Time For Feds To Fund Mass Transit Operating Expenses?

National Journal Online -- Transportation Experts -- Time For Feds To Fund Mass Transit Operating Expenses?

Monday, June 1, 2009
Time For Feds To Fund Mass Transit Operating Expenses?

Americans are using public transportation in record numbers -- taking 10.7 billion trips last year, an increase of 4 percent over 2007 -- yet because of declining state and local budgets, many mass transit systems are facing the prospect of raising fares, cutting service and laying off staff. Given the contribution that mass transit makes to relieving urban congestion and reducing greenhouse gas emissions, is it time to overturn rules that only allow federal funding to be spent on capital projects and not on transit systems' day-to-day operating expenses?

-- Lisa Caruso, NationalJournal.com




Responded on June 1, 2009 9:01 AM
Anthony E. Shorris, Director of the Rudin Center for Transportation Policy and Management, Robert F. Wagner School of Public Service, New York University

It's time to re-think the Federal government's failure to support mass transit operating expenses. The reasons are simple: the beneficiaries of mass transit ridership rider extend well beyond the riders themselves. Good old fashioned micro-economics would tell us that when people are affected by a transaction other than the buyer and seller, there need to be ways to capture the value and costs external to the deal. In the case of mass transit, the riders certainly benefit -- and should pay some portion of the cost -- but others benefit too: commuters who gain more road space when people use the train, families who breathe cleaner air, and a nation that finds itself a step closer to energy independence with every rider.

The only hard question becomes which level of government should provide what share of the operating subsidy appropriate for mass transit systems. Since some of the benefits accrue to commuters in the region served by the transit system, they should certainly chip in, as should residents of the areas served (a balance found in the thoughtful pro...

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It's time to re-think the Federal government's failure to support mass transit operating expenses. The reasons are simple: the beneficiaries of mass transit ridership rider extend well beyond the riders themselves. Good old fashioned micro-economics would tell us that when people are affected by a transaction other than the buyer and seller, there need to be ways to capture the value and costs external to the deal. In the case of mass transit, the riders certainly benefit -- and should pay some portion of the cost -- but others benefit too: commuters who gain more road space when people use the train, families who breathe cleaner air, and a nation that finds itself a step closer to energy independence with every rider.

The only hard question becomes which level of government should provide what share of the operating subsidy appropriate for mass transit systems. Since some of the benefits accrue to commuters in the region served by the transit system, they should certainly chip in, as should residents of the areas served (a balance found in the thoughtful proposal for transit system funding made by former New York MTA Chair Richard Ravitch). But there is a national interest here too. First, since the communities that benefit from cleaner air and less crowded roads often encompass more than one state, there is a role for national government. Even more importantly, shifting riders from cars to transit makes America more secure and less dependent on foreign oil. And perhaps most important of all, a more just distribution of transportation services is an appropriate national policy goal, just as is the equitable distribution of educational or health care services. Indeed, as transportation has become one of the largest household expenses, mechanisms to reduce this cost while achieving other important national benefits may prove highly efficient uses of federal dollars.

One last point: the use of federal transit dollars solely for capital as opposed to operating expense can skew local decision-making away from core maintenance towards system expansion. The federal government should be using the power of its purse to encourage rational decision-making at the local level. While, in the end, all dollars are fungible, a more thoughtful use of federal funds could not only advance the national good by creating a more secure and just America over the long-term, but could improve the quality of our existing transportation systems today.


Responded on June 1, 2009 7:54 AM
William Millar, President, American Public Transportation Association

This week’s question is one that is timely and under much discussion in the public transportation industry. This is a time of great opportunities and great challenges for America’s public transit systems. Last year 10.7 billion trips were taken on public transit – the most in 52 years – and a modern ridership record. Since 1995, public transportation use has grown by 38%, a figure that is almost triple the growth rate of the population (14 percent) and up substantially over the growth rate for the vehicle miles traveled (VMT) on our nation’s highways (21 percent) for that same period.

The paradox of this is that at a time of record demand for public transportation, state and local revenues are declining and many public transit systems are facing severe financial challenges, and America’s transit riders are paying the price. Raising fares and cutting service may seem an odd thing to do in light of record ridership, but fares, both here and abroad, cover only a portion of the cost of operating a public transit system.

Funding from all levels of government – federal...

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This week’s question is one that is timely and under much discussion in the public transportation industry. This is a time of great opportunities and great challenges for America’s public transit systems. Last year 10.7 billion trips were taken on public transit – the most in 52 years – and a modern ridership record. Since 1995, public transportation use has grown by 38%, a figure that is almost triple the growth rate of the population (14 percent) and up substantially over the growth rate for the vehicle miles traveled (VMT) on our nation’s highways (21 percent) for that same period.

The paradox of this is that at a time of record demand for public transportation, state and local revenues are declining and many public transit systems are facing severe financial challenges, and America’s transit riders are paying the price. Raising fares and cutting service may seem an odd thing to do in light of record ridership, but fares, both here and abroad, cover only a portion of the cost of operating a public transit system.

Funding from all levels of government – federal, state, and local – is essential for maintaining and expanding public transit services for our citizens. Unfortunately, public transportation has been underfunded for years at all levels, and the recent economic hardship is making a bad situation even worse.

The decline in operational revenue is creating budget crises for many public transit systems – leading to fare increases and service cuts. The American Public Transportation Association (APTA) and its members believe that the federal government has two legislative opportunities that could provide funding for public transit system’s day-to-day operating expenses in the short term.

The first opportunity involves the recently passed economic stimulus bill – the American Recovery and Reinvestment Act (ARRA). APTA supports a provision in the supplemental appropriations bill, recently passed by the Senate, which would permit transit systems to use up to 10 percent of their ARRA funds for operating purposes. This provision is expected to be considered in a conference committee and by the entire Congress in the next two weeks.

The second opportunity is the climate change legislation, entitled the American Clean Energy and Security Act (ACESA), which unfortunately, at this moment, has no reference whatsoever to public transportation. Public transportation is part of the solution to addressing climate change and with an annual savings of 37 million metric tons of carbon dioxide emissions, should be included in any climate change legislation. Congressional leaders should include an allocation of cap and trade revenues for public transportation in this legislation, including an ability to use this revenue allotment for operating expenses. It is inconceivable that Congress will miss this opportunity as public transportation is one of the most effective solutions to reduce our nation’s carbon footprint.

The bottom line is that additional funding for both capital and operating costs are urgently needed, and that all levels of government – local, state, and federal – must step up and expand investment in America’s public transportation systems to meet our country’s economic, energy, and environmental challenges, while increasing mobility choices.

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