The company that manages the cash-strapped Cumbres & Toltec Scenic Railroad has pulled out, causing the layoffs of all but nine machinists.

The railroad had employed an estimated 25 people during the offseason, said Steve Malnar, executive director of the four-member commission that oversees the railroad.

The Chama-based Rio Grande Railway Preservation Corp., which has operated the train for the past several years, notified the commission last month that it was leaving.

Malnar said he is cautiously optimistic the train will run next year.

The 64-mile narrow-gauge railroad, which chugs between Chama and Antonito, Colo., is owned by the states of Colorado and New Mexico. The train runs between late May and October.

Carl Turner, one of two New Mexico commissioners, said the coal-fired steam engines will be ready to go next year.

"We're going to invest the money to have those engines ready so that the railroad will operate, and I'm sure it will," he said. "I'm not sure how we're going to do it, but I have eternal confidence."

The not-for-profit management company contended the commission had not provided the money it had promised for the train, Turner said.

The company also contended the commission had not provided it with liability insurance, he said.

The insurance glitch arose when the commission changed to New Mexico's state risk-management system, Turner said. The snafu has been worked out, he said.

The funding shortfall was due in part to Colorado's failure to contribute its share of funding for the train, he said.

The compact governing the railroad requires both states to split expenses.

Since fiscal 2003-2004, Colorado has contributed $790,000, while New Mexico has kicked in $2.89 million, Turner said.

The management company also overestimated the number of riders for this season, said Malnar, who is leaving as director at the end of November to return to Minnesota.

The company anticipated 45,000 riders, but ended up with about 33,000, causing a revenue shortfall, he said.

"There was a discussion as to whether the commission wanted to retain the current management company," Malnar said. "The company decided it wanted to terminate the agreement."

The likelihood of finding another company to manage the railroad for the next season is not good, he said.

"Now we're faced with the idea that the commission is going to have to take this over and operate this at least for the 2006 season," Malnar said.

The train's status depends on how much money the states contribute, he said.

The commission is asking for a special appropriation of $870,000 to split between the two states, Malnar said Wednesday.

The funding will be in addition to the $700,000 appropriation, which the states also are asked to divide.