With ridership still far below pre-pandemic levels, the Massachusetts Bay Transportation Authority faces a calamitous revenue shortfall in years to come that would force fare hikes or service cuts and would make it impossible for the agency to enact the sweeping social and environmental changes advocates demand, a new report from a top fiscal watchdog warned Thursday.
The business-backed Massachusetts Taxpayers Foundation found that the MBTA is on track to face a shortfall as large as $400 million in its yearly budget that begins in 2023 and a $13 billion shortfall for core infrastructure improvements it plans to make over the next decade.
As ridership plummeted during the COVID-19 pandemic, the T has been relying on federal relief funds to prop up its operations, and one-time, project-based state and federal funds to maintain and upgrade infrastructure. But when those sources start to dry up two years from now, the agency will face an insurmountable challenge without new funding.
If, when, and how most riders will return to the T is anyone’s guess. In April 2021, the number of average weekday trips on the MBTA transit system, including the commuter rail, was 32 percent of the average weekday trips in April 2019, according to the most recent available data from the MBTA. On the commuter rail alone, the figure was just 14 percent.
The fare revenue shortfall comes as the one-time state and federal funds that have enabled the MBTA to maintain and modernize its transit system to the tune of around $2 billion per year will be used up by the fiscal year that begins in 2023, meaning much of the T’s planned maintenance and facility upgrades could be in jeopardy.
Joe Pesaturo, a spokesperson for the MBTA, said the financial challenges have the agency’s full attention. Making the transit system more reliable is a key part of the MBTA’s plan to draw riders back, citing $2 billion of capital investments planned for this fiscal year.
“The MBTA has acknowledged the fiscal challenges the T will face in the coming years, and during this time, the MBTA will work with its board, stakeholders, and federal and state partners to develop plans and take the actions necessary to meet service demands and fund operations,” he said by e-mail.
The MBTA has acknowledged the same approaching operations budget gaps highlighted by the watchdog group. In a March 2021 report to the board charged with overseeing the T’s finances, MBTA chief financial officer Mary Ann O’Hara noted that even under the most optimistic ridership scenario for fiscal year 2025, in which fare revenue reaches 88 percent of what it was in fiscal year 2019, the T’s operating budget will still face a $300 million shortfall. And T officials have acknowledged a need for more money for capital projects.
But the report lays bare the unfathomably vast space between aspirations for a more resilient, accessible, and electric transit system and the money to pay for it.
This isn’t the first time the Massachusetts Taxpayers Foundation has raised the alarm about the T’s finances, and the nonprofit watchdog is in good company. When Governor Charlie Baker appointed an independent fiscal board to oversee the MBTA in 2015, the board itself acknowledged deep underinvestment was a root cause of the transit system’s total collapse during that year’s record snowfall. Following those findings, the oversight board cut operations costs, raised revenues, and boosted capital investments.
But the MBTA still lacks a sustainable funding source to get it over this next cliff, the watchdog group’s report said. In the fiscal year that runs from the summer of 2024 to 2025, the MBTA will be short around $450 million on its basic operating costs of $2.6 billion, including payroll, materials, debt payments, and its commuter rail service contract. In fiscal year 2026, the estimated operations budget gap will grow to $500 million.
“The trend is unequivocal and unsettling. This is a fiscal calamity,” the report says.
And that’s assuming that by fiscal year 2025, revenue from rider fares reaches 65 percent of what it was in fiscal year 2019. Before the pandemic, yearly fare revenue totaled $664.7 million, one-third of the MBTA’s operating revenue. The MBTA has so far filled the enormous fare revenue gap partly using pandemic relief funds from the federal government, which will run out in fiscal year 2024 or 2025.
In addition to the operations budget gap, the watchdog analysis found the MBTA will be short around $13 billion on its planned investment costs over the next 10 years. The MBTA estimates it will need to spend around $25 billion between 2021 and June 2031 to modernize and maintain its current transit system and expansion projects already underway, but only has $12 billion to spend over those years, the foundation said.
Planned investments include improving bridges and tunnels, updating bus facilities, and partially electrifying commuter rail and bus fleets, but do not include most of the cost of reducing greenhouse gases and storm-proofing the T system amid more powerful, climate-change-driven storms, a sum foundation researchers warn could reach $7 billion, deepening the capital investment budget hole to $20 billion.
The operating and capital shortfalls will require $1.25 billion in new funding for the MBTA annually, the foundation’s report found.
None of these cost tabulations include expansion projects long sought by transit advocates, like the East-West high speed rail, the expansion of South Station, the second phase of the South Coast Rail, and free fares on some or all of the system.
Advocates are eyeing a federal infrastructure bill still winding its way through Congress that could bring as much as $2.5 billion to the MBTA. But it could bring less and, either way, the one-time infusion will not be enough to offset the gaps, the report warned.
The Fair Share Amendment, or “millionaire’s tax,” 2022 ballot question would increase the state’s income tax to 9 percent up from 5 percent for annual income above $1 million starting in 2023 and is another funding source advocates hope could help the T. Proponents of the amendment say it could raise $2 billion a year for education and transportation, but it’s unclear whether voters will pass the ballot question and, if they do, whether that number will bear out — and if it does, how much of that revenue would funnel to the MBTA.
Advocates and lawmakers have long floated congestion pricing — charging drivers in congested areas during peak travel times — as a way to encourage public transit use and raise revenue for transportation investments, but the idea would likely need the support of Baker, who currently opposes it.
Baker does back the Transportation and Climate Initiative Program, a pact signed by Massachusetts and others to begin capping vehicle emissions and taxing fuel suppliers for the carbon dioxide they produce as soon as 2023. Though Massachusetts, Connecticut, Rhode Island, and Washington, D.C., initially agreed on the plan, Connecticut and Rhode Island still need to pass legislation to enact it.
The MBTA shortfalls will be at the top of the agenda for the new MBTA board of directors, created by Baker and the Legislature when the previous board expired over the summer. Baker has yet to make his five appointments to the board.
But when he does, they’ll have their plates full.