A congressionally appointed panel said Thursday that Amtrak is irreversibly flawed and should be broken up to give the free market an opportunity to improve the nation's passenger train system.

Amtrak, created to relieve freight railways of the burden of carrying passengers, should be replaced at least in part by private operators working under franchise, the Amtrak Reform Council said.

The council's report, sent to Congress, says Amtrak should be relieved of policy-making duties and landownership. After a transition period, private operators would be allowed to compete for contracts to run specific routes.

If enacted, the change would be dramatic. Amtrak, formed in 1971, is the nation's sole provider of intercity passenger train travel.

"The council believes that passenger rail service will never achieve its potential as provided and managed by Amtrak," the report says.

The council voted 9-1 in a mail ballot this week to approve the report, which was released Thursday. Transportation Secretary Norman Mineta, the Bush administration's representative on the panel, abstained. Charles Moneypenny, who represented rail labor, cast the only "no" vote.

The next step is up to Congress, due to vote this year on whether to authorize Amtrak's continued existence. The House Transportation Committee has scheduled a Feb. 14 hearing on the report.

White House budget director Mitchell Daniels said this week the Bush administration plans to study the council's plan before deciding on a course for Amtrak and passenger rail.

The plan faces a hostile reception from Amtrak supporters on and off Capitol Hill.

"I think this report should be rejected out of hand," said Amtrak chairman Michael Dukakis, former Massachusetts governor and presidential candidate. He called decentralization "a prescription for bureaucratic paralysis."

Dukakis said the real issue is money.

Amtrak says it has a $5.8 billion backlog in work needed on its trains, tracks, rail yards and stations. The Transportation Department's inspector general, Kenneth Mead, reported last month that Amtrak needs at least $1 billion a year to stave off deterioration of its assets, most of which are in the Northeast.

Last week, Amtrak said it will cancel long-distance routes unless it receives $1.2 billion in the 2003 budget year, which begins in October. President Bush has proposed $521 million for Amtrak, the same amount as the last three years.

In its report, the reform council endorses "adequate and secure sources of funding for intercity passenger rail service" but specifies no amount.

The reform council's chairman, Gilbert Carmichael, said Thursday that Amtrak's problems do not relate to funding. "They stem from an organization that is obsolete, can't do all the things it is supposed to do, and has to change," he said.

Under the council's plan, a new subsidiary of the National Railroad Passenger Corp. — Amtrak's official name — would conduct train operations, ultimately franchising out some or all routes through competitive bidding.

Another subsidiary would own, operate and maintain the tracks, property and stations now under Amtrak's control.

"The council believes that, as is the case throughout our free-market economy, competition would drive down costs and improve service quality and customer satisfaction," the executive summary says.

Congress created the council as part of an overhaul that gave Amtrak until Dec. 2, 2002, to begin operating without government subsidies. The council voted 6-5 in November that Amtrak will not achieve that goal, a finding that gave the panel 90 days to come up with a restructuring plan.

Amtrak President George Warrington said the council's November vote cost Amtrak $52 million because it forced some pending business deals to fall apart.

The rail labor division of the AFL-CIO's transportation trades department failed last week to persuade a federal judge to block release of the council's report.