Now Is the Time to Fix Public Transit Funding

Public transit agencies are facing a unique challenge in unique times. On the one hand, nearly every agency is losing tons of money due to plummeting ridership, while costs keep rising to keep the system clean and disinfected. On the other hand, they have to keep running trains and buses to get essential workers where they need to go. As a result, the agencies themselves are stuck between a rock and a hard place, and they need help right now.

To illustrate the scale of the problem, consider the Metropolitan Transportation Authority, which runs New York City’s subway, buses, and two commuter rail systems. The MTA estimates it will lose $3.7 billion in fares if this were to go on for a whole year. Subway ridership is down 60 percent and commuter rail ridership has plummeted by up to 90 percent on Metro-North. Add in another $300 million for increased expenses from all the cleaning and sanitizing, and the MTA thinks it will need some $4 billion to stay afloat.

This grim outlook extends beyond New York City. San Francisco’s BART system has tweeted its ridership numbers daily in order to raise awareness for its plight. On March 17, ridership was down 87 percent from the average Tuesday in February. It expects to lose $37 million per month in fare and parking revenue.

And that’s just direct revenue that only makes up a minority of its annual budgets. Transit agencies receive the majority of their funding through broader subsidies, often through direct taxes like a portion of sales or gas tax revenue. This revenue stream will also dry up. BART, for example, expects to lose $18 million a month from those tax sources.

Of course, businesses all over America are struggling. What makes this challenge unique for transit agencies is they cannot simply close up shop, hunker down, and wait as best they can for the crisis to pass. They have to keep operating in order to get essential workers where they need to go. Even cutting back service poses public health risks, because the best way to maintain social distancing is to run more trains and buses.

As a result, Transportation expert Yonah Freemark predicts 13 local transit agencies plus Amtrak will be entering a financial crisis “very soon” because of a high reliance on fares. Other agencies that get a lower percentage of their overall budgets from fares will follow later as tax revenues plummet.

This has left transit agencies in an impossible situation. They need money, and they need it now. And they’re calling on the federal government to save them.

On Wednesday, the non-profit organizations Transportation for America and the Union of Concerned Scientists sent a letter to Congress signed by more than 220 elected officials, cities, and organizations calling for $13 billion in emergency funding so transit agencies can continue operating.

But the potential solutions are more complicated than they appear. The remedy transit agencies seek is different from what the federal government has typically done in recessions of the past. This could be bad because Congress is not good at doing things differently, but the speck of a bright spot in this crisis is, should they manage to do what is necessary, we could come out of it with a healthier and more sustainable way of funding useful public transit in America.

Before we get to the hows and whys of all this, we need to step back for a second, because nothing about American transit policy is simple or easy.

Transit agencies have two budgets. The first is an operating budget for things like labor, fuel, and electricity to keep the trains and buses running. The second is a capital budget for long-term expenses like buying new trains and buses, expanding and upgrading the system, and major repairs. We have this two-budget system partly because, for the first two-thirds of the 20th Century, transit agencies did as little of the capital expenses as they could to keep the services running. This worked out very well until everything inevitably broke.

Painting a very broad brush for the sake of brevity, the federal government viewed its role in transit funding as supporting those capital expenses that wouldn’t get done otherwise, although a small amount of money was made available for keeping service stable in some cities. That is, until the Reagan administration ended those operating subsidies because, in the words of Ralph Stanley, head of the Urban Mass Transit Administration, it “cultivated inefficiencies.” The thought here was that if local agencies got dollars from the feds to run service, they wouldn’t care how efficient that service was. If the feds cut them off, local officials would make “efficiencies” and run the same service but better.

This did not pan out. As Jake Anbinder wrote for The Century Foundation, it resulted in agencies owning more vehicles (which the feds subsidized the purchase of) but running them less frequently. We still have inefficiencies, just of a different kind.

The distinction between operating and capital budgets came to a head during the Great Recession in 2009 when Congress passed the American Recovery and Reinvestment Act that included some $48 billion in transportation infrastructure stimulus spending. The vast majority of this money went to building and repairing roads and bridges, but some went to transit, including 850 new or upgraded transit hubs, 12,000 buses, and 700 rail cars.

While that may have provided some benefits to the economy overall, said Ben Fried of the non-profit TransitCenter, “that was very counter to the actual needs agencies were facing.” Because tax revenues had plummeted during the recession, what agencies needed was operating money to keep running trains and buses. Instead, the feds gave them money to buy more trains and buses, not to run more trains and buses.

At that point, transit agencies pulled the only lever they had left to pull. They cut service. Some cities, like Cleveland and Milwaukee, have still not returned to the level of service they were providing before the recession. “Construction workers were getting hired,” Fried summarized, “while bus drivers were getting fired.”

Now, there’s widespread concern in the transit industry that the 2009 playbook won’t cut it. More capital funding would accomplish next to nothing, suggested Jeff Davis of the think tank Eno Center for Transportation. “This recession is going to be all about a sudden and unexpected collapse of demand for the use of transportation infrastructure,” he wrote in an email. “How is spending hundreds of billions [of dollars] on increasing the supply of infrastructure, which won’t become available for use for many months or years, the answer to those specific problems?”

For its part, the Department of Transportation appears aware of the problem. On March 13, the Federal Transit Administration, a sub-agency of the DOT, allowed agencies in states that had declared emergencies to use federal formula funds for emergency-related operating expenses like increased cleaning. It was a small measure, but it demonstrated a relaxed approach to the distinction between capital and operating expenses.

Still, much more is needed where that came from if transit agencies are going to come out of this crisis in one piece. The joint Transportation for America and Union of Concerned Scientists letter asked Congress to temporarily blur the line between operating and capital funds so agencies can redirect money where it's needed most. This would give agencies the budgetary flexibility they desperately need during this crisis without costing the feds any additional money.

However, the letter also makes clear that alone won’t be enough. “Additional funding and policies will be necessary,” the letter adds, especially for agencies not receiving capital funds.

Like everywhere else one looks these days, there’s no question the outlook facing America’s transit agencies is grim. But there is a faint glimmer of hope we can come out of this with a more sensible, humane government than the one we began it with, perhaps one that focuses more on the quality of service transit agencies are actually providing rather than on how many new buses are sitting in the depot.

I asked Fried what his outlook is, on whether Congress can get their act together to make this sensible policy change that could stave off disaster for another day, or week, or month.

“I don’t know, man,” Fried said. Then he laughed for a few seconds. Then he fell silent for long enough that I worried the call had dropped.

“It’s hard to have trust in anything D.C. says these days,” he finally continued. “But this is one of those moments where the problem is so large and the risk is so great they might have to do the right thing.”