“Given the current expense structure and the T’s core mission, solving for the future budget gap is difficult at best,” CFO Mary Ann O’Hara told the Audit & Finance subcommittee Thursday.
Federal funds also bailed the T out this past fiscal year, according to O’Hara, who said that without the $948 million in pandemic aid, it would have been left with a nearly $132 million budget deficit in 2022.
Instead the MBTA saw higher-than-budgeted revenue and lower-than-expected expenses in FY22, which she attributed to higher fare revenues, and lower wages and fringe benefits due to job vacancies and difficulties with hiring.
The budget’s overall net revenue was $816 million, which was transferred to its operating deficiency fund, leaving $500 million in available funds to fill gaps in FY23 and ‘24, according to a budget presentation.
However, expenses could grow significantly this year, as the MBTA is looking to fill more than 2,000 positions. The budget could also be strained by uncertain ridership, high fuel prices, and continued inflation, the presentation showed.
While the T is projecting fare revenue will be twice as much as last year, it will still be nearly half of what was seen pre-pandemic, and will only support 24 percent of operating expenses.
The budget gap, based on different ridership scenarios, could be anywhere between $236 million and $421 million in FY24, a number that could grow to more than $550 million in four years, according to the presentation.
“We cannot reduce service levels or increase fares based on the T’s core mission to offer a transportation system for the area, and for the near term management has elected no fare increases due to a focus on riders returning to the system,” O’Hara said.
“What we are left with is a very small amount of dollars that can be impacted by the T.”
Also complicating factors is the undetermined amount of money it will take to comply with the latest directives issued by the Federal Transit Administration in its report last month.
The T has already projected it will cost $300 million to comply with the four initial directives issued in June, and O’Hara said the finance team is working to “size” the cost of the rest.
One-time federal funding of $666 million has already been allocated through the Legislature, and Gov. Charlie Baker earmarked another $200 million in a supplemental budget to help the MBTA make the fixes required by the feds.
However, Audit & Finance Committee Chair Betsy Taylor said more support will be needed for recurring costs embedded in those directives.
“We need to understand what the recurring costs would be and as I read the report, given the increased levels of staffing required in order to maintain the desired level of safety,” Taylor said.
“And in order to develop the kinds of communication systems within the organization that are rightly requested, it’s got to cost more money and that has absolutely nothing to do with a level of ridership. That’s just the nature of what is being asked.”
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