How The Fight Over Amtrak’s Deficit Could Leave Rural America Stranded

Created in 1980, Amtrak’s Hoosier State Line trains depart Indianapolis once a day, four times a week, winding a circuitous path through several sleepy towns on a five-hour journey to Chicago and back again. If Indiana lawmakers don’t agree to pony up $3 million in the next two weeks, this train will be permanently docked.

The Hoosier State Line serves 37,000 passengers annually, and ridership has steadily increased over the past several years. Even so, it is considered to be a dead weight on Amtrak’s bottom line — especially compared to the far denser, high-speed Northeast Corridor’s annual 260 million riders. Even with Hoosier ridership growing, Amtrak loses about $80 per ticket to operating and maintenance costs.

The federal government has traditionally made up the difference, subsidizing the service by about $3 million a year. But in 2008, Congress set a deadline of October 1, 2013 for states to find other ways to fund lines under 750 miles. With just two weeks to go, only seven out of 19 agreements in 15 states have been finalized. Indiana Gov. Mike Pence (R) is among the last holdouts, waiting for a cost-benefit analysis due in late September.


At a summit to discuss the Hoosier’s fate in late August, Indiana Department of Transportation Chief of Staff Troy Woodruff was very blunt about the administration’s position. “We absolutely opposed the legislation when it was coming through and we were very clear we wouldn’t participate in unfunded mandates,” Woodruff said. “The business case has not been made. If you look at the numbers, this is not a business model we would choose to invest in.”

Leaving Behind Rural America

Rural America is shedding population as young people flee to cities. The result is less economic activity and more poverty in these remote areas.

Rail service can be a lifeline for small towns, bringing economic benefits along with connectivity. An analysis of Amtrak’s Downeaster, which runs through New Hampshire and Maine, found that the route generated more than $15 million in revenue over its first three years, spurred more development near the train, and brought in an influx of new visitors.

Conversely, letting the Hoosier State Line go defunct will jeopardize 550 jobs at Amtrak’s major repair facility in Beech Grove, IN, which relies on passing trains to deliver work. According to Amtrak, the maintenance hub repairs 150 to 175 locomotives and passenger coaches a year with a payroll of $30 million, paying a starting salary of $28 an hour.


The Hoosier State Line is also a draw for students at Purdue University and Wabash College who want easy access to Chicago. At the Amtrak summit last month, Purdue Student Senate President Micah Matlock warned, “Without rail, [students] will not be impressed with Indiana or want to stay here, period.”

Because Amtrak must think about profitability to shrink its deficit, it has focused on connecting high-volume cities and only offers passenger rail service at fewer than 200 non-metro locations. As a result, most rural residents currently live too far from an Amtrak station to take the train regularly.

Investing in increasing ridership in rural areas, however, could be the key to solving Amtrak’s budget woes. In defense of the Hoosier State Line, Arvid Olson of the Lafayette Chamber of Commerce pointed to a comparably-sized town, Normal, IL, which has 10 passenger trains a day and carries 300,000 passengers a year. If the Hoosier State Line ridership increases to those levels, it would produce $6.9 million in revenue, more enough to cover operating costs for the next year.

“They are starting to build high-rise apartments near the station because young people can live in an affordable, safe community and be in downtown Chicago in 1 hour and 45 minutes,” Olson told Indiana alt weekly Nuvo. “That is faster and cheaper than commuting everyday from Schaumburg or Elgin by car.”

Long-Haul Routes In Peril

Should the Hoosier line be eliminated, there will still be one-way rail service three times a week via the Cardinal, which runs through Indianapolis between New York and Chicago on the days the Hoosier is off. But the Cardinal, which attracted 116,373 riders last year, could also soon be on the chopping block. Budget hawks now say federal subsidies should be revoked for long-haul routes over 750 miles as well. Earlier this year, the Brookings Institute released a report arguing that because most of these long-distance routes lose money, the states they service should fund them or lose them.


