The State hasn't been part of Caltrain for many years. Yes, Caltrans provided the bridge between SP and the JPB, and bought the first set of replacement equipment, but hasn't been otherwise related to the operation since the mid-1980s. Since then, it's been a transit operation run by a consortium of the 3 counties' transit agencies (the Joint Powers Board).

As with most public transit operations, it's not possible for Caltrain to break even let alone make money. As was true with SP, you can't charge people enough to cover the cost of carrying them around AND upgrade and maintain the operation. If you could, UP (SP) would still be in the passenger business. You have to subsidize the passengers either openly (with tax revenue) or under the table (if you make enough from doing something else like hauling freight to afford the cross-subsidy). The subsidy theoretically works because the overall economic activity supported by the transit is greater (workers can get to work...) so other revenues are higher to compensate for it. When times were better, the transit agencies on the Board could kick in enough funds to keep things going at Caltrain and still run their buses (and streetcars/light rail in SF and SJ). That's no longer possible, and Caltrain as a child of the transit agencies apparently can't get OPERATING subsidy funds from Federal and State sources on its own. Hence the current problems.

There's deadwood in any organization. However, I don't think firing a couple of mid-managers who cost (with benefits and overhead - actual paycheck probably about 1/2 that) $250K a year will make much of a dent in a deficit of $50 million -- and the JPB is a small enough organization (among govt agencies) that I'd be surprised if there are more than 1/2 dozen people at that salary level or higher. Their budget should be available (it's a public document) and that should show what their staff costs really are. BTW, the median income in SM Co. last time I looked was near $100K, and you need double that or more to qualify for buying even the cheapest condo or slum house there (median price even in the slump is near $500K), so a wage in the $100K neighborhood is probably about a basic living wage for the area; suspect train crew with decent seniority get paid near that.

Yes, people love to bash govt, and RRs with their traditional union/craft/management structure are an easy target too, but the Caltrain cost structure really isn't unreasonable given the character of the area and the line. It's just not sustainable in terms of revenue the way transit on the Peninsula is presently organized. What they probably need is another 1/4-1/2c sales tax dedicated to the train (in addition to what's going to the regular transit systems); that's the way it's set up in the BART counties.