BOSTON — In the wake of transit funding talks that stalled out on Beacon Hill and facing an unprecedented financial challenge inflicted by the COVID-19 pandemic, the MBTA plans to embark on a multi-year effort to reshape revenue sources and rein in spending -- a strategy that could lead to fare hikes or layoffs.
Leaders at the transit agency on Monday projected a deficit of between $308 million and $577 million in fiscal year 2022, as well as shortfalls in at least three subsequent years, depending on the arc of ridership trends as Massachusetts and the country attempt to bring the highly infectious virus under control.
In their first meeting since June, the MBTA Fiscal and Management Control Board signed off on an unusual two-year budgeting process that will link the ongoing fiscal 2021 spending plan and fiscal year 2022 preparations.
The T will attempt to find $400 million in savings over the next two years by reallocating $160 million in federal funding from the capital to the operating budget, getting legislative approval to pay $120 million of capital project salaries with bonds, and through another $120 million in spending cuts and revenue increases.
How that last goal would be achieved is still unclear, but it could have ramifications for workers and riders.
MBTA officials will seek ideas and proposals from individual departments, though they said during a Monday media briefing that they could not rule out fare hikes or cuts to the workforce starting in fiscal 2022.
MBTA General Manager Steve Poftak said the agency will also undergo a "detailed review" of train and bus service levels to determine whether any changes are appropriate and financially beneficial, given the significantly lower levels of ridership still present across the system.
"This is the beginning of a dialogue," MBTA General Manager Steve Poftak told reporters before presenting the budget outlook to the board. "We are mindful of the riders who depend on the MBTA and we continue to provide them service, but this is the beginning of a conversation and I think it's premature to take anything off the table."
The T Board voted unanimously to set up a sequestered fund to store any savings from its three-pronged approach and use the money to blunt the impact of the forthcoming budget crunch.
If officials decide they need to use fare increases or job cuts to cover holes, they would not happen until the next fiscal year that starts in July 2021, according to Transportation Secretary Stephanie Pollack.
"There's no plan to do any increase in fares or decreases in headcount in year one of the two years," Pollack said. "I think how successful the general manager and the Control Board are in that first year and what the service scenario-planning exercise that will go on this fall shows us will lay the groundwork for the more robust service planning in year two."
"We are trying to make sure that we don't have to do unnecessary service cuts or layoffs in year two, but the entire story for year two will have to be written over the course of this fall when we understand better federal and state support and when we understand better ridership levels," she added.
Transit agencies across the country have seen their financial outlooks battered during the pandemic, with ridership evaporating as commuters switched to working from home or attempted to avoid potential risks of COVID transmission.
Systems in Philadelphia, San Francisco and Seattle are all projecting hundreds of millions of dollars in lost revenue, while New York City's MTA expects a $3.8 billion loss this year and $6.6 billion next year, Poftak said Monday.
"This is a transit problem, not an MBTA problem," Poftak said.
The FMCB in May approved a $2.29 billion fiscal 2021 budget that increased spending over last year by about 7 percent, using -- and likely exhausting -- the $827 million the agency received in CARES Act federal stimulus funding to close budget gaps.
Almost a third of the money the agency hopes to save in the next two years would come from using bond funds, not operating dollars, to pay salaries for workers on capital projects, a change MBTA officials have been seeking for years but cannot make without authorization from the Legislature.
Both House and Senate versions of roughly $18 billion transportation bond bills included approval for that switch, but a final compromise version has not yet emerged from a conference committee after private negotiations began on July 23.
MBTA officials appear not to be expecting additional help from the state. Asked if he believed legislative leaders were willing to direct more dollars toward the agency, Poftak said he briefed House and Senate officials who are "also considering a variety of needs across the spectrum of public services."
"From my perspective, the MBTA was the recipient of $827 million CARES Act funding, and I think as stewards of the system, it's incumbent on us to try to manage as much as possible through this with those resources," Poftak said.
The public health crisis dramatically altered the course of the T's budget outlook and the debate around it.
At the start of the year, the system's aging infrastructure and its frequent revenue shortfalls were a central topic on Beacon Hill, particularly after an independent panel's finding late in 2019 that the MBTA did not have a culture that sufficiently emphasized safety.
In its current fiscal year 2021 budget, the T planned for hiring 151 of the 303 safety-related staff that officials initially targeted in the wake of the panel's report.
Poftak did not say Monday exactly when the remainder would be hired, but said that "safety will be prioritized" in any budget discussion.
The House approved a sweeping set of tax and fee increases aimed at generating more funding for roadway and transit improvements just before the pandemic hit, and that effort later died in the Senate without a vote.
Uncertainty remains over fare revenue, which typically represents about a third of the T's budget.
At the peak of the outbreak, ridership dropped to less than 10 percent of pre-pandemic averages on MBTA subways and about 20 percent on MBTA buses. This week, ridership on buses and the Blue Line was about 40 percent of those baselines, while the Orange and Red Lines saw crowds at about 20 percent.
If fare revenue returns to 80 percent of normal, the T would face a budget deficit of $308 million in fiscal year 2022, officials project. But if social distancing and hesitation about public transit remains in place and fare revenue only hits 40 percent of its prior level, the budget gap would grow to $577 million.
Under current projections assuming the system hits its 80 percent target, the T could face deficits of $380 million in fiscal 2023, $424 million in fiscal 2024 and $468 million in fiscal 2025, according to Monday's presentation.
Both Poftak and Pollack said, though, that they felt a two-year planning process fit best at this time. The longer-term outlook could change significantly, they said, based on the trajectory of treatments or a vaccine for COVID-19, federal or state aid, or commuting patterns.
“We’re trying to do this in digestible steps, not only for the organization, but also for the riding public,” Poftak said. “Those years are going to roll out differently in terms of ridership, and I don’t think it makes sense for the MBTA to plan for a perpetual pandemic through the whole (five years).”
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