addressed

• Federal role: What should it be? Federal government has policy and ownership

interests

• Federal-state partnerships: Role of state participation/Use of financial

leveraging/Mechanisms for interstate cooperation

• Freight railroad issues: Defining Infrastructure access and cost issues

• Workforce issues: Availability of expertise, flexibility and productivity of the 

workforce/Potential labor protection payments/Status of labor-management laws

• Private sector issues: Availability of private sector operators/Costs of private

operators/Incentives needed for participation

• Funding issues: Availability of funds/Aligning decisionmaking with

beneficiaries/Development of Incentives for stakeholder participation and cost sharing

Page 20 GAO-07-382R Intercity Passenger Rail 
Enclosure 

18

Findings: Challenges That Must be Addressed

• Response to IPR funding challenges are more complex than

providing comparable funding to other transport modes:

• Other modes, like highways and airports, receive funds from

explicit taxes and user fees.

• Commitments made to some user-fee based transport

modes (e.g., highways) is not sustainable.

• The magnitude of federal funding for IPR needs to be based 

on the role IPR does (or could) play in national mobility

relative to other transport modes and their public benefits.

Page 21 GAO-07-382R Intercity Passenger Rail 
Enclosure 

19

Findings: Challenges That Must be Addressed

• Issues associated with adopting a “user pays” principle:

• “User pays” concept would have the full range of system

users (e.g., states, public) pay the costs to build and

maintain the rail infrastructure.

• If adopted, a better matching of fees paid to costs incurred

by diverse users could provide incentives to make modal 

choices and select options based on true costs.

• Amtrak is currently unable to define “true costs” of IPR

service due to accounting practices and multiple information 

systems.

Page 22 GAO-07-382R Intercity Passenger Rail 
Enclosure 

20

Options for Reform: Components for Defining

Federal Involvement in IPR

•federal funding for future projects involving intercity passenger rail 

service will require a high level of justification

•cost sharing for investment in new infrastructure will maximize the 

impact of any federal expenditures and investment

Determine effective funding 

approaches

•state and local governments

•private participation

•ensure that the federal role does not negatively affect the 

participation or transportation role of other stakeholders 

Establishing and clearly defining

stakeholder roles

•establish what federal participation in the system is designed to

accomplish

•should be specific, measurable, achievable, and outcome-based. 

Set national goals for the system

Component Description

Source: GAO analysis.

Page 23 GAO-07-382R Intercity Passenger Rail 
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21

Options for Reform

• Potential Options for Reform:

1. Keep existing structure and funding of IPR.

2. Incremental changes within existing structure of IPR.

3. Discontinue federal role in IPR.

4. Restructure IPR.

Page 24 GAO-07-382R Intercity Passenger Rail 
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22

Framework for Deciding the Future of Federal

Involvement in Intercity Passenger Rail

Page 25 GAO-07-382R Intercity Passenger Rail 
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23

Options for Reform

• Each option has advantages, disadvantages, and challenges.

• Status Quo: Foregoes benefits from improving the system and 

could lead to deteriorating infrastructure and aging equipment 

that would increase costs.

• Incremental Change: Does not address fundamental flaws in 

the system.

• Discontinue: May reduce services; would require detailed 

planning; substantial federal expenditures

• Restructure: Allows opportunities for increased transportation 

and public benefits.

Page 26 GAO-07-382R Intercity Passenger Rail 
Enclosure 

24

Conclusions

• Long term fiscal challenges require reexamination of base of

government

• Effective integration of IPR into the national transportation system and 

targeting federal support to assure performance, results, and

accountability, calls for a change to the current structure of and federal 

role in IPR.

• Development of a national IPR policy should have: 

(1) clearly defined federal role, 

(2) outcome-based policy goals, 

(3) financing that stimulates investment by others, and

(4) appropriate accountability mechanisms.

• The current IPR structure meets none of these goals.

Page 27 GAO-07-382R Intercity Passenger Rail 
Enclosure 

25

Matter for Congressional Consideration

(from November 13, 2006 report)

• Restructure the approach for the provision of IPR service in 

the United States.

• Solicit input from all stakeholders, particularly the Department

of Transportation (DOT) and the Federal Railroad

Administration.

• Consider the relationship between passenger and freight

railroads and the national freight transportation policy being 

developed by DOT.

Page 28 GAO-07-382R Intercity Passenger Rail 
Enclosure 

Intercity Passenger Rail:

Need for National Policy and Strategies

to Maximize Public Benefits

from Federal Expenditures

GAO-07-15

Statement of JayEtta Z. Hecker

Director, Physical Infrastructure Issues

January 17, 2007

(544135)

Page 29 GAO-07-382R Intercity Passenger Rail 
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