WASHINGTON -- The Alaska Railroad said Thursday that Congress has struck a deal to save it from a massive budget cut that could have meant large-scale layoffs and less passenger service.

Railroad officials said Alaska U.S. Rep. Don Young's office told them Thursday the railroad should expect a $4 million cut instead of the $30 million cut the U.S. Senate wanted.

Young was on the committee negotiating the differences between the Senate version of the transportation bill and the House version of the bill, which would not have cut the railroad at all.

"The Senate-passed highway bill hung Alaskans out to dry and would have had drastic implications all across the state," Young said in a written statement.

Alaska railroad officials had warned that the Senate cut would have meant "some fairly serious cuts in personnel" as well as a restructuring of the business model for the railroad. The union that represents the railroad's train crews had urged Senate Majority Leader Harry Reid to reverse the cut, saying it would have forced the state-owned railroad to shed one third of its employees, dramatically reduce passenger services and default on its bonds.

The Alaska Railroad has $135 million in bonds backed by federal dollars, money that pays for track work, collision avoidance technology and equipment.

Alaska Railroad spokesman Tim Sullivan said Thursday that railroad officials just received word the funding cut would not be nearly as large as feared and were weighing the implications. "Everything is still a little up in the air we need to sit down and see what it all means," Sullivan said in an interview.

But he said the initial reaction is that the $4 million cut in the compromise bill would mean less money for some railroad projects. It's not clear what projects would be affected, he said.

The compromise bill is expected to pass Congress this week.

The Senate wanted to cut the Alaska Railroad by $30 million after deeming the money to be an earmark. Congress wanted no earmarks in this year's transportation bill.

The funding originated in 2005 when the Alaska congressional delegation put language in that year's transportation bill setting out how the railroad would be funded.