T flips its operating budget philosophy
Embraces legislative funding, goodbye to ‘structural deficits’
THE MBTA HAS SPENT the last five years trying to eliminate any reliance on legislative appropriations to balance its operating budget, calling any use of the funds a sign of a structural deficit. But in an abrupt turnaround on Monday the agency did away with the deficit terminology and fully embraced using all of its legislative appropriation – plus additional operating funds being sought by Gov. Charlie Baker – to help balance its budget for the next five years.
The turnaround comes at a time when the Legislature is considering raising revenues to support transportation and the Baker administration, which opposes new taxes, is eager to show the MBTA doesn’t need new tax revenue to support it.
David Panagore, the T’s chief administrative officer, said revenue is revenue, and the transit authority needs to tap the legislative appropriation to support the agency’s growing workforce, its expanding operations, and its many new initiatives.
“The world that we lived in three years ago is not the world of today,” Panagore said.
Over the last five years, the transit authority has succeeded in bringing its expenses more in line with its revenues, but it has repeatedly taken the position that it should only use the sales tax money and its own revenue sources to cover its operating expenses. The T chose not to tap the legislative appropriation for two reasons: one, the money is subject to appropriation and therefore not guaranteed year to year; and two, the T has tried to funnel the legislative money into longer-term capital projects.
Whenever the T has been unable to balance its operating budget with its sales tax and own-source revenues, it has dipped into the legislative appropriation and defined the additional funding as the agency’s structural deficit. The T has repeatedly gone to great lengths to minimize the size of that structural deficit, including paring back spending, raising fares, and even proposing to cut service.
Transit advocates and key lawmakers have argued that the “structural deficit” referred to by the T is a fiction. Rep. William Straus, the House chair of the Legislature’s Transportation Committee, said in a 2017 interview that he viewed the annual appropriation as just another source of funding for the T that is unlikely to disappear. He applauded the T’s cost-cutting efforts, but said the agency doesn’t face a structural deficit.
“Structural deficit is a loaded phrase because it conjures up an image of some sort of budgetary crisis,” he said. Straus was not available on Tuesday.
At a presentation to the Fiscal and Management Control Board on Monday, Panagore outlined how the agency would balance its operating budget for the next five years. His revenue projection for the operating budget included a $127 million expected legislative appropriation, and added in $73 million being sought by Baker in his budget for the coming fiscal year. The analysis assumed that the same level of funding – a total of $200 million — would be forthcoming for the next five years.Transportation Secretary Stephanie Pollack, citing a relatively recent surge in sales tax revenue, the expected higher legislative appropriation, and a proposal for more relaxed rules on how bond funds can be used to pay for employee salaries, said there is plenty of money for the T to do what it needs to do over the next several years. “I think it’s a good story,” she said.
But the good story is now dependent on legislative appropriations and a new approach to budgeting that makes that dependency acceptable. Without the legislative appropriation of $200 million a year, the MBTA operating budget would quickly be in actual deficit. The budget in fiscal 2023 is also counting on a 4.5 percent fare increase.