To balance its budget, T to seek additional funds

Control board expected to vote on request later this month

IN A SIGN OF MOUNTING pressures on the MBTA’s operating budget, the Fiscal and Management Control Board is preparing to take a portion of a legislative appropriation that had been set aside for capital projects and use the money to cover the authority’s rising expenses.

In and of itself, the shift of funds would not be a big deal – the money is there. But sources say the need for more operating funds at the T reflects a new fiscal reality at the agency. The T over the last several years has reined in the growth in operating expenses, but as the agency expands its services and adds staff that belt-tightening is becoming increasingly difficult to do. The revenue debate on Beacon Hill until now has focused primarily on the T’s capital spending, but now the operating budget may deserve attention as well.

The agenda for the December 16 meeting of the control board calls for a vote on a “supplemental budget request.” Officials say the vote could add funding to the operating budget for fiscal 2020, which began July 1, 2019, and ends June 30, 2020.

“Maintaining the T’s commitment to transparency, the general manager and the chief administrative officer look forward to engaging the Board in a thoughtful discussion on possible additional budget needs for this fiscal year,” the T said in a statement.

Over the course of the last several months, David Panagore, the T’s chief administrative officer, has made a number of presentations to the control board on financial pressure points. His presentations have touched on rising costs associated with an expanding workforce, debt service, fuel, utilities, overtime, pensions, and the Paid Family and Medical Leave Act. A group of consultants hired by the control board to review safety practices at the T is expected to file its report on Monday, which could lead to higher spending on a host of safety measures.

On the revenue side, the T is struggling to meet its budget targets. Revenue from the state sales tax is growing, but revenue from fares is sluggish and income from parking, advertising, and real estate is lagging projections. The T’s fare recovery ratio – a percentage calculated by dividing fares and own-source revenues by operating expenses – is now forecast at 41.8 percent this fiscal year, a whole point below what was budgeted. As recently as fiscal 2017, the fare recovery ratio was 43.2 percent.

One wildcard element in the T’s revenue picture is $187 million provided by the state’s budget. This year, $60 million of the $187 million came in the form of bond funds for T capital projects, with the remaining $127 million coming in the form of a legislative appropriation.

The T used $37 million of the $127 million to balance its fiscal 2020 budget and stashed the remaining $90 million in what the agency calls its lockbox – a special fund used for capital projects to help accelerate repairs on the system.

In early October, Panagore indicated the T will probably need additional funds to balance its budget. How much more is unclear, with current estimates suggesting at least another $16 million is needed. That number could grow, particularly if the Legislature fails to pass a fiscal 2019 budget closeout bill that includes $50 million for an ongoing accelerated infrastructure improvement program. In a letter to lawmakers this week, Gov. Charlie Baker’s budget chief called the $50 million a “critical deficiency” that the Legislature needs to address.

The control board is expected to assess the agency’s financial situation on December 16 and decide whether to tap more of the money in the lockbox to balance the fiscal 2020 budget.