Biden looks to undo Reagan policy on mass transit funds
BY: MINHO KIM | 03/20/2023 06:32 AM EST
CLIMATEWIRE | The Biden administration has signaled to Congress that it wants to change a long-standing policy that has prohibited large transit agencies from spending federal dollars on operating expenses such as staff wages and fuel costs.
The proposal was included as part of President Joe Biden’s 2024 budget plan for the Transportation Department, and it comes as transit agencies nationwide have struggled to rebound financially from the Covid-19 pandemic. The policy shift outlined by the Biden administration would give local authorities the freedom to divert billions of dollars from various transportation grant programs in order to cover “operating shortfalls.”
If approved by Congress, the proposal would let regional transit systems in cities such as Chicago and Washington, D.C., pay their largest expense category with federal money. This change would give them more leeway to address a “very serious fiscal cliff,” said Jarrett Walker, a public transit planning and policy consultant.
The ability to tap federal funds for operating expenses would help regional transportation agencies avoid a “transit death spiral,” Walker said. That’s when a lack of money forces transit agencies to cut services, which can lead to further declines in ridership.
Large regional transit agencies have been prohibited from using federal dollars for expenses such as fuel or wages since former President Ronald Reagan convinced Congress to put that policy in place during his second term. At the time, Reagan was pushing for a broad reduction in federal spending.
The policy defined large transit agencies as those operating in metropolitan regions with populations larger than 200,000 people. Reagan’s policy did, however, let large transit agencies spend federal dollars on capital expenses such as the maintenance or expansion of bus or train fleets.
A shift in federal policy would be a “huge help for transit agencies to give them the flexibility to adjust to the new world that they’re in,” said Joshua Schank, a former Los Angeles County Metropolitan Transportation Authority chief innovation officer and a senior fellow at UCLA.
Since Covid-19, fewer people are taking mass transit, and they’re doing it a way that’s different from their pre-pandemic routines. For example, as more people work from home, travel demand during nonrush hours has increased, Schank said.
The change in behavior means transit agencies need to provide more frequent service during off-peak hours to increase ridership and reverse their death spiral, he added.
The Biden administration’s proposal would make this shift easier, said Walker, the transit planning and policy consultant. “All day, all direction, all-the-time service is turning out to be the most useful to the most people for the most diverse purposes.”
One of the two pillars of potential new federal support would come from Federal Transit Administration’s Urbanized Area Formula grants, which amounted to $6.9 billion in fiscal 2022.
The Biden proposal also would grant local authorities the flexibility to divert a proportion of their highway funding to transit systems — a notable shift in policy that would permanently open up more federal dollars to public transportation, said Adie Tomer, a senior fellow at the Brookings Institution.
Eligible highway programs could include the Congestion Mitigation and Air Quality Improvement program and Surface Transportation Block Grant program, which the 2021 infrastructure law provides at least $13.8 billion and $2.5 billion annually between fiscal 2022 and 2026.
“The administration is signaling what could be a transformative amendment to how the federal government funds transit agencies across the country,” Tomer said.
Transit Fiscal Cliff
The current fiscal crisis of transit systems began with Covid-19 lockdowns, when ridership plummeted to unprecedented levels. In response, the federal government since March 2020 has injected nearly $70 billion for transit agencies to help prevent their failure.
But for most transit systems, those Covid-19 relief funds are set to dry up in the months ahead — even though ridership remains below 75 percent of pre-pandemic levels in most urban areas, according to a survey by Transportation for America, a transit advocacy group.
The transit authority in Washington, D.C., faces a $184.7 million funding gap for fiscal 2024, according to a December budget report. The gap is projected to grow to $738 million in fiscal 2025 as federal aid dries up. Meanwhile, Chicago’s Regional Transportation Authority warned Illinois lawmakers last Wednesday that its budget deficit could reach $730 million per year by fiscal 2026 — as its ridership remain around half of 2019 levels.
Without service cuts or additional funding, nearly two-thirds of 27 major transit agencies that participated in a recent Transportation for America survey predicted budget deficits by 2025.
