Why Are We Still Talking About Amtrak Profitability?

by Jim Mathews / President & CEO

Just like cicadas, the five-millionth cable re-run of 'Shawshank Redemption,' or a dyspeptic lunch, the argument about Amtrak and profitability just seems to keep coming up.

Between a few press interviews I’ve done lately and even some congressional queries, it looks as if it’s time again for me to dust off my diatribe on whether Amtrak needs to make a profit (spoiler alert: it doesn’t).

Bottom-line up front? Amtrak critics base their profit-motive analysis on a combination of ideological blindness, a quirk in Amtrak’s early legislative history, and admittedly confusing prose in the Amtrak statute itself. But, for the past 46 years the laws on the books have not required Amtrak to make a profit, and trying to make Amtrak profitable not only won’t work but will make it even harder for Amtrak to do what we already pay it to do.

None of the critics’ misperceptions can overcome these realities: that Congress changed its mind in 1978 on this topic and since then has never required Amtrak to make a profit; that the Congressional Research Service confirmed it in 2002; that the Supreme Court has ruled – twice – that Amtrak is not a “private company,” and; that when Congress re-visited Amtrak’s mission and purpose it explicitly stripped profit-making out of Amtrak’s to-do list.

I’ll concede a couple of stipulations. Yes, it’s true, when Amtrak was “born” in 1971 those who created it and supported it thought the newly nationalized rail carrier might just turn a profit. And yes, it’s not a bad thing to ask Amtrak to exercise corporate-style care with the taxpayer dollars we give it to run 305 trains a day and to plan for the future – in fact, it’s a Very Good Thing ™. We all want Amtrak to do a good job with our money and deliver the service we deserve.

But in the past few weeks I have had to explain Amtrak’s convoluted history and background to a lot of reporters and others, all of whom asked variants of the following question: “I read the law, and it says that Amtrak is a private company and that ‘Amtrak will be operated and managed as a for-profit company.’ So there!”

Let’s start with “operated and managed as.” During the 1978 Amtrak reauthorization, Congress expressly modified the “for profit corporation” status of Amtrak. Direct from the statute: “The second sentence of section 301 of the Rail Passenger Service Act (45 U.S.C. § 541) is amended by inserting ‘operated and managed as’ immediately before ‘a for profit corporation.’” [Amtrak Improvement Act of 1978, Pub. L. No. 95-421, §11, 92 Stat. 923, 928.]

So, what does that actually mean? The members of what was then the House Interstate and Foreign Commerce Committee explained their reasoning on page 15 of their report on the bill, “Section 9 amends section 301 of the RPSA to conform the law to reality, providing that Amtrak shall be ‘operated and managed as’ a for-profit corporation. This amendment recognizes that Amtrak is not a for-profit corporation.” [H.R. Rep. No. 1182, 95th Cong., 2d Sess. 15 (1978) (emphasis added).]

Earlier in that report, on pages six and seven, the Committee made it clear that their intent in conforming the law to reality was based on actual performance to-date. “Problems with the [for-profit] thesis arose in the very beginning, when the Secretary of Transportation published a report which provided for a passenger train network that was merely a ‘cut and paste’ of the pre-existing railroad-operated system in that the basic system merely entailed a series of discontinuance from the old pattern of service.” [H.R. Rep. No. 1182 at 6-7, 95th Cong., 2d Sess. (1978)]

(This House report can’t be found online anymore, but thanks to Stanley Rhodes – our intrepid intern from the University of Michigan who spent an afternoon in the ornate stacks of the Library of Congress – we have again a physical copy and we’re uploading it here for you to use.)

Since then, Congress has revised Amtrak’s mission several times. Before passage of the IIJA, the revision in force in 2015 called on Amtrak “to provide efficient and effective intercity passenger rail mobility” while using good business judgment to “minimize Government subsidies.” [49 U.S.C. § 24101(b) and (d).]

