Coalition members provide feedback on funding, reform as fiscal cliff nears

More than 200 riders, advocates, and other stakeholders met virtually with the RTA on August 13 for the eighth quarterly Transit is the Answer Coalition meeting and discussed the 2026 budget process, how peer regions are addressing their fiscal cliffs, and HB 3438, the funding and reform bill that passed the Illinois Senate during the General Assembly’s spring legislative session but was not called for a vote in the House.

Fiscal cliff and 2026 budget process

The meeting began with a presentation from RTA Communications Manager Melissa Meyer on the fiscal cliff and 2026 budget process. Without new funding, CTA, Metra, and Pace face a budget gap in 2026 that will grow substantially in future years.

RTA launched the Regional Transit Fiscal Cliff Hub last month, which will be updated frequently with links, upcoming meetings, ways to get involved, and more. It also summarizes the 2026 budget process.

To prepare for 2026, RTA has asked CTA, Metra, and Pace to develop two budget scenarios due to the uncertainty of if and when new funding will be passed by the General Assembly. Scenario 1 assumes no new funding is identified and service reductions are required. Scenario 2 assumes that enough funding is made available to avert the fiscal cliff in 2026. Part of this budget process will include updating the cliff number, which in late 2024 was forecasted at $771 million, or approximately 20% of our operating budgets.

The Service Boards will list any budget balancing actions such as service cuts in Scenario 1 of the budget process. If the General Assembly approves new funding, the second scenario assumes the Service Boards will be able to maintain current service levels at minimum. Depending on the level of funding made available, the Service Boards could also further illustrate their expansion scenarios to grow transit services.

How peer regions are addressing their fiscal cliffs

The Chicago region is not the only transit system facing a fiscal cliff. Beatrix Yan, RTA Program Specialist, Strategy and Policy, next presented an update on how several peer regions are addressing their fiscal cliffs.

SEPTA in Philadelphia faced a $240 million (roughly 20%) budget gap for 2025 after receiving a one-time infusion of $153 million last year, postponing the most severe cut scenario. But still, 20% of service was cut in 2025, and fares were increased by over 20%. Multiple attempts to provide funding have failed to gain the support of both chambers of the Pennsylvania legislature, forcing SEPTA to make 20% more cuts to service, which begin on August 24 with another round slated for January 2026, and another 21.5% fare increase, which goes into effect on September 1.

BART in the San Francisco Bay area has a current cliff that will balloon to over $500 million by 2026. In 2024, the State of California provided $5.1 billion in one-time funding to all transit operators across the state, providing temporary relief. A new ballot measure to be voted on in November could bring sales tax revenue for transit but it would likely be implemented too late for BART to avoid service cuts.

In Boston, MBTA faces a $700 million gap beginning in 2026. A state task force recommended Fair Share revenue from a millionaire’s tax to fund MBTA operations, totaling $1.2 billion over two years. Fair Share revenues have produced higher than projected returns, potentially extending their cliff further into 2028. But the distribution of Fair Share revenue is agreed upon annually, so MBTA only has funding certainty through 2026.

Lastly, MTA in New York hit their cliff in 2023 with a projected deficit of $600 million, growing in future years. The state and city acted quickly, increasing the payroll mobility tax and the city increasing funding for paratransit operations. Additionally, MTA identified $100 million in efficiencies. MTA has also implemented a congestion pricing program that funds capital investment only, but this generational investment in capital will allow the agency to realize operations savings through improved efficiencies achieved with upgrades to infrastructure.

Chicago has stretched COVID relief funds further than most peers nationally; every peer covered in the meeting has expended all remaining relief funds. All peers studied have received some sort of stopgap funding action from their state; however, Illinois has not acted yet.

“MTA is the only agency on stable footing for operations revenue,” Yan said. “Other states will require future legislation to provide long-term funding to their transit systems. All peers have elements we can learn from…The RTA region is the only region exploring reform to tackle the fiscal cliff.”

Using an online engagement tool called Menti, RTA asked attendees which ideas from peer regions could apply to Chicago, with many responding that they’d like to see congestion pricing, a millionaire’s tax, rideshare taxes, and a general sentiment that any taxes should be progressive and equitable.

