TOP MBTA OFFICIALS are forecasting that operating expenses at the transit authority will grow by less than 1 percent this fiscal year, the lowest rate of increase in at least 15 years.
Operating expenses at the T have been increasing 5 percent a year on average over the last 15 years, but officials say they expect to hold the line this fiscal year, with either no increase or only a minor increase. Through the first six months of the fiscal year, the agency spent $735 million on operations, up from $734.8 million the year before.
Brian Shortsleeve, the chief administrator of the T, said the agency is working hard to comply with a state law requiring the authority to bring operating expenses and revenues into balance, without having to rely on a discretionary infusion of state funds. “The core mandate is to get our costs under control,” he said.
The T has squeezed $69 million in savings out of the T’s operating budget this fiscal year, led by cost reductions of $25 million on energy, $10 million on commuter rail, $7.9 million on health care, and $7 million on the RIDE, the T’s paratransit service.
The T also reduced the size of its structural deficit from $170 million to $95 million by paring back spending and increasing revenues from advertising and real estate. Unfortunately, the structural deficit is likely to balloon again in fiscal 2017, which begins July 1. The agency will see its payroll rise $52 million as it begins transferring some 550 employees currently paid with borrowed funds onto the operating budget. The T also is facing a union wage increase of $12.5 million, higher debt service costs of $10 million, and a higher annual pension contribution of $8 million because of slumping investment returns.
T officials undertook an internal review of the oft-criticized pension fund and revised investment return estimates downward, from 8 percent to 7.75 percent. The revision means the T needs to set aside more money to meet its pension obligations.
“It’s painful, but it’s important,” said board member Steve Poftak. “We’ve got to be honest with ourselves. This is a positive step forward.”
Shortsleeve said cost control efforts will continue next year, led by the privatization of fare collection and marketing services in a bid to pare back the agency payroll by 300 people. The MBTA’s oversight board wants to pursue privatization, but some members have expressed caution about moving as quickly as Shortsleeve wants.
Shortsleeve said the cost of the RIDE should also keep coming down more as some customers are shifted to private ride-sharing services such as Uber and LYFT. He said advertising revenues should increase $6 million in fiscal 2017 and initiatives to reduce overtime will continue.
The state is providing $187 million in discretionary assistance to the T this year and Gov. Charlie Baker has included another $187 million in his budget for fiscal 2017, which begins July 1. Shortsleeve said any money left over in the T’s budget at the end of either fiscal 2016 or 2017 will be plowed into pressing capital projects.