CA: Massive Bay Area transit cuts likely as Newsom backtracks on $750M loan, lawmakers warn

Bay Area commuters may see devastating cuts to transit service because Gov. Gavin Newsom is backtracking on a promise to provide a critical $750 million loan to BART, Muni and other regional transit agencies, local lawmakers say.

Lawmakers and Newsom agreed to the loan as part of the state budget passed in June, contingent on details about how and when the money would be paid back being worked out later this year. Newsom staff members now say they want to table the matter until next year, and that they are confident these agencies will sustain operations until then.

But politicians and advocates who spent months lobbying for the money criticize Newsom for what they view as a betrayal and say a pledge of future funds isn't good enough.

"We've been sounding the alarm bells all year that if we do nothing our Bay Area transit systems are going to cut service severely," state Sen. Scott Wiener, D- San Francisco, said Saturday. "BART in particular could collapse. Muni could cut entire bus lines."

If the two sides can't agree by Tuesday, the deadline for all bill language to be made public, the loan is dead — lawmakers won't be able to pass it before they adjourn for the year Friday. Wiener and fellow state Sen. Jesse Arreguín, D- Berkeley, say Newsom's Department of Finance informed them at the end of last week that it wouldn't finalize details of the loan before the end of the legislative session.

Transit agencies have faced a deepening financial quandary over the past year, with ridership largely plateauing as people continue working remotely and with COVID emergency funds set to dry up. As Muni confronts a $322 million annual deficit, top officials are already bracing for a more austere future: This week, the agency's chief financial officer directed all the agency's divisions to scale back their budgets by 5% to 7%.

BART, meanwhile, projects a funding gap of $375 million to $400 million a year beginning in 2027. The agency has attempted to salvage money by running shorter trains to reduce energy costs and eliminating some contracts, among other actions.

In March, Wiener and Arreguín sponsored legislation that would allow leaders in San Francisco, Alameda and Contra Costa counties to place a measure on the November 2026 ballot to raise money to prevent the near-total erosion of BART and Muni.

But transit agencies still need enough funds to survive until the passage of SB63, the Connect Bay Area Act.

Without that funding, the senators say, BART will have to close stations and limit train service on many routes to once an hour. Muni could face a 50% reduction in frequency on many lines. As transit commutes become untenable, workers will shift to driving, leading to miserable freeway congestion, they warn.

The potential impact of Saturday's announcement left transit advocates reeling.

"People are going to suffer," said Carter Lavin, co-founder of the Transbay Coalition advocacy group. "Their lives depend on BART and Muni."

In response to the lawmakers' contention that Newsom was imperiling public transit by reneging on the deal, spokesperson Daniel Villaseñor noted that the budget legislation enacted in June "specified that the loans could only be made if subsequent legislation outlining the terms of the loans is passed."

"The Administration supports our local transit agencies and remains open to reviewing proposals," he said in a statement.

Representatives of the Department of Finance said they received an outline of proposed terms of the loan from the Legislature last week and that the outline is "still short of a legislative proposal that is necessary to resolve this issue."

But a spokesperson for Wiener cited an August letter to Newsom from five Bay Area business and policy organizations, which included a framework for the loan, requesting that it be interest-free and repaid over a 30-year term.

Wiener and Arreguín doubled down on their demand Saturday, with a statement that underscored the "absolutely essential" role that public transportation plays in the Bay Area. They pointed to the impact of BART's seven-hour systemwide shutdown Friday: bumper-to-bumper traffic, and children and workers unable to get to school or to their jobs. "Without the funding in this deal, conditions like these could soon become a daily reality," the joint statement said.

"It's essential that this loan happen," the lawmakers continued. " California has a long and bad history of not adequately funding public transportation, particularly compared to other large blue states."

San Francisco Mayor Daniel Lurie also urged lawmakers to "follow through" on their commitment, noting that Muni has seen improvements in ridership and customer satisfaction.

"Every working family, senior, student and business leader knows that safe, affordable and reliable public transit is key to powering our comeback," he said. "I'm talking to the governor and I know he understands the importance of transit to our entire economy."

Officials at BART oscillated between frustration and disbelief Saturday. Board Director Edward Wright, who represents San Francisco, said that if the loan falls apart, leaders will immediately scramble to stave off "an enormous deficit a year from now."

Transit advocates excoriated the governor's move, saying it will have serious, negative consequences for Bay Area residents.

"It's incredibly disappointing that the governor was unable to follow through on a commitment that he and the state legislature made to the people of the Bay Area just months ago," said Lavin, with the Transbay Coalition. "It's tragic what's about to happen to the people of the Bay Area, to our neighbors, who had been speaking up for transit for months."

Without a bridge loan, service on local transit is expected to plummet, he said. BART is likely to be hit hardest, with service cuts of up to 85%, he said.

"It's one of those things — like looking up the definition of 'decimate,'" he said.

Laura Tolkoff, transportation policy director at local think tank SPUR, said the service cuts that are now all but certain will limit opportunities for people who can't drive; set back the recovery of the downtowns of San Francisco, San Jose and Oakland; and damage the region's economy.

"We understand the state's financial challenges," she said, "but believe that this loan would pay for itself in the state and local taxes that this region generates as a result of a strong economy."

The administration's wavering on the loan comes as the state faces serious financial pressure because of federal cuts. The state budget outlook was already grim before the cuts.

Newsom and lawmakers had to reduce state spending for the 2025-26 fiscal year in their June budget agreement to make up for a projected $12 billion deficit. Since then, federal spending cuts to research and other federal programs are hitting California local governments and universities hard, causing them to seek more funding from the state.

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