What is a fiscal cliff?

For transit agencies, a fiscal cliff occurs when money available to fund operations (drivers, energy/fuel, mechanics, etc.) is significantly less than what’s needed to pay for the cost of existing transit service. For agencies that are heavily relying on federal emergency funds to run service, the fiscal cliff occurs when that one-time money runs out.  

Why are many Bay Area transit agencies facing this fiscal cliff?

Many Bay Area transit agencies historically have relied on the money collected from fares to pay for a significant share of their operations. This is good news for the traveling public: funding operations with strong fare revenue allows an agency to run more service and make other improvements with the other public funds, such as local sales tax dollars or bridge toll money, they receive.

When the COVID-19 crisis hit in March 2020, Bay Area transit ridership dropped by about 90%. Lost fare revenue created a huge, immediate budget hole for local transit agencies. The federal government stepped in to provide one-time relief funding to backfill lost fare revenue under the condition that agencies did not lay off workers and maintained service for essential workers. This federal money helped Bay Area transit agencies – and those in other major metro areas across the country – offset their farebox losses, but the funds will run out for the region’s largest agencies over the next couple of years. Meanwhile, though ridership gradually is climbing, fare revenues are still far below pre-pandemic levels while costs have grown by about 30%. The COVID-driven shift toward remote work also has been especially acute in the Bay Area, with San Francisco (previously a major transit destination) now having the highest office vacancy rate in the nation.

How much funding is needed to address Bay Area transit operating needs and when?

The funding needs and fiscal cliff timelines vary by transit agency. The state budget for fiscal 2023-24 (July 1, 2023-June 30, 2024) provides an important but temporary fix for Bay Area transit agencies, including $1.1 billion in flexible transportation funding over the next four years to help support transit operations. Without this money, agencies such as Muni, BART and others whose fare revenues remain well below pre-pandemic levels likely would have had to make deep service cuts as early as this year. The Metropolitan Transportation Commission (MTC) estimated that between $2.5 billion and $2.9 billion is needed over the next five years to allow Bay Area transit to survive and thrive, so this $1.1 billion falls far short of covering the estimated deficits facing Bay Area transit agencies.

How much COVID relief money did Bay Area transit agencies get from the federal government and how much is left?

Bay Area transit agencies received a combined total of $4.4 billion through three separate COVID relief bills passed in 2020 and 2021. The amount still available varies by agency with fare-dependent agencies seeing their relief funds depleting more quickly. BART and Muni, which face the largest deficits, will fully expend their share by July 1, 2025.

If most transit agencies received emergency funding during the pandemic, why is there a fiscal cliff?

Federal relief funds were temporary pots of money to offset immediate COVID-related revenue losses and help pay for operating expenses. The hope had been that transit ridership and revenue would recover by the time the funds ran out. But this hasn’t been the case. So, for many transit agencies, the fiscal cliff looms as soon as the COVID relief funds run out.

Can the fiscal cliff be avoided, and who can help stop it?

Yes. Transit agencies and advocates across the state called upon the Governor and state Legislature to provide a multi-year commitment to invest in transit operations to prevent California transit agencies from falling off the fiscal cliff while they adapt to new travel patterns and make necessary service improvements.

California has invested billions of dollars in modernizing and expanding transit systems across the state to attract more riders, but without a new source of state operating assistance to keep the buses, trains and ferries running, some agencies will be forced to make deep service cuts that will strand existing riders, harm the economy, and deter new riders from choosing transit over driving. 

How much money is needed to keep Bay Area buses, trains, and ferries running without interruptions?

Bay Area transit agencies need an additional $2.5 billion to $2.9 billion over the next five years to ensure local transit service can survive and thrive. The acute need begins in the fiscal year starting July 1, 2025, when Bay Area agencies face a shortfall of over $700 million.

Is the financial status of the Bay Area's public transit similar to or worse than Southern California and other major cities across the state?

The Bay Area’s needs are more acute than those in Southern California for several reasons. First, in the Bay Area fare revenue covered a much higher share of transit operating costs before the pandemic than in Southern California. The steep decline in ridership has had a greater impact on transit budgets in the Bay Area than in Southern California where other subsidies, such as sales tax, make up a greater share of transit budgets. Second, a larger share of the Bay Area’s pre-COVID transit riders relied on transit primarily to commute to work as opposed to other daily travel needs. With the Bay Area leading the nation’s work-from-home rates, these commute-based transit trips have been hit hard. National surveys indicate the Bay Area has experienced slower return-to-workplace recovery than any other U.S. metro area, including Los Angeles, San Diego and Sacramento. This trend helps explain why the Bay Area’s commute-based systems, namely BART and Caltrain, have the lowest rates of ridership recovery in the Bay Area. Compounding matters, these systems also had the highest share of their operating expenses covered by passenger fares pre-pandemic. Bay Area bus systems, on the other hand, are seeing recovery rates on par with other parts of the state as bus riders are less likely to have other travel options and use transit for a variety of trip purposes, not just commuting.

What will the new transit operating funding from the state pay for in the Bay Area?

The new state transit operating funding provided in the FY 2023-24 state budget will enable local bus, rail, and ferry operators to maintain transit service levels to help residents get where they need to go for the next two years.

How many daily trips are taken on Bay Area transit?

About 1 million trips are being taken on transit each weekday right now in the Bay Area.

What share of those who ride transit today lack access to a car?

Before the pandemic, about one in four Bay Area transit riders lacked access to any vehicle. But this figure varies widely by operator. According to AC Transit, nearly half of its riders have no access to a car at home. For BART, it is 44% of their ridership.

