Future fare increases on the table as MBTA faces budget woes

The MBTA also wants to improve fare collection on its commuter rail service.George Rizer for The Boston Globe/File

Officials at the Massachusetts Bay Transportation Authority say the agency’s budget deficit is set to balloon in the coming year, raising the specter of potential fare hikes in 2019.

The MBTA expects its budget shortfall to increase by more than $70 million — to $111 million — in the next fiscal year, which begins July 1. New costs include increased pension contributions and debt payments, the launch of commuter rail service to Foxborough, planned bumps in payments to contractors, and scheduled raises that union workers agreed to forgo last year.

“Revenue growth is less than expense growth,” MBTA chief administrator Michael Abramo said Monday at a meeting of the agency’s oversight board.

For now, officials aren’t saying that fare increases will be necessary to offset the deficit. Monday’s discussion was merely a starting point for the board to grapple with the MBTA’s finances as budget season begins, said Luis Ramirez, the T’s general manager.

But with the transit agency eligible to raise fares next January, board members signaled at least some interest in exploring a hike, asking whether the MBTA’s soon-to-be-replaced fare technology could handle an increase next year. They also raised the possibility of boosting parking fees for the first time since 2008.

“It would be good to get a little bit of sensitivity about what different options give us for either fare or parking adjustments,” said Joseph Aiello, the board’s chairman.

The last MBTA fare hike came in July 2016, raising prices by 9 percent across the system despite rider protests. The Legislature has since passed a law limiting fare increases to a maximum of 7 percent every two years.

The MBTA has made considerable progress reducing its budget deficit since 2015. At that point, the agency projected a $391 million deficit in 2019 if changes weren’t made.

But at some point, the transit agency will no longer be able to cut costs without impacting service, said Rafael Mares, a transit advocate with the Conservation Law Foundation.

“There are diminishing returns,” he said. “At that point, the budget is either balanced, or you have to start thinking about more revenue.”

Mares cautioned that fare hikes may accelerate the MBTA’s ridership decline if costs stay stable for ride services such as Uber and Lyft.

The options for bringing next year’s budget closer to balance are somewhat limited. The agency hopes to cut pension costs through negotiations with workers; the agreement governing the pension system expires this summer. However, the pension only accounts for an additional $5 million in the upcoming budget.

In 2015, the MBTA was temporarily given the authority to outsource more services as it sought to lower costs. But the agency abandoned its most high-profile outsourcing initiative when it reached a new contract agreement with its bus mechanics this month — though that deal is expected to save money in other ways. MBTA spokesman Joe Pesaturo did not directly answer questions about whether the agency is pursuing other outsourcing initiatives.

Governor Charlie Baker’s proposed state budget might bring some relief, because it would change how the MBTA pays some employees next year. That would save the agency $27 million.

Meanwhile, the MBTA is aggressively working to generate more revenue from real estate holdings and advertising, including hundreds of new digital ad displays across the system.

Increasing ridership through the MBTA’s corporate pass program and improving fare collection on the commuter rail could also help, officials said Monday.

Transit advocates and state officials have long debated whether the MBTA actually has a budget gap at all. Advocates point out that the Legislature has annually sent the agency extra money — beyond its base funding — that could be used to cover the shortfalls.

But the MBTA argues it should spend most of that money on capital projects, such as repairs. Even as the MBTA has sought to limit its operating costs, it has increased capital spending under the Baker administration.

Spending too much of the additional funding on operating costs “will have an impact on capital execution,” said MBTA chief financial officer Paul Brandley.