That’s kind of close to words about making a profit, but even there, there’s no actual reference to “profit” or an implication that one is mandatory in that version of Amtrak’s authorizing legislation. Nonetheless, a lot of people remained convinced then that Congress still intended for Amtrak to make a profit even if they didn’t say so in words.

In 2021, Congress addressed the profit idea again in Section 22201 of the Investment in Infrastructure and Jobs Act, the rail reauthorization that transformed into the Bipartisan Infrastructure Law. Under the heading “Amtrak Reforms,” Section 22201 of the BIL replaces Amtrak’s ambiguous profit status with this paragraph:

“Use its best business judgment in acting to maximize the benefits of Federal investments, including – (A) offering competitive fares; (B) increasing revenue from the transportation of mail and express; (C) offering food service that meets the needs of its customers; (D) improving its contracts with rail carriers over whose track Amtrak operates; (E) controlling or reducing management and operating costs; and (F) providing economic benefits to the communities it serves.”

Read that paragraph closely. I’ll wait. You will find explicit language about competitive fares, decent food, controlling management costs, and fulfilling Amtrak’s role of supporting economic development in the communities it serves. “Minimizing Federal subsidies” was replaced with “maximize the benefits of Federal investments.” That’s important. Not even a hint of “profit” anymore.

The 2002 Congressional Research Service report that I referenced earlier in this commentary was supposed to be the last word on declaring congressional intent for Amtrak’s to be relieved of the legal requirement to be profitable. In fact, the analyst/author – D. Randall Peterman – says so right in the very first few sentences at the top of his report:

“Most discussions of Amtrak refer to Amtrak’s status as a for-profit company and have noted that Amtrak was intended by Congress to be a profit-making enterprise. Despite these references, Amtrak is not now a for-profit company; it was originally created as such, but that status was changed by the Amtrak Improvement Act of 1978 (P.L. 95-421); the Conference report noted that the bill removed Amtrak’s for-profit status but required that the corporation be ‘operated and managed as’ a for-profit corporation (H.C.R. 95-1478).”

The idea behind “operated and managed as” is really just an admonition that Amtrak should try to run a tight ship. That’s something I think we can all agree we want. Use taxpayer dollars wisely and well. That’s it. Period. Full stop.

Furthermore, two subsequent Supreme Court rulings recognized this intent and incorporated it into their own judgments about Amtrak’s status as a government entity.

The Supreme Court in 1995 put Amtrak firmly into the realm of a government agency rather than a private corporation (Lebron v National Railroad Passenger Corp.). You can find that ruling here: https://www.law.cornell.edu/supct/html/93-1525.ZO.html Lebron v. Nat'l R.R. Passenger Corp., 513 U.S. 374, 115 S. Ct. 961, 130 L. Ed. 2d 902, 1995 U.S. LEXIS 909, 63 U.S.L.W. 4109, 95 Cal. Daily Op. Service 1228, 95 Daily Journal DAR 2219, 8 Fla. L. Weekly Fed. S 564 (Supreme Court of the United States February 21, 1995, Decided )

Writing for the majority, then-Justice Antonin Scalia noted that “Amtrak was created by a special statute, explicitly for the furtherance of federal governmental goals. ...six of the corporation's eight externally named directors (the ninth is named by a majority of the board itself) are appointed directly by the President of the United States – four of them (including the Secretary of Transportation) with the advice and consent of the Senate. See §§543(a)(1)(A), (C)-(D)....

“Although the statute restricts most of the President's choices to persons suggested by certain organizations or persons having certain qualifications, those restrictions have been tailor-made by Congress for this entity alone,” Justice Scalia wrote. “They do not in our view establish an absence of control by the Government as a whole, but rather constitute a restriction imposed by one of the political branches upon the other....”

