IOWA CITY — State lawmakers retained a small appropriation for a passenger rail link from Iowa City through the Quad-Cities to Chicago in the fiscal 2012 budget, setting up a battle next year over committing $20 million to draw down as much as $280 million in federal funds for the project.

“It’s hanging by a thread,” Sen. Jeff Danielson, D-Cedar Falls, said of the passenger-rail proposal after Democrats on a House-Senate conference committee succeeded in preserving $5 million currently in the budget. Republicans blocked — for now — additional funds for fiscal 2012, which begins July 1, and beyond. The funds make up the state match to draw down federal money to develop the passenger service to Chicago.

Sen. Matt McCoy, D-Des Moines, called the compromise a victory for passenger-rail supporters. Initially, he said, House Republicans sought to delete all passenger rail funding, not just the $6.5 million in the fiscal 2012 budget.

Now it’s up to passenger-rail advocates to make the case for committing state funds to the service, he said Wednesday.

“They need to convince the Legislature, the governor and the public that this is a marketable asset for the state,” he said. “There’s a lot at stake.”

For Republicans, what’s at stake is the ongoing operating cost associated with the service.

“We have fiscal and philosophical objections,” said Rep. Royd Chambers, R-Sheldon. “We object to setting the state up for an ongoing expense — forever.”

According to Republicans, similar Amtrak service elsewhere has never been profitable.

Former Iowa Transportation Director Nancy Richardson has maintained that the line would need state support initially, but it eventually would operate in the black.

Originally, $230 million was identified for the Iowa City-to-Chicago line through the Quad-Cities. That could grow to $280 million when passenger-rail funds rejected by other states are redistributed, McCoy said.

Chambers doesn’t think Iowa will throw away $230 million if it doesn’t participate in the federal plan.

“It’s a plan that may not serve the interests of the state,” he said. “People tell me the bus is cheaper and faster.”

In explaining the conference committee report to the House, which adopted the infrastructure budget 75-17, Chambers said the door hasn’t been closed on participation in the development of the line. Language indicating the state’s intent to participate remains.

According to McCoy, that’s enough to hold Iowa’s place in the funding pipeline.

“We’re not sending a signal that we’re backing off,” he said. “It’s not like Wisconsin that said, ‘Take it back.’”

Secretary of Transportation Ray LaHood, a former Illinois Republican congressman, has assured Iowa it will get its share of those funds turned back by Wisconsin and other states, McCoy said.

Senate Appropriations Committee Chairman Bob Dvorsky, D-Coralville, agreed and said the next $6.5 million installment on the matching funds isn’t needed until fiscal 2013.

The Senate is expected to approve the infrastructure budget tonight.

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