MBTA, facing grave financial crisis, avoids fiscal cliff for another year using one-time federal funds

A Red Line train at the Kendall Square Station in Cambridge.Lane Turner/Globe Staff

The Massachusetts Bay Transportation Authority’s oversight board unanimously approved a $2.55 billion budget on Thursday for the fiscal year that starts in July.

Using federal pandemic relief dollars and money from its rainy day fund, the MBTA is fending off its fiscal cliff for another year. But come summer 2023, the MBTA will face a $236 million gap in its operating budget, the agency estimates, which could grow to $406 million the following year.

In other words, the T’s expenses are expected to outpace the money coming in by hundreds of millions of dollars — a catastrophic financial hole for an already beleaguered agency.

Most of the T’s planned revenue for the upcoming year’s budget comes from state sales tax at $1.33 billion, followed by fares at $474 million, state assistance at $187 million, and fees from municipalities at $184 million.

The T plans to spend most of its funds on wages and benefits at $932 million, followed by contracts with companies that operate Commuter Rail, The Ride, and ferry services at $652 million, and debt payments for capital projects at $566 million.

The federal COVID-19 relief funds and rainy day funds plugged a $288 million gap in the budget this time, said T Chief Financial Officer Mary Ann O’Hara told board members.

“This highlights the question about ongoing fiscal sustainability,” she said.

T ridership remains well below pre-pandemic levels. In April, average weekday trips on the MBTA transit system, including the commuter rail, reached just 55 percent of April 2019 levels, according to MBTA data. Weekday ridership on the bus system has been the most resilient, reaching 67 percent of pre-pandemic levels in April.

Before the pandemic, fare revenue made up around ⅓ of the MBTA’s operating revenue. For the upcoming fiscal year, the MBTA estimates it will get around 19 percent of its revenue from fares.

Without additional funding for its operations, T riders could face service cuts, warned Brian Kane, executive director of the MBTA Advisory Board, a group made up of representatives of municipalities served by the transit system. He urged the board of directors to slow spending growth and advocate for new funding sources for the T.

“One-time federal funds will expire, and the T’s considerable reserves are dwindling, but they’re not exhausted” he said. “There is a great deal of hope.”

Last year, the business-backed Massachusetts Taxpayers Foundation warned of the T’s revenue shortfall in years to come. MTF’s Vice President for Policy and Research Andrew Bagley, who authored the report on T finances, said the T either has to find necessary revenues to support its operations or the agency will be forced to reduce service.

“The T has managed its operating budget remarkably well to this point,” he said in a statement. “But if remote or hybrid work persists as expected, operating costs to provide safe and reliable service will far outpace revenues making a crisis in the next 18-24 months inevitable.”

The impending fiscal cliff comes as the T is awaiting the findings of a nearly unprecedented federal review of safety at the agency, prompted by a series of recent safety incidents, including the April dragging death of a passenger whose arm got stuck in a Red Line train door.

O’Hara said there are 148 new budgeted positions specifically designated for safety in the next fiscal year, a $15 million investment.

Chair of the MBTA board of directors Betsy Taylor said she was “dismayed and concerned” by the most recent known serious safety incident just last week when two Green Line trains crashed near Government Center, sending four operators to the hospital.

“I now challenge the general manager, the safety officer, and every employee at the T to do more,” she said. “I ask the staff to report back to the full board on measures that can be taken quickly and expeditiously to refocus the habits of everyone at the T in ways that will promptly increase safety for our customers and employees.”

Last week’s Green Line collision was the second time in a year that two Green Line trains crashed — safety incidents that could have been prevented by a technology the federal government first recommended the MBTA install 13 years ago. In March, the board approved a plan to speed up the implementation of the collision prevention technology on the Green Line by one year, to 2023.