“Moreover,” Scalia continued, “Amtrak is not merely in the temporary control of the Government (as a private corporation whose stock comes into Federal ownership might be); it is established and organized under Federal law for the very purpose of pursuing Federal governmental objectives, under the direction and control of Federal governmental appointees. It is in that respect no different from the so-called independent regulatory agencies such as the Federal Communications Commission or the Securities Exchange Commission, which are run by Presidential appointees with fixed terms.”

Yes, it’s true that in 2013 – when we were all fighting for Amtrak to have the right to help draft the passenger rail performance metrics and standards which finally took effect in 2020 – the DC Circuit Court of Appeals reversed a District court ruling on Amtrak by determining that Amtrak was a private entity.

But that was a very, very short-lived determination. Less than two full years later, in 2015, the Supreme Court reversed that finding – soundly, and nearly unanimously.

Writing for the majority in 2015, then-Justice Anthony Kennedy concluded that “the Court of Appeals’ premise that Amtrak is a private entity was flawed” DOT v. Ass'n of Am. R.R., 575 U.S. 43, 135 S. Ct. 1225, 191 L. Ed. 2d 153, 2015 U.S. LEXIS 1763, 83 U.S.L.W. 4145, 25 Fla. L. Weekly Fed. S 114 (Supreme Court of the United States March 9, 2015, Decided).

Kennedy then harkened back to Scalia’s ruling some 20 years earlier, pointing out that the government controls most of Amtrak’s stock, the majority of its Board is appointed by the President of the United States and confirmed by the Senate, and that Amtrak was created by Congress with an expressly public purpose.

You can find the text of that 2015 ruling here: https://www.supremecourt.gov/opinions/14pdf/13-1080_f29g.pdf

So what is it about the Amtrak profitability argument that gets me so wound up that I’ll freely write 1,681 words about it (so far)? It's simple, really: public confusion over Amtrak’s for-profit status helps nobody, not Amtrak nor the policymakers trying to improve transportation. And as we start working on reauthorizing the Bipartisan Infrastructure Law, I’d rather talk about the future than continue to rehash tired old arguments that are not only long-settled but which actively damage the cause of getting more rail investment.

Amtrak will never be a successful “company” in the traditional sense, and the leadership team is setting itself up for failure if it implies that Amtrak should be measured by that yardstick. If Amtrak tries to masquerade as a for-profit company, it diminishes the public policy purpose for which it was created and continues to be funded. A have-it-both-ways mentality (today I’m a company, tomorrow I’m an agency) contributes to the public’s confusion about how their tax dollars are actually being used. Worse, it could actually undermine continued congressional support by setting unreasonable expectations – expectations which have already been debunked and legally removed for decades.

Moreover, the 2024 Amtrak is nothing like the pre-pandemic Amtrak. Back then, our government-supported rail operator was, by and large, a rail operator. Today, our nationalized rail operator is also a construction company responsible for managing tens of billions of dollars for building bridges, tunnels, stations, and more – with all the overhead in project-management staff and capital delivery that this entails.

Asking the 2024 version of Amtrak – part rail operator, part construction conglomerate – to pretend to make a profit now is tying cinder blocks around their ankles and telling them to run a marathon. Paradoxically, it also makes Amtrak look much worse than it actually is. Amtrak can fairly be described as a successful government agency that does a pretty solid job with the public monies it gets, thanks to high farebox recovery, broad daily service across small and needy communities across the country, strong customer loyalty, and a return to pre-pandemic levels of passenger growth.

The yardstick we use to measure success for government programs and agencies is different than the one we use to measure the success of private companies. As a for-profit company, Amtrak fails...spectacularly. As a government agency, created half a century ago to carry out a public purpose recognized in law and in Supreme Court rulings, it is a spectacular success worth celebrating, supporting, and building up.

So for the good of rail service, future rail investment, Amtrak, and even the exciting new private-sector entrants like Brightline or established entrants like Herzog and Keolis competing on their own merits and models, let’s please stop comparing Amtrak to the private sector once and for all.