Eliminate Funding for Amtrak and the Essential Air Service Program

Background

The federal government subsidizes intercity travel in various ways. For example, the National Railroad Passenger Corporation—or Amtrak—received appropriations of about $1.5 billion in 2017 and $1.9 billion in 2018 to subsidize intercity passenger rail services. The 2018 figure includes $650 million in grants for the Northeast Corridor and debt service and about $1.3 billion in grants for the national network that Amtrak operates. For comparison, Amtrak's capital spending in 2017 was $1.6 billion and its operating expenses totaled $4.2 billion (including $0.8 billion in depreciation and amortization costs).

Another form of federal subsidy for intercity travel is the Essential Air Service (EAS) program, which received $150 million in discretionary budget authority and $122 million in mandatory budget authority in 2017; the latter came from overflight fees that are charged to aircraft that fly through U.S. airspace but take off and land in other countries. As of September 2018, the EAS program—created by the Airline Deregulation Act of 1978 to maintain airline service in communities that had been covered by federally mandated service—subsidized air service in 63 communities in Alaska, 2 in Hawaii, 1 in Puerto Rico, and 108 in the continental United States (CONUS). Based on EAS data available for those CONUS communities, the federal subsidy per airline passenger in 2017 ranged from $14 in Joplin, Missouri, and Cody, Wyoming, to $536 in Alliance, Nebraska.

Option

This option would eliminate funding for Amtrak and discontinue the EAS program.

Effects on the Budget

Provided that federal appropriations were reduced accordingly, this option would yield savings of about $21 billion in discretionary spending from 2020 through 2028, the Congressional Budget Office estimates. That amount consists of about $20 billion in savings from eliminating funding for Amtrak and roughly $2 billion in savings from eliminating the discretionary component of the EAS program (identified separately in the budget as Payments to Air Carriers). Discontinuing the EAS program would also yield savings totaling about $1 billion in mandatory spending over that same period, CBO estimates.

CBO's baseline projections of budget authority for Amtrak and the discretionary component of EAS are based on the appropriations contained in the Consolidated Appropriations Act, 2018, adjusted for projected inflation through 2028. Estimated budget authority for the mandatory component of EAS reflects anticipated revenues from the overflight fees, which are charged per nautical mile and may be adjusted periodically so as to remain "reasonably related" to the government's cost of providing air traffic services. CBO's projections of revenues from the fees primarily reflect its projections of economic output (gross domestic product, or GDP) and inflation in consumer prices.

In all three cases, most savings in outlays are projected to occur in the same year as the reductions in budget authority. For instance, the Federal Railroad Administration is required to make quarterly payments to Amtrak, and CBO expects virtually all of a reduction in budget authority in a given year to result in outlay savings in the same year. For the EAS program, CBO projects the reductions in outlays from a given year's cut in budget authority to be distributed over three years, with about two-thirds occurring in the same year and the remainder over the next two years, for both mandatory and discretionary spending. Those rates reflect the time required for the Department of Transportation (DOT) to select and contract with airlines to provide the subsidized air services, obligate funds, receive invoices for services provided, and review and approve the invoices as outlined in the contract.

Relatively little uncertainty surrounds the option's savings relative to CBO's baselines for Amtrak and the EAS program—although those baseline projections could differ substantially from the amounts that the Congress might appropriate for the programs even if lawmakers did not change the programs otherwise. The effects on outlays of changes in budget authority have not varied much from year to year in the past, making the projections of those effects fairly certain. The main source of uncertainty in this option is the projected revenues from the overflight fees; actual revenues, and hence the savings from not using those revenues for the EAS program, could differ from CBO's baseline either because GDP or inflation diverged from the agency's current baseline projections or because those factors are imperfect proxies for miles of overflight travel and changes in the costs of air traffic control.

Short of eliminating support for Amtrak and the EAS program, the Congress could reduce spending on either program in more limited ways. For example, the minimum distance for federal support of Amtrak's rail lines could be raised from 750 miles to some higher threshold, with corresponding reductions in appropriations. Setting the minimum at 1,000, 1,500, or 2,000 miles would reduce the number of eligible lines from 15 to 11, 6, or 4, respectively. Alternatively, eligibility for continued federal support of Amtrak could be based on the number of states served: Five of the 15 lines serve 10 or more states, and an additional 8 lines serve between 5 and 8 states. Eligibility for subsidized air travel service in the EAS program could be tightened by increasing the minimum distance of a community from the nearest medium or large hub airport, lowering the maximum subsidy per passenger, or reducing or eliminating DOT's authority to grant waivers of the existing requirements (discussed below).

Other Effects

One argument in favor of this option is that when the Amtrak and EAS subsidies were first authorized in the 1970s, both were viewed as temporary measures. They were intended to help Amtrak become self-supporting and to aid communities and airlines as they adjusted to deregulation.

A second argument for the option is that both subsidies support transportation services that are of some value to particular groups of users but that are not commercially viable and provide little if any benefit to the general public. According to that argument, states or localities that highly value the subsidized rail or air services should provide the subsidies. States are already required to provide support for Amtrak service on rail lines less than 750 miles long in amounts determined by a cost-allocation method that Amtrak developed in consultation with the states to ensure that those lines cover their operating costs. Some analysts have called for the federal government to extend that requirement to Amtrak lines longer than 750 miles. The EAS program also has cost-sharing requirements, although they affect only the three communities in the program that are less than 40 miles from the nearest small hub airport: Those communities must now negotiate a local share of the costs before their participation in the program will be renewed. Communities not in the EAS program have used various methods to develop or maintain air service, including guaranteeing airlines a minimum level of revenues (in some cases, using federal grants to back the guarantees), waiving fees, and taking over ground-handling operations.

An argument against eliminating funding for either Amtrak or EAS is that rail or air service to some smaller communities would be curtailed without the federal subsidies. Amtrak's long rail lines could be particularly vulnerable because reaching agreement among all of the affected states on how to replace the federal subsidies could be difficult. Eliminating service on existing rail lines could cause hardship for passengers who rely on them and might undermine the economies of affected communities.

Another argument against eliminating support for Amtrak is that the amount of such support needs to be analyzed relative to federal subsidies for other modes of travel. Rail travel has certain advantages for society, including a much lower fatality rate than travel by highways and lower emissions of air pollutants and greenhouse gases than travel by highways or air. Those advantages could be lost under the option: The loss of federal support could lead to sharp reductions in Amtrak's operations and capital investment and consequently could undermine the future viability of passenger rail service in the United States.

An additional argument against discontinuing EAS is that efforts to control the program's costs are under way. Four communities with high average subsidy costs per passenger in 2015 or 2016 have lost their eligibility for EAS: In one case, the subsidy exceeded a cap of $200 for CONUS communities within 210 driving miles of a medium or large hub airport; the other subsidies exceeded a cap of $1,000 that applies to all CONUS communities. Also, a fifth community has taken a buyout to leave the program voluntarily. DOT used its authority to grant temporary waivers to 28 other communities that were out of compliance with the $200 cap in 2015 or 2016 or with a requirement that CONUS communities within 175 miles of a medium or large hub airport board an average of at least 10 passengers per day; seven of the 28 came into compliance by 2016 or 2017. Looking at the average 2017 subsidies of the remaining 21 communities, 9 fell between $201 and $250, and another 6 were $100 to $500 below their 2015 levels. (Four more communities fell out of compliance in 2016 or 2017; their 2017 subsidy rates ranged from $203 to $265.) Continued efforts by communities to comply with the requirements and by DOT to terminate the eligibility of communities unable to comply could help to control the EAS program's costs.