T projects fare revenue to be down for at least 5 years

Poftak prefers to plug gap with federal aid, not new state funding

THE MBTA is projecting that fare revenue will not return to pre-pandemic levels for the next five years and possibly longer, and transit authority officials say they are counting on federal stimulus funds and spending controls – not additional state funding – to close the gap.

Using three scenarios for future ridership, the T is currently projecting fare revenue will range between 66 percent and 89 percent of pre-pandemic levels through fiscal 2026, which would end June 30, 2026. The pre-pandemic fare revenue total was just under $700 million. The T also receives $1.1 billion from the state sales tax, which has been growing, and $200 million from communities in the core service territory, a number that is also expected to grow.

The long-term fare revenue projections are surfacing at a time when key lawmakers on Beacon Hill are beginning to discuss transportation legislation. Sen. Joseph Boncore of Winthrop, the Senate chair of the Transportation Committee, has filed sweeping legislation called “A New Deal for Transportation,” which calls for the elimination of fares on T and regional transit authority buses, the adjustment of fares to reflect the income level of individual passengers, and the development of new revenue streams through higher fees on Uber and Lyft rides and three years of gas tax increases.

At a press briefing with reporters, MBTA General Manager Steve Poftak said he is not looking to the state for additional funding but will instead rely on transit aid contained in the next $1.1 trillion federal stimulus package to help balance future budgets. T officials say they don’t know what the agency would receive under the latest federal stimulus plan, which is expected to be voted on in the House Tuesday.

“The federal government is the appropriate place to look,” Poftak said, discounting pending initiatives in the Legislature. Gov. Charlie Baker vetoed a number of smaller revenue-raising measures for transportation at the end of the last legislative session, saying the impact of COVID on transportation needs to be studied further.

Joe Aiello, the chair of the Fiscal and Management Control Board, pressed T officials at a meeting Monday on what federal money might be forthcoming but they said exact amounts won’t be known until the package passes and federal guidance is issued. Aiello said the amount is important because it will likely determine when the T begins facing budget shortfalls. “After this next dollop of federal money, I don’t think we can expect future dollops of money,” he said.

Poftak said doing away with bus fares, as Boncore has suggested, would also have an impact on revenue from the T’s paratransit service, where fares are supposed to mimic those on the bus and subway system. He said the financial impact of doing away with bus fares, combined with the impact on paratransit, could range from the tens to the hundreds of millions of dollars.

Poftak said he would be very cautious about tinkering with the T’s fare revenue. “Fare revenue is an integral part of the MBTA’s revenue,” he said. “It is not something the T can do without.”

Boncore says the impact of fare free buses would range between $30 and $60 million and the impact on paratransit revenues is less than many are forecasting. Boncore said his bill is an attempt to both improve service and equity, noting bus riders tend to be people of color and low-income residents.

The MBTA laid out some broad five-year projections for budget planning. In the current fiscal year, fiscal 2021, the T plans to balance its budget with $605 million in federal aid and end the year with $365 million that can be used to help balance fiscal 2022. The $365 million includes $21 million in savings from service cuts, budget cuts, and additional federal aid and reimbursements.

With those revenues sources, T officials expect to offset fare revenue losses and balance the fiscal 2022 budget. In fiscal 2023 and beyond, however, the T is forecasting deficits of $423 million in fiscal 2023, $405 million in fiscal 2024, $458 million in fiscal 2025, and $495 million in fiscal 2026. All of those deficit projections are based on the lowest of the three fare projections and don’t include any revenue gained from the latest stimulus bill moving through Congress or potential fare increases. With higher fare projections, the deficits narrow but don’t disappear, reaching $430 million in fiscal 2026 using the mid-range fare revenue scenario and $329 million that same year using the most optimistic projection.

The T has not laid off any employees yet or taken other measures to reduce costs other than implementing service cuts. Poftak and Jamie Tesler, the acting secretary of transportation, said the T’s budgetary response has avoided steep cuts so far and is in line if not more moderate than what other transit systems are experiencing.