Summary: In order to stay within the current Federal investment limit, Conrail's 5-year business plan calls for reduced capital expenditures during 1980 and 1981, and catch-up spending in the later years. To improve its operations, Conrail has been committed to a massive track rehabilitation program. To soften the impact of reductions to this program, it plans to increase expenditures for other kinds of maintenance such as surfacing. GAO believes that the curtailing capital programs to stay within the current Federal funding limit creates an unacceptable risk. Reduced capital investments could result in plant deterioration and a return to declining service quality, thereby eroding the benefits gained from the already significant Federal investment. Congress has several options for responding to Conrail's situation. It can defer any action, pledge additional funds, enact regulatory reforms, or seek an alternative solution to rail problems in the Northeast. Although GAO does not endorse a particular solution, it encourages resolution of the matter as soon as practicable to avoid the risk of a return to an inadequate rail freight system.
