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High Stakes Budget Battle for California's Public Transit

The state's public transit systems want $5.15 billion to avoid budget deficits and service cuts over the next half-decade. They’re expecting a tough fight.

A Bay Area Rapid Transit (BART) train at a stop in Oakland. The system is bleeding red ink as the heavily fare-dependent rail network continues to hemorrhage passengers. BART has joined with 75 transit agencies to ask the state for fiscal support.
In Brief:
  • The California Transit Association is seeking new funding from the state to help plug a projected $6 billion budget deficit across the state’s public transit agencies in the next five years.

  • The money is needed to avoid service cuts, fare hikes and layoffs, and to give agencies time to adapt to changing mobility patterns.

  • The state is already facing a $22.5 billion budget deficit of its own, with a budget negotiation deadline in June.

  • California’s public transit agencies face a delicate task over the next few months: They need to convince state lawmakers that the service they provide is essential and invaluable, and that the cost of preserving it for the next half-decade or so is a little over $5 billion. They need to make this argument, also, in a year when the state is facing a budget deficit of at least $22.5 billion.

    American transit agencies are confronting huge budget gaps as federal relief funding expires and riders have yet to return to subways and buses at the same rate they did before the pandemic. The problem is especially bad in places like San Francisco, where the downtown core has been gutted and traditional commuting patterns have been drastically altered. But it’s a challenge everywhere. Last month, the California Transit Association, which represents 85 public transit systems around the state, formalized a request for $5.15 billion from the state. The request comes as the systems anticipate a cumulative budget deficit of around $6 billion over the next five years, according to the association.

    The agencies took pains to identify funding sources outside the state’s general fund, hoping to ease pressure on lawmakers who are already dealing with competing demands on limited money. But, they acknowledge that the funding is a big ask, and that it’s tough to get footing in the legislative budget negotiation even in thick years.

    “What we’re doing is asking the state to step in and provide emergency operational support [for transit], which it has not done before, and to do it during a really bad budget year,” says State Sen. Scott Wiener, who is leading the charge for more funding in the Legislature.

    Hunting for Revenue Sources

    California’s transit agencies worked together to come up with a single amount they could advocate for in the budget negotiations. Earlier this year, the California Transit Association surveyed its member agencies about their anticipated operating deficits in the next several fiscal years, says Michael Pimentel, CTA’s executive director. The association asked agencies to ground those projections in a series of assumptions about ridership recovery and anticipated service levels, in order to set a realistic baseline that would inform the cumulative budget request.

    While the projected deficits add up to around $6 billion, the slightly smaller budget request reflects the association’s efforts to identify non-general fund sources of subsidy. The agencies are hoping for additional funds from the state’s sales tax on diesel fuel and unallocated revenue from the state cap-and-trade program. They’re also asking to use some existing capital funding to support operations over the next several years. As part of the funding request, the agencies also say they’re willing to give more oversight of transit operations to the state, and respond to demands for “accountability” in the form of safety and service improvements.

    “We wanted to apply great diligence and an observation for political viability in the options we offered,” Pimentel says.
    A light rail stop in Long Beach. California's transit agencies aren't used to asking the state legislature for funds to support their operations. But they are doing it a time when the state faces an enormous budget deficit and Gov. Gavin Newsom has already proposed slashing some capital funding for transit.

    Consequences of Underfunding

    Transit agencies feel they have strong arguments to back up their $5 billion funding request. Transit is key to the state’s environmental, economic and equity goals, Pimentel says. If transit systems are allowed to fail or drastically cut back service, more people will drive. That would increase greenhouse gas emissions — especially problematic in a state that purports to care more about decarbonization than most — along with roadway congestion and hazards to pedestrians and bicyclists.

    Cuts to transit service have been linked with spikes in poverty and unemployment, and in California those cuts would disproportionately affect low-income riders and communities of color, the transit association argues. The transit industry represents a large, unionized workforce. And it also props up the manufacturing sector and creates demand for energy-efficient and zero-emissions vehicles, which helps advance commercialization of those technologies.

    But even those arguments are no guarantee of success in a budget negotiation that’s sure to create losers and winners. In his first budget proposal earlier this year, California Gov. Gavin Newsom proposed slashing some capital funding for transit. Wiener has been leading a select committee to study Bay Area transit issues since February, and has collaborated with the California Transit Association on its budget request. He says the Legislature is sympathetic to the challenges transit is facing, and that the collaboration among agencies around the state is unusually strong. But transit hasn’t typically had the “800-pound gorilla” that other industries have had in their corner during budget negotiations.

    “A lot of people acknowledge it's important not to let transit fall apart. But when push comes to shove in the tug of war of a bad budget year, we have fewer allies,” Wiener says.

    There’s recent precedent for states stepping in to save transit systems from the fiscal cliff, including a budget deal in New York which dedicates new money for the Metropolitan Transportation Authority through an increase in the payroll tax. But even if the Legislature manages to approve the full $5.15 billion request, the long-term future of public transit in California is murky.

    Mobility patterns are probably permanently altered in the big cities, and it will take agencies time to figure out how to adjust service accordingly. Agencies that relied heavily on fares will need lots of ongoing state, local or regional subsidy to keep fast and frequent service running long term. But it will be impossible to adapt without short-term bridge funding from the state, advocates say.

    So for now, agencies are bracing for a fight. Newsom is expected to release a revised budget proposal this month, which many anticipate being even worse for transit than the original proposal. And then it will be a scramble of negotiations until the mid-June budget deadline.

    “It’s going to be tradeoffs all around,” says Kate Breen, director of government affairs for San Francisco Municipal Transportation Agency (SFMTA). “I don’t think anybody expects the entire need to be met.”

    Note: This article was updated to show the full number of transit agencies represented by California Transit Association.
    Jared Brey is a senior staff writer for Governing. He can be found on Twitter at @jaredbrey.
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