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MBTA’s spending plans, debt raise concern as revenue shrinks

The annual budget for the MBTA is due June 15.
The annual budget for the MBTA is due June 15.Craig F. Walker/Globe Staff/The Boston Globe

The MBTA’s independent oversight panel warned Tuesday that the transit authority may need to scale back plans for transforming fare collections, weekend pilot programs, and other spending because of a dire revenue outlook brought on by the pandemic.

The MBTA Advisory Board, which represents the 176 cities and towns in the Massachusetts Bay Transportation Authority’s service area, said in an oversight report that the transit system “cannot continue to grow expenses by greater than its revenue growth for long.”

Members raised concerns about debt levels in the T’s budget and use of one-time federal relief funds to cover the costs of running a standard service schedule for most of fiscal year 2021.

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According to the board’s report, about 22 percent of the T’s spending is dedicated to debt service, interest payments of $303.4 million and principal payments of $220.1 million.

“Serious questions must be asked if the MBTA can afford this level of indebtedness, regardless of what the policy may be,” the board wrote.

“They’re in a bad way,” said Brian Kane, the advisory board’s acting executive director. “The one thing they have done to enable them to operate is, for the first time, they have permission to issue paper to fund operations. This is a big red flag, as well.”

The T’s Fiscal and Management Control Board originally approved a $2.33 billion draft operating budget for fiscal year 2021, but the outbreak of COVID-19 — and the ensuing drop-off in public transit ridership — prompted T budget-writers to revamp their plans.

Last week, the control board sent an updated $2.29 billion budget to the advisory board for review. The spending plan scaled down some proposals, but is still about $170 million larger than the $2.12 billion fiscal 2020 budget.

With ridership at only a fraction of what it was before the pandemic and the MBTA’s portion of state sales tax revenue unlikely to exceed the baseline minimum, officials expect the transit authority to bring in between half and three-quarters of a billion dollars less than they had originally anticipated for fiscal 2021.

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One way that the advisory board endorsed to help ease the strain is granting the MBTA legal authority to fund capital project salaries using bond dollars, something T officials themselves have projected could free up more funding and push next year’s budget from the red to the black.

The advisory board also wants officials to reconsider how the MBTA handles debt and to consider trimming costs next year because of the unprecedented circumstances.

Board members described spending on safety and maintenance staff as a worthwhile goal, but in their report they said the T should pause other plans for hiring staff for weekend pilot programs, for expanding income-based fare options, for updating fare-collection practices, and for redesigning bus networks.

"There is a point where the MBTA cannot afford to do all the things it wants and must focus on the things it needs to do," the board wrote. "Safety and system maintenance and modernization are essential and must continue to happen. Many other projects/programs, however, need to be seriously reconsidered in light of current conditions, or may only move forward if other programs/projects are reduced or eliminated."

The advisory board called for a hiring freeze at the MBTA in all positions that are not safety-sensitive or deemed essential for carrying out capital improvements and modernization.

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“Now is the time to focus spending in a limited number of strategic initiatives and realize that the Authority cannot afford everything it would like to have,” the board wrote.

About $827 million in federal stimulus funding directed to the T from the federal CARES Act will help close budget gaps this fiscal year and next, but advisory board members said during a Zoom meeting Tuesday that further spending cuts may be necessary.

“I know we’re counting on the CARES Act and money from this federal government, but I don’t think we can count on that,” said Jon Berg, who represents Melrose on the board and who voted against its report after citing concerns about the T’s revenue outlook. “Until it’s really in our hands and allocated and appropriated, we’re flying by the seat of our pants.”

The advisory board said it would be “prudent” for the MBTA to begin planning for layoffs or furloughs if ridership and revenues do not rebound in a timely manner, noting that several cities and towns have implemented layoffs, as well as many private employers.

After receiving the advisory board’s feedback, the T’s control board plans to take a final vote on the fiscal 2021 operating budget as soon as Thursday. Under a recent change in state law, a completed MBTA budget is due by June 15.