This is the first article in a multi-part series exploring the looming mass transit fiscal cliff

Steady operational funding for transit agencies around the United States has never been a guarantee. While most agencies today rely on public subsidies to cover a portion of their operating expenses—typically coming from local or state-level sources—the revenue an agency itself collects helps to support its operating costs, with the amount varying widely from agency to agency. Fare revenue dropped significantly after the beginning of the COVID-19 pandemic, leaving huge operating shortfalls in agencies across the country.

Congress plugged this hole temporarily, but the funding crisis is set to return as the COVID aid is running out while ridership, and its accompanying fare revenues, are still far from their pre-pandemic levels. In 2019, the 50 U.S. transit agencies with the highest operating expenses had an average farebox recovery of 36 percent, with a total farebox revenue of $13.5 billion, according to an Eno analysis of National Transit Database (NTD) statistics. How that affects different agencies varies widely. This analysis shows which transit modes and which transit agencies are most at risk in the coming years.

COVID Relief Funding for Transit Agencies

As stay at home orders were put into place in 42 states and the District of Columbia in March of 2020, ridership plummeted as those who were not deemed essential were mandated to stay at home. Even those going out for essential work and essential trips usually opted for more individualized forms of transportation, such as a personal automobile or bicycle, to reduce their contact with others. Transit agencies’ fare revenue dried up overnight along with their ridership, leaving unsustainable gaps in their annual operating budgets. Industry wide, mass transit fare revenue in the United States dropped from a total of $15.8 billion in 2019 to $8.7 billion for all of 2020.

Agencies with higher fare reliance faced greater budget gaps. But state and local operating assistance decreased as well, across all agencies by 12 percent and 16 percent, respectively, as local and state budgets similarly took a hit. Meanwhile agencies still provided essential transportation services (including extra cleaning) and their overall operating expenses declined just 1 percent from 2019 to 2020.

The federal government supplemented lost operating revenue through three major funding laws:

The Coronavirus Aid, Relief, and Economic Security (CARES) Act (March 2020) provided $25 billion in emergency funding for transit agencies, all of which could be used for either capital or operating expenses. Because the bill was penned and passed in a great hurry, amidst the early pandemic confusion, the distribution formula for transit funds was not heavily scrutinized, resulting in a disproportionate distribution with no regard to operating costs or farebox revenues. For example, the CARES Act gave the New York City MTA aid equivalent to 34 percent of its 2018 operating expenses, and San Francisco Muni only 23 percent of a year’s OpEx, but the average for the smaller providers (outside the top 20 highest fare totals) was that their CARES grants were 72 percent of one year’s operating expenses.

The Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act (December 2020) provided $15 billion of additional relief funding dedicated to mass transit, with the stipulation that every urbanized area receive enough federal relief money such that between the two relief packages they received a total appropriation of at least 75 percent of its agencies’ combined 2018 operating expenses. Although the original impetus of this portion of funding in the bill was, broadly, to provide more aid to transit agencies, a secondary goal was to achieve a more even distribution of funds between agencies.

The American Rescue Plan (ARP) Act (March 2021) appropriated a final $30.5 billion to transit and brought each urbanized area’s relief total up to at least 132 percent of its 2018 operating expenses. ARP included $2.2 billion of discretionary funds that the Secretary of Transportation could (and did) distribute if an agency demonstrated their need for additional funding.

In total, the three federal relief laws supplied almost $70 billion of funds for public transit operations in the United States (For context, the IIJA provides $18.2 billion annually to transit agencies, for capital projects only except in urbanized areas under 200,000 population). The federal relief funding has provided critical support to transit service throughout the pandemic, but these funds will not last forever and are not necessarily targeted to the agencies that have the largest revenue gaps. On many services, transit ridership, and thus fare revenues, might not fully recover by 2030. As agencies publicize their FY23 budgets, some are predicting large operating budget shortfalls as their COVID aid runs out.

Fare Revenue Risk by Mode

Some modes of transit are more reliant on fare revenues than others. Eno analysis shows that the most fare reliant modes are high-capacity modes that, pre-pandemic, heavily served commuters, including commuter rail, commuter bus, and heavy rail. The tables below indicate the farebox recovery of services for the largest 25 U.S. agencies (by 2019 farebox revenue). The New York MTA and its modes are excluded from Table 1, as they are outliers in the data. (Ed. Note: Very often, the only way to make sense of U.S. mass transit data is by separating New York City’s population and finances from the rest of the country.) The New York MTA’s farebox recovery by mode is represented in Table 2. The farebox recoveries by mode in Table 1 are comparable to national averages of all urban agencies.

Table 1: Farebox recovery of Top 25 US Agencies (by 2019 farebox recovery), by Mode (Excludes New York MTA)

*Similar modes were combined to simplify analysis. In most cases, modes that made up a relatively small share of all modes, i.e. trolley busses and cable cars, were combined with bus and streetcar services, respectively. The FTA’s mode classification codes represented above are as follows: FB=Ferry Boat, HR=heavy rail, YR=hybrid rail, CR=commuter rail, CB=commuter bus, RB=bus rapid transit, CC=cable car, SR=streetcar rail, MB=bus, TB=trolley bus, LR=light rail, MG=monorail/automated guideway, DR=demand response, VP=vanpool

⁺These modal categories exclude NYMTA services.

