Photo courtesy of the MBTA
The MBTA faces “existential” long-term budget challenges as the pandemic’s impact on revenue exacerbates existing trends, a fiscal watchdog group warned in a new report.
By fiscal year 2022, the T could have an operating budget deficit of more than $400 million thanks to downstream effects of COVID-19, according to a new analysis released by the Massachusetts Taxpayers Foundation. Spending and revenue patterns could reach the same “severe imbalance” that a special panel first flagged in 2015, the foundation said.
The business-backed foundation, which has sounded alarms about MBTA finances in the past, argued the growing financial strain could prove more significant than the dire conditions in 2015 that prompted lawmakers and Gov. Charlie Baker to put the transit authority under the oversight of a soon-to-expire Fiscal and Management Control Board.
“When the current FMCB took command in 2015, the MBTA was in crisis,” MTF authors wrote. “As it exits, the MBTA is lurching towards another financial crisis, one that this time could prove existential.”
The beleaguered transit agency has long struggled to keep its spending and revenues in line and to deliver the kind of service that riders desire, but now the agency faces a ridership decline and a severe dip in the sales taxes that are dedicated to the agency’s budget.
Since its inception, the FMCB – which approved fare increases in 2016 and 2019 – has focused on trimming costs and expanding revenue from sources such as advertising and parking. MTF praised the board for its “long list of substantial and important accomplishments.”
In 2013, report authors noted, a report from then-Gov. Deval Patrick’s administration projected the T’s expenses would outpace revenues – excluding state contract assistance – by $358 million in fiscal year 2019. Under the FMCB, the actual gap in fiscal 2019 was only $18 million.
However, the report warned that progress has “unraveled” due to a combination of the COVID-19 outbreak and already-planned increases in spending.
Through fiscal year 2025, MTF projected the MBTA’s expenses will grow an average of 4.7 percent annually while revenues will grow only 2 percent per year between fiscal 2023 and fiscal 2025.
The FMCB last month approved a $2.29 billion fiscal year 2021 budget that increases spending by about 7 percent while anticipating about a quarter as much fare revenue as pre-pandemic expectations.
As part of the CARES Act signed in March, the T will receive about $827 million in one-time federal support, which will help close spending gaps in fiscal 2020 and fiscal 2021. However, the current plans would not keep any of that money available for fiscal 2022 — when revenue impacts from the pandemic may still be felt — and it remains uncertain if Congress will seek another round of stimulus for transit agencies.
MBTA officials are also pushing for more spending on operations. The T plans to hire hundreds of new employees in safety-related roles, a response to an independent panel’s conclusion last year that the T has not prioritized safety on its core subway lines.
Other cost drivers MTF flagged include growing pension obligations, debt service for the borrowing that funds capital expansions, and operating losses on the under-construction Green Line Extension and South Coast Rail.
“With the FMCB near its end, the incoming MBTA board will face a financial outlook even bleaker than that of 2015, with limited capacity to act without impacting current or planned MBTA services,” MTF wrote
Legislation to aid the T’s budget remains stalled. In March, the House approved a major package of tax and fee increases – including a 5-cent gas tax increase and a 9-cent diesel tax increase – that Democratic leaders projected could bring in more than half a billion dollars per year in revenue for transportation purposes.
Supporters of that bill pointed to unreliable service and safety issues at the T as underscoring the need for more funding at the agency.
That bill still has idled in the Senate, where leaders have hinted they are wary about pursuing some tax hikes amid the strained economic climate marked by record unemployment levels.
The House included language in its transportation tax bill extending the FMCB another three to five years and adding two members, while the Senate last week approved a narrower bill creating a new seven-member MBTA Board of Directors.
The current board is set to expire on June 30.
