$6 bn funding crisis at US mass transit threatens commuters, travel

Business Standard

30-04-2025

By Sri Taylor and Aaron Gordon
When Covid-19 broke the US economy, the trains and buses that carried millions of Americans to work every day emptied out. A $70 billion lifeline from the federal government kept them going — a bet that someday they would again be packed with commuters.
Five years later, that day has come. Workers and tourists are back on the rails and roads. Throngs of straphangers stand shoulder-to-shoulder on the subway. Finding a seat on a crowded rush-hour express train feels like a small victory. For transportation systems from New York to Chicago to San Francisco, it should be a moment to exhale. Faced with extinction, they survived.
Yet there has been no time for celebration.
That's a big problem for services that rely on the fares paid by riders to fund their operations. To close the gap, many mass-transit authorities are preparing to increase fares, cut service, or both — steps that transit advocates fear could lead to a 'death spiral.'
'When transit isn't frequent and when transit isn't reliable, people stop using it,' said former Pennsylvania Department of Transportation Secretary Leslie Richards, now a professor at the University of Pennsylvania Stuart Weitzman School of Design.
Shifting political and economic winds are amplifying the challenges. The Trump administration is drastically reining in federal spending, creating fear of job losses that could again decimate ridership. And tariffs could fan inflation, leaving riders less willing — or able — to swallow higher fares.
The accumulating pressure has transit agencies worried not only about their capacity to upgrade aging infrastructure, but even to keep buses and trains running for the riders who count on them. Cuts to service raise the risk of longer commutes, lost work hours and clogged roads, as well as a setback to the fight against climate change as more people turn to driving.
Few services are under more financial pressure than the Southeastern Pennsylvania Transportation Authority, which serves commuters in Philadelphia and its suburbs. The system is hurtling toward a projected structural deficit of $213 million.
State lawmakers have previously refused to enact proposals from Governor Josh Shapiro to increase the share of sales-tax proceeds allocated to mass transit, which would provide a backstop for fare revenue. Shapiro's latest budget proposal includes $1.5 billion in mass-transit funding over the next five years.
Transportation advocates have been sounding alarms about SEPTA's finances for years. The agency reduced its budget gap by $27 million by freezing salaries for roughly 1,300 of its employees. It plans to propose a fiscal 2026 budget that cuts service by 45 per cent while boosting fares 21.5 per cent starting in September. The cuts would lead to the elimination of 50 bus routes, five regional rail lines and Sports Express trains, according to SEPTA.
'There is nothing left to cut from the budget but service,' SEPTA says in large, red type on a website it set up to explain its funding issues to riders. The proposed fare increases would be the system's largest ever, 'by a long shot,' according to Scott Sauer, SEPTA's interim general manager.
'That will erode the operating money that is coming in,' said Richards, the former transportation secretary. 'Every time you make a decision to save money, either on the capital side or on the operating side, you're going to lose.'
System-wide data shows SEPTA ridership in March was 80 per cent of pre-Covid levels. At a board meeting in late March, Sauer warned that if SEPTA is forced to cut service, 'all these efforts that we are making to improve service will be disrupted and it will be extremely difficult to reverse course.'
Sauer said the 'cuts do not have to happen' if the state legislature backs Shapiro's plan. Shapiro's office didn't respond to a request for comment.
The federal government is unlikely to step in with an additional lifeline. President Donald Trump has sought to rein in government spending and US lawmakers are looking for savings to help finance an extension of Trump's first-term tax cuts.
'Literally no one has any expectation of Congress doing anything else for them,' said Yonah Freemark, principal research associate at the Urban Institute. 'A lot of folks are worried that the Trump administration will try to claw back transit dollars. And if that happened, their situation would get even worse.'
US transit agencies are in a trickier spot than international peers, which generally enjoy higher usage, lower construction costs and more consistent government support.
Transport for London's ridership stands at approximately 85 per cent of pre-pandemic levels; it no longer required government subsidies to compensate for lost ridership starting in 2024. Paris is faring better, with ridership almost fully back to where it was before Covid. Both London and Paris opened major new subway lines, in 2022 and 2024, respectively, which helped attract new riders.
Canadian transit agencies have recovered more than 90 per cent of revenue excluding subsidies and more than 80 per cent of ridership compared with pre-pandemic levels, according to Statistics Canada.
