A Trial Balloon about Transit Funding

I want to float a trial balloon. Don't take my head off, it's just a thought: What if we were to give the MBTA the ability to raise its own tax revenues regionally subject to periodic voter approval (as in Proposition 2.5)?

Some background first: As compared to other major transit agencies in the United States, the MBTA gets a relatively large share of its revenues from the state, as opposed to regional/local sources (see page 11 of this study from MassINC). Transit services have regional benefits, so it makes sense to fund them regionally.

Arguably, the economic health of Massachusetts, perhaps New England as a whole, depends on the health of Greater Boston. Perhaps, but growth in many other regions of the state has lagged growth in Boston.

A majority of legislators live outside the core MBTA service area (see this study from MassINC at note 22). Rightly or wrongly, they tend to see the disparity in growth as an argument for more state investment in their own regions instead of in Greater Boston. Hence, the basic political difficulty of funding the MBTA operating deficit.

In 2000, the state ended its practice of covering the MBTA's deficit at the end of the year. Under "forward funding", the MBTA was placed on a steady funding diet and held accountable for managing its costs. The state pledged 20% of state sales tax revenues as permanent support for the MBTA.

The MBTA board was unable to live within the forward funding framework. Multiple factors contributed to the failure -- notably, rising health care costs, wage increases awarded by arbitrators, rising energy costs and, on the revenue side, weak sales tax growth. Additionally, understandable political pressures to limit fare increases and to avoid cutting services contribute to the strain on the MBTA's budget.

The MBTA's debt burden was not one of the factors that unraveled the forward funding plan -- debt costs remained within projections (see the D'Allesandro report at page 29) and the state's contribution to the MBTA's budget more than covers debt service. Nonetheless, debt is a relatively high portion of the MBTA's budget as compared to other transit agency budgets (see page 16 of this study from the MBTA Advisory Board). Much of that debt was transferred from the state at the time of forward funding.

So, against that background, here is one idea that is in the mix as a long-term solve for the MBTA's operating budget: (1) Transfer some of the MBTA's debt back to the state, relieving the immediate financial pressure on the T. (2) Give the MBTA the power to levy a tax in its service area subject to voter approval.

Some have suggested a regional payroll tax, but that would probably run into constitutional problems. More likely, it would be an increment on sales or property taxes within the service area. The increment could start at zero and then the voters would have to approve the new taxes at the biennial election of 2014 and approve any increases at biennial elections thereafter.

This proposal doesn't necessarily answer the question of how to address the long-term capital needs of the MBTA. One could devolve that challenge to the voters of the service area or, one could keep the state politically and financially involved for major investments.

Putting in place a two-year cycle would support long term planning. Making increases subject to voter approval in regional elections would improve both transparency and accountability.

I'd appreciate your thoughts -- I've created an online forum devoted to this proposal at this link: http://willbrownsberger.com/forums/topic/a-trial-balloon/   Or, you can always call my office to register feedback at 617-722-1280.