Dear Amtrak Co-workers:

Last week, the Board of Directors and management unveiled a reform 
package for Amtrak and a Grant and Legislative request.  The FY ’06 
funding request is $1.820 billion, the amount necessary to operate the 
existing system and continue our state-of-good-repair capital program. 
The increase we are seeking in FY ’06 compared with the current year is 
for working capital and capital.  The operating budget will be tight, 
but achievable.

The reform package is a good proposal in my opinion and, if you take the 
time to read it (it is on our Web site), you will find that the Board 
has taken a strong position in support of intercity rail service.  When 
you read it, keep in mind that it’s important that you look at the 
totality of the package, some of which you may think is good, some bad. 
  However, overall it is a decent plan and the best I’ve seen in Amtrak 
history.  It was not done in haste, and not made just for the sake of 
change.

None of us should be under any illusion that business as usual will be 
acceptable in the current political and economic climate — there will be 
reform.  Either we can attempt to shape it, or we can stand aside and 
let it happen without our input.

There are a number of very unwise reform proposals floating around that, 
I believe, would be extremely harmful to our company and the future of 
intercity passenger rail.  Our proposal is thoughtful and practical, and 
will form the basis for the coming debate, albeit some portions of the 
proposal are controversial.

The proposal calls for:

1. Adequate funding for Amtrak in FY ’06.

2. Establishment of a federal capital grant program for state investment 
in intercity passenger projects (80 percent federal, 20 percent local) 
placing rail on the same basis as highways and air.  Once in place, 
states would be responsible for 100 percent of any operating deficit 
after four years.

3. The federal government through Amtrak would be responsible for 
bringing the Northeast Corridor up to a state of good repair.

4. Amtrak would remain a vertically integrated company, i.e., corridor 
maintenance would not be separated from operations.

5. Organizationally, Amtrak would remain as it is today; however, we 
would budget and report on five businesses – state corridors, long 
distance trains, NEC operations, infrastructure and ancillary businesses.

6. Performance targets would be set for long-distance trains.  Trains 
requiring more subsidy than these standards would also require 
additional state or federal subsidy, or be discontinued.  This would not 
happen overnight, but would put pressure on us to improve.

7. It is proposed that the Railway Labor Act be changed (for Amtrak 
only) to move us closer to a standard business.  For example, negotiated 
agreements would terminate at the end of the term; management may impose 
new terms; unions may exercise self help; and presidential emergency 
boards and releases would be eliminated.  The reason for this change is 
to allow us to deal with work rule issues that frankly are very 
difficult to deal with under the existing law.

8. It is proposed that new employees would be placed in Social Security. 
  Current employees would be grandfathered in Railroad Retirement.

9. The plan envisions that there would be a growth in competition in the 
industry for both services and possibly operations.  The states would 
become the purchaser and have the right to select the most efficient 
operator.

10. Lastly, our debt of some $3.8 billion would be assumed by the 
federal government, thereby removing the need for nearly $300 million in 
annual funding.

Under this plan it is important that we be in a competitive position, 
which is why the company is seeking work-rule changes and the change to 
Social Security.  For example, we have already lost business to 
competitors who organize their maintenance activities based on 
industrial vs. craft lines and are covered by Social Security.  Further, 
we recently lost the opportunity to bring Acela overhaul work to the 
Bear, DE, shop because of our inability to organize our forces 
efficiently.  The current rules are based on existing craft distinctions 
and scope rules, and it is now clear to me that this has to be changed 
if we are to survive and if our work force is to have a future in this 
industry.  If management and labor were more creative, we could work our 
way through this problem.

In sum, while I believe this is a good plan, I know some portions of it 
are controversial.  However, I would remind you that reform will happen 
and we can either shape that reform or be its victim.  What it comes 
down to is unless we change, we will not survive.
Our Board has shifted the debate and I would urge all to understand what 
is proposed and to support responsible change.  There is much in our 
proposal for all of us to support.  We should limit our disagreements to 
the extent possible.

Our next hearing will be this Wednesday, April 27, before the House 
Appropriations Subcommittee.  I will testify on behalf of the company. 
Following that, Amtrak Board Chairman David Laney has been asked to 
appear with me on a panel before a Senate Appropriations Subcommittee 
hearing on May 12.  We expect the House Transportation and 
Infrastructure Committee will hold general oversight hearings beginning 
in mid-May.

How some of these proposals actually pan out will be the subject of much 
discussion over the course of this year and maybe the next.  No one 
really knows exactly what the outcome of all of this will be.

I will keep you posted as things develop and on our public appearances 
before the United States Congress.

Sincerely,

/s/ David L. Gunn

P.S.  Tomorrow I will be talking about this proposal on C-SPAN’s 
Washington Journal television program from 9 a.m. to 9:45 a.m., ET. Tune 
in if you can.

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