What share of those who ride transit today are low-income or very low-income? 

According to the U.S. Census, about 50% of those who commute by public transit are considered low income, with a household income at or below $50,000.

How important is public transit to achieving the Bay Area and state’s greenhouse gas reduction/climate goals?

Transportation is the biggest contributor of carbon emissions in California, and investing in public transit is the best way to reduce pollution and greenhouse gas emissions from on-road travel. While California has set ambitious goals to shift to zero emission vehicles (ZEVs) and offers incentives for their purchase, there is still a great need to reduce the amount of driving that occurs, given that the vast majority of cars on the road today are gasoline-powered and will remain so for many years to come. 

Every driver who leaves their car at home and instead rides a bus, train or ferry reduces not just their own emissions but also congestion on our freeways and bridges, which reduces emissions associated with idling from those who continue to drive. Robust transit service allows families to choose to own fewer vehicles, further reducing driving and emissions in our communities. Plan Bay Area 2050, the region’s climate plan, assumes an almost 50% increase in transit’s share of commute trips as one of the core levers to achieve our ambitious greenhouse gas reduction goals.

What is the current rate of ridership recovery in the Bay Area relative to 2019 (pre-COVID)?

As of June 2023, Bay Area ridership recovery stands at 59% of pre-pandemic levels, but rates vary by transit agency, with urban bus agencies seeing higher ridership returns than regional agencies that have historically focused on serving commuters. For example, relative to pre-pandemic ridership AC Transit, SF Muni, and Santa Clara VTA are each at around 65%, while Caltrain is only at 37% of pre-pandemic ridership and BART is at 42%. Some of the smaller bus systems have seen the most robust recovery, such as Marin Transit and SamTrans, which are above 80% pre-pandemic ridership.

Can transit agencies save money by adjusting their service to reflect reduced ridership?

Yes, but the ability to reduce service to save money is a tool more available to bus and ferry operators than to rail systems, which have very high fixed costs. Bus and ferry operators have made service level changes to reflect more robust weekend recovery and to enhance flexibility for passengers. Across-the-board service reductions would lead to reduced ridership, which would necessitate further reductions to service levels and lead to further ridership reductions. This is sometimes known as the transit death spiral. In addition, cutting transit will disproportionately harm vulnerable populations and will make it harder to reach the state’s goals to reduce pollution and greenhouse gas emissions.

What can transit agencies to do improve safety and the overall experience so more people will ride transit?

Bay Area transit agencies, along with state and local elected officials, advocates for people with disabilities, business and labor groups, and transit and social justice advocates, approved a 27-point Transit Transformation Action Plan to re-shape the Bay Area’s transit system into a more connected, more efficient, and more user-focused network across the entire Bay Area. More recently, MTC and several transit agencies and advocates released “Survive and Thrive: Roadmap to a Sustainable Business Model for Bay Area Public,” a report that lays out a path to achieving financial sustainability.

Is a regional transportation funding measure needed and if so when would it go on the ballot for voter consideration?

MTC, county transportation authorities and transit agencies are considering all options, including a potential ballot measure in 2026, to create a sustainable revenue flow that will ensure a faster, more reliable and more customer-focused transit network for all Bay Area communities.

What would a regional transportation measure look like? What type of tax is under consideration?

It is not yet known what a measure will look like. MTC has begun stakeholder engagement and will conduct a poll and further stakeholder engagement in Fall 2023. MTC needs to work with Bay Area transit agencies, key stakeholders, state lawmakers and the Governor to get enabling legislation passed in order to place a measure on the ballot in 2026.

What happened with the fiscal 2023-24 state budget?

The fiscal 2023-24 state budget signed into law by Gov. Newsom includes $1.1 billion over four years to address the fiscal cliff by establishing a new, flexible Zero Emission Transit Capital Program, which allows funds to be used for either operating expenses or zero emission transit investments. The Bay Area’s share of this funding is approximately $375 million. These funds will help transit agencies avoid a near-term “fiscal cliff” that likely would have led to deep service cuts as early as this year by Muni, BART and other agencies whose fare revenues remain well below pre-pandemic levels.

The new budget also restores a previously imperiled $4 billion commitment to local transit capital improvements, with an option to flex these funds toward transit operations. The Bay Area’s share of this $4 billion total is estimated to be about $800 million over the next two years.

Notably, the future year funding for these programs will require legislative approval in each year that the funds have been promised.

How much money will each transit agency get?

This has yet to be determined. MTC is required to submit a plan to the state for how to allocate the region’s share of these funds before the end of 2023. MTC is coordinating with Bay Area transit agencies to assess their near-term operating deficits, which will inform the proposed distribution.  

Will this solve the financial crisis Bay Area transit agencies are facing?

No. MTC estimates that the funds provided in the 2023-24 state budget will only fully cover the funding shortfalls through the fiscal year ending June 30, 2025 (FY 24-25). Starting the next year, the region’s operating deficit is estimated at more than $700 million. BART, for example, anticipates an operating deficit of more than $300 million that year without additional operating revenue sources, while Muni’s deficit is more than $200 million.

Will BART and others still be faced with making drastic cuts to service?

It’s not yet clear how much money BART and other agencies will receive and when disbursements will be made. But the temporary funding has helped transit agencies avoid immediate and drastic cuts to service.

Do agencies support the call for accountability measures?

Bay Area transit agencies fully supported the calls by Bay Area legislators for transit accountability and reform. Agencies agreed to the California Transit Association’s proposed Accountability and Reform Framework and look forward to providing the information required by SB 125, the bill passed this year that includes numerous new reporting requirements as a condition of operators receiving the new state budget funding.