Analysis of HB 3438: The Sustainable Transit for Northern Illinois Act

To finish out the meeting, RTA Government Affairs Principal Kyle Whitehead presented a preliminary staff analysis of HB 3438, the funding and reform bill that passed the Illinois Senate in May but was not called for a vote in the House. Both the House and Senate bills would reorganize the transit system under a regional authority renamed the Northern Illinois Transit Authority (NITA). Key responsibilities are shifted from CTA, Metra, and Pace to the new regional entity, including fare setting policy and some aspects of service and capital planning.

Revenue summary

The Senate version of the bill included more than $1 billion in revenue, based on estimates from Senate staff. Just under $900 million—about 75% of the total revenue package—would be generated by a climate impact fee of $1.50 imposed on each retail delivery in the state, with an exception for groceries and prescription drugs. Eighty percent of the revenue from this fee would be for transit operations in the RTA region and 20% would go to downstate transit. RTA staff continues to work with partners to provide realistic estimates of revenues to ensure the final package is able to fund transit in a sustainable manner.

Next, Whitehead discussed what implementation of the Senate bill might look like in key areas if it were to become law as written.

Operations funding may be unstable

As proposed, the revenue package relies heavily on the climate impact fee as the bulk of new operating funding. It is unclear if this fee can generate the revenue initially estimated based on other methodologies that take household incomes into account. Furthermore, if the delivery fee is weakened or removed, the package as proposed will not fully address the operating budget gap and could force transit operators to reduce service.

Cost of new initiatives could limit funding available for frequent service

NITA takes on many new, mandatory responsibilities, several of which come with significant costs, like a new regional police force, dial-a-ride program, and transit ambassador program, as well as expanded fare programs.

The RTA has supported many of these initiatives and several of them were included in the Transforming Transit legislative proposal the agency released earlier this year, such as fare capping, expanding reduced fares for people experiencing low incomes, and a transit ambassador program. But Whitehead emphasized that these initiatives come with significant costs, and how they are paid for could affect the frequency and reliability of service, which riders consistently identify as their top priority.

Regional agency may struggle to hold operators accountable

To create a more integrated and efficient transit network and boost accountability within the system, it’s important for the regional agency to have sufficient authority and for it to maintain funding discretion to address service gaps, incentivize innovation and mitigate other challenges in real time. As written, the proposal may provide the new regional entity only limited authority. For the first three years, funding is distributed to operators via formula, and then a discretionary distribution is gradually transitioned in over the next three years. For the first three years, the new agency has no clear ability to incentivize operators to advance regional goals by granting additional funds, and no clear ability to hold operators accountable by withholding funds.

Recovery ratio penalties could hurt riders

The legislature’s inaction this spring means the system’s waiver from the existing 50% recovery ratio requirement and its associated financial penalty are currently scheduled to expire at the end of 2025. If this is not addressed, the system will face significant financial penalties in 2026. Failure to meet the 50% recovery ratio in 2026 could mean a loss of hundreds of millions in state funding, which would dramatically worsen the fiscal crisis.

What’s next

Governor Pritzker and legislative leaders say they intend to continue to work on transit funding and reform through the summer and into the fall, but a firm timeline has not been set for any future action. The General Assembly’s fall veto session is set to be held October 14-16 and October 28-30.

Anyone looking to advocate for transit funding to their legislator may do so by sending a letter at SaveTransitNow.org.

The presentation was followed by a series of questions to gather feedback from attendees. When asked what feedback they would provide to lawmakers, many stressed the urgency of finding a funding solution quickly before severe cuts are implemented, and others emphasized that proposed reforms would have limited impact on service and that funding is needed to add frequency.

RTA staff will present the feedback gathered at the Coalition meeting to the RTA Board at their August 21 meeting.

Watch a recording of the full Coalition meeting online and join the Transit is the Answer Coalition to be part of the process and stay informed on progress. If you’re interested in a more active role in advocating for sustainable transit funding—like writing or signing a letter to the editor or op-ed, speaking with a reporter, or joining a meeting with your legislator—sign up to be a Transit Champion.