The Metropolitan Transportation Authority, which operates New York City's subways, buses and commuter rails, faces potential operating deficits of about $400 million in 2027 and 2028. The MTA needs state and federal money for infrastructure upgrades to improve service and attract more riders. Its 2025-2029 capital plan relies on an anticipated $14 billion of federal funds.
The MTA is also counting on a congestion-pricing toll to finance service improvements and upgrades. The $9 fee to drive into certain parts of Manhattan is expected to raise $15 billion — yet US Transportation Secretary Sean Duffy is seeking to end the program, and has threatened to withhold federal transportation funding if it continues. The MTA sued the Transportation Department in February after Duffy withdrew federal approval for the toll.
The MTA's capital program 'must be fully funded to carry out critical work that will keep the system running and canceling congestion pricing has serious consequences,' Kevin Willens, the agency's chief financial officer, said in a statement. 'More broadly, unpredictable federal transportation policy harms the MTA and municipalities across the country.'
New York draws roughly half a million commuters every day from nearby suburbs in New Jersey and Connecticut. New Jersey Transit, which received about $4.4 billion in Covid relief, gets $850 million in federal formula funds annually. Competitive grant awards brought its total to just over $1 billion in fiscal 2025. Any freeze in federal funding could be devastating, officials said.
'Imagine what an existential crisis it would be if I'm not able to pay the staff, if I'm not able to advance projects,' NJ Transit Chief Executive Officer Kris Kolluri said in an interview. 'That would have a crippling effect on not just the Northeast Corridor, but the entire nation's infrastructure.'
To help tackle the system's fiscal challenges, New Jersey Governor Phil Murphy enacted a corporate transit fee last year that is the first dedicated state funding source for NJ Transit in its history. The surcharge, which is expected to generate $815 million in revenue in fiscal 2026, will supplement a 15 per cent fare increase that took effect last summer and annual 3 per cent fare hikes thereafter.
Transit officials across the nation are confronting similar squeezes. San Francisco's Bay Area Rapid Transit is on track to use up its roughly $2 billion in federal and state emergency aid by spring 2026.
Faced with a drop in ridership that it expects to never fully recover, BART likely will need to overhaul its funding model. Fares and parking fees once paid for 70 per cent of operating costs before Covid, but now, they cover only 25 per cent. BART said in a statement in March that it had eliminated a projected $35 million budget deficit for fiscal 2026 by reining in costs, but structural deficits of $350 million to $400 million will remain in the years to follow 'unless long term stable funding sources can be identified.'
'I can't remember a situation where it's been this dire,' BART General Manager Bob Powers said in an interview.
In Chicago, a $770 million budget gap currently looms over the area's three transit systems, which average about 1.2 million daily rides combined in northeast Illinois.
If the city can't scrounge up funding to fix it by the end of the legislative session in May, service cuts of as much as 40 per cent are possible. Officials from the Regional Transportation Authority are pushing for an annual injection of $1.5 billion in additional operating funding from the Illinois legislature, along with a 10 per cent fare increase.
Moody's Ratings revised its outlook in March on the Chicago Transit Authority's debt to negative, saying it doesn't expect that the CTA, which runs the city's 'L' train service and buses, can close its operating deficit with spending cuts and fare increases alone. Kroll Bond Rating Agency cut its outlook on CTA's debt to negative from stable this month.
CTA didn't respond to request for comment.
Boston is also facing acute transit-funding issues. Governor Maura Healey has proposed an additional $500 million boost for the Massachusetts Bay Transportation Authority, the agency that runs the cash-strapped subway system known as the 'T.'
While that would help the agency balance its operating budget in the upcoming fiscal year, the deficit is projected to balloon to nearly $500 million by fiscal 2028, according to pro forma forecasts shared in February. The MBTA also needs at least an estimated $24.5 billion to bring its infrastructure to a state of good repair.
The system that serves the heart of the federal government, the Washington Metropolitan Area Transit Authority, could face financial woes due to the Trump administration's spending cuts. Federal workers make up much of the Metro's ridership, but the District of Columbia is expected to lose as much as 21 per cent of its workforce.
The financial pitfalls risk leaving transportation systems unprepared to serve not only commuters, but also tourists.
About half the nation's major public transit systems need to prepare for the FIFA World Cup, which is expected to bring millions of international visitors to the US next year and place big demands on transportation infrastructure. Looming service cuts could make that all but impossible.
'The simple fact is we can't do it,' said SEPTA's Sauer. Boston, Philadelphia, San Francisco and New Jersey are all hosting matches. 'We won't be able to handle the influx of people that we're going to see.'