GOVERNANCE: Addressing Remaining Shortcomings Would Lead to a Budget Development Process More Fully Aligned with Leading Practices

Since its creation in 1971, Amtrak (the company) has had to rely on federal assistance—$46 billion to date—because passenger revenue and other funding sources do not cover the company’s costs. For example, in fiscal year (FY) 2016, Congress provided federal grants of about $930 million to cover the company’s capital maintenance and improvement costs and almost $300 million to cover its net operating loss.1 However, the company has an extensive backlog of state-of-good-repair projects, and the annual capital grant amounts have not been sufficient to meet all of its needs. In recent years, the company has made some improvements to its capital budgeting process, but the amount of reprogramming that occurs throughout the year is still significant. In addition, over the past two years, the company has not generated the revenue it expected and has had to reduce its planned operating budget through a series of spending cuts.

Given that the company’s needs have exceeded the level of funding available each year, it is particularly important to optimize the value of the company’s capital and operating expenditures through a sound budget development process. In this report, we identify shortcomings in the company’s budget development process as compared to leading practices for budgeting, and we discuss possible solutions that are in line with these leading practices. To identify these practices, we reviewed literature and interviewed a number of experts—including executives of other passenger railroads and railroad associations, transportation and budgeting consultants, and representatives of government and private-sector entities. Because the process for both the capital and operating budgets includes common elements, such as submitting budget requests and reviewing them for approval, our results in this report address one overall budget process.