MBTA expects challenging fiscal year despite budget increase
Photo | Courtesy of MassDOT
An MBTA commuter rail train
Gov. Maura Healey's push to increase state support for the MBTA could help the agency navigate the year ahead, but it would not be enough to solve a projected budget gap, officials said Thursday.
MBTA Chief Financial Officer Mary Ann O'Hara said budget-writers will need to find another $93 million in fiscal year 2025 to balance the T's revenues and expenses, even after accounting for the extra funding Healey's state spending plan would provide, if approved by the Legislature, and draining the last tranche of stashed-away federal pandemic aid.
"It will be a challenging [fiscal year] '25," added Chief Administrative Officer David Panagore. "So we have to watch our p's and q's."
Healey's $58.1 billion fiscal year 2025 budget calls for providing the T $127 million more in operating assistance, plus $45 million to cover the costs of implementing a low-income fare option.
The T, whose leaders typically roll out a draft operating budget in March, has long faced financial challenges. Officials project the funding gap could swell to more than $900 million by fiscal year 2029 in the most pessimistic outlook.
A persistent drop in ridership and fare revenue since the COVID-19 pandemic exacerbated the problem, which T officials in the past week have tied to the way the system has been funded for the past two and a half decades.
Before outlining their five-year financial projections, Panagore and O'Hara gave a presentation on the history of MBTA funding.
In 2000, after a string of MBTA budget shortfalls, Beacon Hill enacted a "forward funding" law that dedicated a percentage of revenue from the state's sales tax to the T. The measure also handed the MBTA billions of dollars in debt related to the landmark "Big Dig" project, they said.
Since then, Panagore and O'Hara wrote in their presentation, sales tax revenue "grossly underperformed expectations." It grew at an annual rate of 2.3 percent, well short of the 6.4 to 8.5 percent projected at the time. They estimated that left MBTA revenues cumulatively $8.9 billion to $15.5 billion short of expectations.
MBTA Board member Thomas McGee said during the presentation that the T would "be in a whole different place" if sales tax revenue growth matched original expectations.
"We made a -- we didn't find the right revenue that we needed to run the agency at that point," McGee, who served in the Legislature from 1995 to 2018 and co-chaired the Transportation Committee, said. "I'm not saying it was the wrong decision at the time, but as you're going through all of this, that's the piece that's really driving all of this other challenge."
"Don't forget the debt, too," O'Hara replied.
Thomas Glynn, who chairs the T board and previously served as its general manager from 1989 to 1991, said he has had conversations with another MBTA veteran, Richard Davey, who now leads the New York City Transit Authority.
"They did eight small things that cumulated to help solve their [financial] problem, as opposed to one big thing," Glynn said. "I mean, they had to do a lot of work. They had to talk to the Chamber of Commerce in Rochester. It's the same issue, upstate New York's view of New York City, et cetera. So they did a great job."
The heightened interest among MBTA leaders in drawing attention to its funding history comes as Healey and her deputies begin to explore long-term reforms. Alongside her budget proposal, Healey also signed an executive order creating a "Transportation Funding Task Force" instructed to craft recommendations "for a long-term, sustainable transportation finance plan that can support safely and reliably support road, rail and transit systems throughout our state."
It's a topic that previous administrations and the Legislature -- which has its own Transportation Committee -- have studied in depth on multiple occasions. One point that might become a newer focus this time around is how the state can replace revenue from its gasoline tax as electric vehicles slowly become more common and motorists buy less gas.
"We are going to continue to talk about how we fund transportation, not just in our annual budgets, but really talking about the next 10, 20, 30 years," Transportation Secretary Monica Tibbits-Nutt said at Thursday's board meeting.
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