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BOSTON (State House News Service) — Potentially teeing up a new round of debate about how the state funds public transit, MBTA officials on Friday rolled out a dire financial forecast that projects a sizable operating budget shortfall this year and a nearly $1 billion chasm within five years.
T budget-writers said worse-than-expected ridership and a successful hiring blitz widened the gap between anticipated revenues and expenses in fiscal year 2025, which starts July 1.
Depending on factors such as fare revenue, the agency could face an operating budget gap between $567 million and $652 million in fiscal 2025, the latest projections show. MBTA officials still have a few hundred million dollars of pandemic-era federal relief stashed away, but even if they control expenses and deplete that account, they still forecast a $182 million shortfall.
The MBTA's fiscal year 2024 operating budget totals about $2.72 billion.
It's not clear how the agency's higher-ups will navigate what MBTA Chief Financial Officer Mary Ann O'Hara dubbed "the fiscal cliff," or the subsequent years of projected budget gaps that could surpass $900 million by fiscal 2029 in the worst-case outlook.
The figures also do not take into account any potential changes in state funding in fiscal 2025. As she deals with the state's own budget woes, Gov. Maura Healey announced this week she will push to "double our support for MBTA operations," which could direct tens or hundreds of millions of dollars more to the T if she can win over lawmakers.
MBTA officials familiar with financial discussions said they do not plan to propose fare increases this year, and they voiced hesitation about the prospect of slashing service -- which still has not been fully restored after cuts in recent years -- or laying off employees. While nothing is set in stone, T officials involved in discussions suggested those cost-trimming options would make transit service worse at a time when the agency is trying to win back riders and fix glaring safety problems.
"Difficult decisions must be made," O'Hara told the board's audit and finance subcommittee.
Actual budget decisions are still weeks away. Healey will unveil her proposed state spending plan next week, and MBTA officials are expected to roll out their own draft budget in March.
A few factors contribute to the widening budget gap. While recovery rates have varied, most public transit agencies across the country are still grappling with depleted ridership nearly four years after the COVID-19 pandemic began, eating away at fare revenues that played key roles in budgets. Roadway traffic, meanwhile, quickly roared back.
MBTA officials do not expect that to change any time soon. Even the most optimistic scenario they outlined Friday projects that fare revenue by fiscal year 2029 will be only about three-quarters as much as the T collected before the pandemic.
The T has also been on a hiring blitz, growing its workforce by 730 positions over the past year. More workers means more money spent on salaries, which officials have pitched as worthwhile to improve service and safety.
Thomas Glynn, the MBTA Board of Directors chair who served as the agency's general manager from 1989 to 1991, recalled that during his GM tenure the T typically served about 650,000 passengers per day with a workforce of 7,000 employees.
"Now you have 1.3 million passengers a day, and until recently, you had 6,000 employees," he said at Friday's meeting. "We doubled the number of passengers, in part because of the Big Dig, and we reduced the headcount by 1,000. To me, that sums up a lot of these dynamics."
The worsening outlook for T finances, plus Healey's apparent desire to boost MBTA funding, could ramp up pressure on the House and Senate to wade back into a topic they haven't been inclined to embrace in recent years.
Representatives approved a series of tax and fee hikes in 2020 designed to generate more funding for the state's transportation needs, including the T, but the measure never got a vote in the Senate once COVID-19 took over in the spotlight. Top Democrats since then have shown little desire to rethink long-term operational funding for the MBTA, though they did direct significant surtax revenue toward the agency in this year's state budget.
While throwing cold water on raising fares Friday, MBTA officials set their sights on another fare change that will instead cut into their available revenues: rolling out a reduced-cost option for low-income Bay Staters.
T staff, who have studied the idea for years, signaled they are ready to pursue board approval for a new ticket type aimed at riders who earn 200 percent or less of the federal poverty level but don't qualify for one of the existing low-fare options.
Steven Povich, the agency's senior director of fare policy and analytics, said about 60,000 riders between the ages of 26 and 64 could qualify. The income threshold would be equivalent to about $29,160 for a single individual or $60,000 for a household of four.
If approved, MBTA officials expect the program would cost roughly $25 million in its first year and $50 million to $60 million annually once it ramps up.
Healey said this week she plans to include funding in her upcoming state budget proposal to cover a permanent low-income fare option.
Written by Chris Lisinski/SHNS
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