The Metropolitan Transportation Commission (MTC) has approved recommendations for crafting a new state budget that provides operating funding on a multi-year basis to avert service cuts among hard-pressed transit agencies facing major budget deficits due to slow ridership recovery.
MTC endorsed a menu of potential funding shifts and fee increases over five years, giving legislators $7.4 billion worth of options to address a statewide “fiscal cliff” estimated by the California Transit Association to total $6 billion statewide. Bay Area transit agencies alone face an estimated $2.5 billion five-year operating shortfall, with Muni and Bay Area Rapid Transit accounting for the largest shares of this revenue gap.
Recommendations approved by MTC include:
- Cap and Trade, $2.5 billion: Shift discretionary Cap and Trade proceeds above and beyond what California Gov. Gavin Newsome had proposed in his January budget
- Federal Highway Funds, $2.3 billion: This option would involve a temporary five-year redirection of the growth in new federal highway funds from the Infrastructure Investment and Jobs Act (IIJA) that would otherwise go towards state highway repairs but have not yet been assigned to specific projects. The proposal would still allow a 19 percent increase in major highway repairs relative to pre-IIJA levels.
- Diesel Sales Tax, $1.3 billion: Shift 100 percent of funds to transit. About 80 percent of the tax already is dedicated to transit.
- Transportation Improvement Fee, $1.3 billion: A proposed five-year increase in a vehicle registration surcharge, with cars valued at less than $5,000 (some 40 percent of all registered vehicles in California) exempt from the temporary fee hike and a maximum increase of $30 per year for vehicles valued over $60,000.
MTC since last fall has been working with transit agencies, business and labor groups, environmental and transit rider advocacy organizations and others to urge the Legislature to invest in transit agencies’ recovery from the COVID-19 pandemic. The commission’s advocacy principles include:
- Meet critical service needs for agencies with demonstrated operating deficits caused by reduced ridership and for improvements to enhance the rider experience
- ‘Survive’ funds should be based on need while ‘Thrive’ dollars could be distributed by formula or competitively
- ‘Thrive’ funds may be front-loaded beginning in the fiscal 2023-24 budget because investments to attract more riders may reduce transit agencies’ operating deficits in later years, and the agencies’ ‘Survive” needs are expected to jump sharply from 2023-24 to 2024-25 and then hold largely steady from 2025-26 through 2027-28.