Republicans, who have long been gunning for Amtrak as an example of a wasteful government program, are on board with this plan. “In 2012, [long-distance routes] lost a combined $600 million,” Rep. Jeff Denham (R-CA) said in a May committee hearing. “We simply cannot afford to continue these levels of subsidized losses year after year.”

These cuts are based on the premise that Amtrak should be, and is failing to, turn a profit. True, Amtrak is in the red every year and received about $1.4 billion from the federal government last year (which accounts for about four-hundreths of 1 percent of the total federal budget). Even Amtrak’s then-president, David Gunn, told a Senate Committee in 2002, “Amtrak will never be profitable.”

But the logical conclusion of this profit-driven mentality would eliminate the 41 of Amtrak’s 44 routes that lose money every year, leaving only the densest urban corridors connected by rail. In other words, rural communities would be essentially stranded.

The Problem With Profits

Passenger rail seems to be the only mode of transportation expected to make a profit. A federally subsidized highway’s value is not measured in spending per passenger, though traffic outside Los Angeles, CA is certainly denser than the stretch of I-80 near Elyria, OH. Nor are Amtrak’s passengers the most subsidized travelers; that award goes to airline users via the Essential Air Service program, which subsidizes rural airline service by thousands of dollars per ticket.

Greyhound buses, another important public transit alternative for carless Americans, is one operator that has discovered how difficult it is to connect small towns without government help. The bus company has dropped 60 percent of its bus stops since 1977. As C.B. Hall of the Daily Yonder, a rural issues blog, explains, “Greyhound is shifting its emphasis to express and ‘BoltBus’ services that simply skip the small towns in favor of rider-rich metropolises.”

That’s because it simply does not make sense to think of transportation services as a cash cow. Extending routes to less-populated rural areas will never be profitable. In fact, Congress decided to subsidize long-haul routes in the first place because they are considered a necessary public service that no private company would touch.

Crumbling Bridges To High-Speed Rail?

Of course, Amtrak is still a mess compared to passenger rail systems abroad. The backlog of repairs needed on the Northeast Corridor alone would cost $5.8 billion. Routes outside the Northeast Corridor are also heavily dependent on track laid by private freight companies, which Amtrak must pay a fee to use. If a freight company decides to shut down unprofitable lines, Amtrak must also cut service along those routes.

Yet ridership continues to grow, creating even more urgent need for investment by both state and federal entities. America’s only high-speed route, the Northeast Corridor, turns a regular profit and attracts millions of riders because it’s often the fastest way to get somewhere. The Midwest, sensing the massive economic opportunities, is working to create a similar high-speed rail network. Thanks to new grant programs in the stimulus bill, the Midwest received about $6 billion for a high speed rail corridor.

However, since Republicans swept the House of Representatives in 2010, federal funding for high speed rail has dried up completely. The 2012 transportation bill brought in some money for repairs and updates, but 80 percent of it went to highways while all other forms of transit jockey for the remaining 20 percent. The national rail network envisioned by President Obama will require far more aggressive investment and a lot more money over the next decade.

Climate change will also force more investment in rail and other non-automobile transit options. As the blog Greater Greater Washington points out, Amtrak’s federal subsidies are slightly lower than road subsidies when indirect public costs of cars — air pollution and greenhouse gas emissions, for instance — are factored in. Amtrak estimates that passenger rail removes eight million cars from the road and consumes 21 percent less per passenger mile than automobiles. According to the Department of Energy, the average intercity passenger rail train produces 60 percent lower carbon dioxide emissions per passenger mile than the average car.

Even without aspiring to a high-speed rail system comparable to those in Asia and Europe, basic infrastructure maintenance will require trillions of dollars over the next decade. Thousands of “time bomb” bridges could collapse at any moment, forcing automobiles and trains to risk disaster or find other, less efficient routes. This year has been marked by frequent train derailments, some with passengers on board.

Instead of addressing these increasingly urgent conditions, lawmakers continue to squabble over Amtrak’s subsidies. But eliminating trains won’t actually save money; only increased ridership and investment in high-speed rail can generate enough funds to keep Amtrak afloat. If long-haul routes are the next sacrifice on the austerity altar, rural communities may be permanently locked into isolation and poverty.