WASHINGTON — The Alaska Railroad faces a huge budget cut from the U.S. Senate that could mean large-scale layoffs, less passenger service and a default on the state-owned corporation's bonds.
The national transportation bill that passed the Senate last week would cut $30 million from the Alaska Railroad if the House agrees and it becomes law.
"Such a dramatic cut, if enacted, would have a devastating impact on this state railroad," the union that represents the Alaska Railroad's train crews wrote to Senate Majority Leader Harry Reid.
"It would cause the railroad to reduce employees by about one-third. It would cause a bond default ... it would cause a dramatic reduction in passenger services."
Alaska Railroad CEO Chris Aadnesen said in a Monday interview that the union's estimate of a one-third workforce cut is a worst-case scenario but probably not too far off if the Senate cut goes through.
"It would be a big blow to us. So we would have to restructure not only the workforce but the business model and that would include some fairly serious cuts in personnel," Aadnesen said.
He said it would also put railroad bonds in jeopardy. A default would have big negative impacts on the railroad's credit and the cost of borrowing, and that would be avoided at all costs, he said.
The version of the transportation bill in the House doesn't slash funding for the Alaska Railroad. But support has been lacking for the House version, which sought to tie transportation spending to drilling in the Arctic National Wildlife Refuge and offshore of the East Coast.
President Obama said Monday he wants the House to go ahead and accept the Senate bill, which passed with bipartisan support. It's not clear if the House will do that or push something else. Another possibility is that Congress passes a short-term extension of the current transportation law while lawmakers fight over what to do.
Aadnesen wrote a letter to railroad employees on Friday, saying the cut would "put unexpected pressure on our business model."
"We believe there is a very good chance of retaining our funding status," Aadnesen wrote. "However, in the event our funding is reduced we want to be prepared. We are undergoing contingency planning exercises that explore various ways we could reshape the organization and our services to withstand a decrease in funding."
"The most important thing for you to do at this point is to keep your head in the game of railroading," he wrote the employees.
The cut to the Alaska railroad went through the Committee on Banking, Housing and Urban Affairs, chaired by South Dakota Democratic Sen. Tim Johnson.
Alaska's congressional delegation had put language in the 2005 transportation bill allowing the Alaska Railroad to count 60 percent of its track mileage for Federal Transit Administration formula funding. But the banking committee is taking the position that that was an earmark and that this year's transportation bill will include no earmarks.
Alaska Sens. Mark Begich and Lisa Murkowski pushed amendments to try to put back the Alaska Railroad's funding but they fell short. Begich's office said the banking committee maintained that the railroad doesn't provide commuter transit for people who ride to work, so shouldn't qualify for the money, but that the Bush and Clinton administrations had taken the view it did qualify by providing "public transportation."
Both Murkowski and Begich ended up voting in favor of the overall transportation bill despite the cut to the railroad. They said Alaska got a lot in the bill, with other proposed cuts being prevented and $1 billion going to the state over two years for road work and other infrastructure projects.
Alaska Congressman Don Young is protesting the railroad funding cut and other parts of the Senate bill. The railroad said it's hoping Young can influence House Republican leaders to fight the cut.
"It's sort of an unprecedented worry we're going through, where you're written into the law and you think something is permanent and then there's a concerted effort to write you out of the law," said railroad CEO Aadnesen. "I'd say we're pretty hopeful but as far as confidence goes, I don't have any experience with it to really handicap it."