Table 2: New York MTA Farebox Recovery by Mode

As ridership has recovered for some types of trips, downtown office commuters have returned to transit much slower. Correspondingly, the commuting modes they relied upon are recovering more slowly. Especially problematic for those modes is that they are also more fare reliant, making them much more susceptible to budget shortfalls.

Fare Revenue Risk by Agency

Although examining modal fare reliance and risk yields intuitive results, fare reliance by agency is a bit more complicated. This analysis divides agencies into four general groups that are helpful to understand revenue risk:

• Agencies with high farebox recovery
• Agencies with high fare revenues (not included in the first group)
• Medium sized agencies with moderate fare reliance
• Smaller agencies with low fare reliance

Agencies with high farebox recovery

Many larger agencies, like San Francisco’s BART or New York MTA’s Metro North, are heavily fare reliant as anticipated. But some smaller and medium sized agencies also rely heavily on fares. Shown in Table 3, Hudson Transit’s Short Line—a commuter bus service that serves the New York City Greater Metro Area–is the most fare reliant, large service in the country, at 85 percent. Other less well-known services such as the Alaska Railroad and the Northern Indiana Commuter Transportation District’s South Shore Line are also included. Table 3 show the 16 U.S. Agencies that had 2019 operating expenses over $40 million dollars and relied on fares to cover more than 40 percent of those costs.

Table 3: Agencies with High Farebox Recovery (>40%)

Note: Table 3 only includes agencies that had a 2019 farebox recovery of more than 40 percent within a sample of U.S. Agencies with 2019 operating expenses greater than $40 million (top 125 agencies).

While they may not have billions of dollars in operating expenses, the smaller, less talked about agencies still have a significant amount of fare revenue that they use to fund their transit operations, with those in Table 3 with operating expenses under $100 million still relying on a total of $158 million of fare revenue.

Agencies with high absolute fare revenues (not included in the first group)

Additionally, farebox recovery is not the only metric that should be used to demonstrate transit financial risk. Some agencies have a smaller farebox recovery, but because they have large operating budgets, the fare revenue is still a substantial amount that is difficult to replace, meaning they are still fare reliant. Table 4 includes all U.S. transit agencies that had 2019 farebox revenue greater than $100 million, that did not have a 2019 farebox recovery greater than 40 percent.

Table 4: Low Farebox Recovery Agencies with more than $100 million in 2019 Fare Revenue

Medium sized agencies with moderate fare reliance

While the first two groups capture the largest and most fare dependent agencies, many American cities are served by mid-sized agencies with fare revenues between $20 million and $100 million. The 50 agencies in this group have an overall farebox recovery of 23 percent. The total 2019 fare revenue for these agencies was just over $2.1 billion, averaging $42 million per agency. These agencies include Southern California’s Metrolink, Dallas’s DART, and Miami-Dade County, and account for a significant number of transit riders in the United States.

The fiscal cliff for these agencies is less severe, but still looming. They rely less on fare revenues, both as a percentage and as an absolute number, making it easier to fill future funding gaps. Also, because of this, they have not necessarily spent down their COVID relief funds, so budget gaps might not be immediate.

Smaller agencies with low fare reliance

The United States is sprinkled with hundreds of small urban and rural agencies that provide primarily bus and paratransit operations. The 814 agencies that reported fare revenues in 2019 less than $20 million have an overall farebox recovery of 15 percent. The total 2019 fare revenue for these agencies was $1.5 billion. While this is still a large amount of money, each agency only averaged about $1.9 million in fare revenue, compared to their average operating expenses of $12.3 million. (Note that over 1,000 agencies with reported operating expenses in 2019 did not report fare revenues and were not included in this analysis). These agencies, including the Greater Richmond Transit Company (VA), the Interurban Transit Partnership (Grand Rapids, MI), and the City of Tuscon (AZ), are at low risk when subject to diminished fare revenues.

Next Steps

The transit fiscal cliff is not a problem that is years away, but one that is beginning now for some agencies, like WMATA, who just announced an anticipated budget shortfall of $185 million in fiscal 2024 (which begins on July 1, 2023), followed by a $738 million deficit in 2025, and larger annual deficits afterwards, even if 100 percent ridership has been restored. (Download their latest budget presentation under “FY2024 Budget Outlook” here.)

When each agency hits the fiscal cliff, and how they deal with it, depends greatly on their situation. Agencies with large budgets, those that rely on fares for a significant portion of their operating revenues, and those with commuter bus, commuter rail, and heavy rail services are most at risk. A federal solution to provide additional operating funds to the few dozen agencies that need it will be politically difficult in Congress. Finding large sums at the state and local level will be challenging for many regions. Making service cuts will be painful to riders who rely on transit.

In the next part of this analysis, Eno is going to review individual agency budgets at large, fare dependent agencies to see what approaches they are taking and what assumptions they are making to help bridge the coming fiscal cliff. Starting the conversation about the problem now is a needed step towards developing potential solutions.