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What Illinois can learn from transit funding packages in peer states

August 24, 2023

Peer regions

Public transit plays an essential role in the lives of millions of riders across the Chicago region and has the potential to reach even more people — but the system has been drastically underfunded for decades. This lack of funding has been exacerbated in recent years because of pandemic-induced drops in ridership and fare revenue.

While significant ridership recovery has occurred, permanent changes in remote and hybrid work are projected to result in lower levels of ridership for the remainder of the decade compared to 2019. Beginning in 2026, the RTA system is facing a projected $730 million annual budget gap. At nearly 20% of the annual operating budget, this gap, if unaddressed, would drastically impact current service and fares, and prohibit any additional improvements to the regional system.

The RTA system is not alone in facing many of its current challenges. Large transit systems across the US are facing proportionally similar funding gaps as they draw down remaining federal COVID relief funds, many facing shorter timelines than our region.​ Every major transit agency across the country has been able to continue operations because of this relief funding, and all are working to find solutions to fill their budget gaps before they hit their own fiscal cliffs when that funding is depleted. Three states have already taken action to provide new revenues for transit. Action taken at the state level to support peer agencies will provide valuable insights into how the RTA can continue to advocate for additional public funding as the fiscal cliff approaches.

Big city agencies like Chicago’s are facing these significant operating deficits because their budgets are heavily reliant on fares. While small and midsize agencies already secure 80% or more of their operating funding from federal, state, and local governments, regions like Chicago have traditionally been expected to raise as much as 50% of our operating revenue from fares.

Transit is the Answer calls for the RTA to work with regional partners and stakeholders to secure increased funding for transit operations and develop a funding structure that is less reliant on fares. This would allow us to not only avoid severe fare hikes and service cuts, but ultimately improve service, grow ridership, and create a more equitable system.

What peer states are doing

Three states have taken action to support their transit systems through recent budget packages. Highlights of each package provide an early look at what others are doing to help inform how the RTA should pursue solutions for our region.

California

Spurred by advocacy from the California Transit Association, California’s legislature passed a package that provides $5.1 billion to the states’ 300+ transit agencies over the next 4 years. This is forecasted to cover operations for 1-2 years before more funding will need to be sought.

More details:

  • $1.1 billion new cap and trade funds (can be used for capital or operations)
  • Reinstated $4 billion capital fund, allowing agencies to flex capital to operations
  • Transit Accountability Framework with new data transparency policies required to implement funding flexibility, includes relief from 20% farebox recovery ratio
  • Overall focus is on repurposing existing funding and providing new flexibility

New York

Governor Hochul championed new funding for transit in her budget proposals early on, and the final budget includes nearly $4.5 billion in one-time and ongoing revenues to the Metropolitan Transit Authority projected to fill their budget gap until at least 2027.

More details:

  • $1.1 billion from increase in top rate of payroll tax
  • $450 million one-time appropriations, some earmarked for a fare hike reduction, off-peak subway service and safety improvements, and fare free bus pilot program
  • Future one-time revenue from casino licensing and annual tax revenue
  • Funding is a combination of immediate and future, one-time and sustainable revenues

Minnesota

Minnesota had not passed a state capital bill since 2008, so there was significant momentum behind taking bold action in support of transportation this session. The final package pairs an $8.8 billion state capital bill with dedicated, ongoing revenue for Metro Transit operations.

More details:

  • $430 million annually from 75 cent sales tax in Minneapolis/St. Paul metropolitan area
  • Portion of new retail delivery fee and sales tax on auto parts
  • Over $120 million in capital funding for expanded bus rapid transit, light rail extension
  • Total package will fill operating budget gap and allow for planned expansions of service

Lessons for the Chicago region

While this is only a small subset of the agencies that will ultimately have to take action to address their fiscal cliffs, a few basic takeaways can be gathered from their examples:

  • State legislatures understand the value of transit and the need to avoid service cuts and massive fare increases. Even when faced with budget deficits, legislators made it clear that transit operations were essential and needed support, even if some packages included temporary or imperfect solutions.
  • Revenue solutions range from providing short-term, stopgap measures to dedicated, sustainable revenues. California’s state funding package essentially serves as a bridge to other regional measures for larger systems like BART in San Francisco, and uncertainty associated with MTA’s revenue assumptions in New York makes it likely that they could need additional revenue in the near-term as well. Minnesota’s funding package stands out in its ability to sustain transit operations in the long-term and even support some amount of expansion.
  • All three packages included commitments to new programs or reform measures like California’s Accountability Framework, New York’s various earmarked pilot programs, and Minnesota’s Transit Rider Investment program in response to the desire from advocates and legislatures to see new funding balanced with improvements. New ideas are needed both in terms of the types of revenues and commitments to operational improvements to both be responsive to changing rider needs and gain more buy in from the public and policymakers.

The RTA will continue to monitor legislation affecting peer systems as it advances to help inform our own strategies moving forward, but we know that we cannot do this alone. Join our coalition to take future action and advocate with us for solutions.

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Tagged in: Transit is the Answer | Fiscal cliff | RTA

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