13 votes

American transit agencies are constantly at risk of financial ruin. How can we fix this problem?

Posted by scroll_lock
Tags: usa, agencies.transport, urban institute, transport.public, funding, author.yonah freemark, author.lindiwe rennert, source.urban
https://www.urban.org/research/publication/surmounting-fiscal-cliff

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Title
Surmounting the Fiscal Cliff
Published
Nov 1 2023
Word count
820 words

2 comments

  1. tuftedcheek
    Link
    The answer is always the same: more taxes. And yes, in fact, it is that simple. Higher taxes on higher earners, both personal and corporate. There is a strong correlation between higher tax rates...

    The answer is always the same: more taxes. And yes, in fact, it is that simple. Higher taxes on higher earners, both personal and corporate. There is a strong correlation between higher tax rates and better public services (which include public transit) both internationally and in the United States. There’s no surprise that public infrastructure was more robust decades ago at a time when taxation was significantly higher.

    Higher taxes means more public revenue but it also has downstream effects: it reduces the ability of wealthier parties to shirk public resources by opting for private alternatives.

    Now whether there’s political or public appetite to call for more taxation is a different question and is what I believe pieces like this article are really addressing — what are creative ways to generate revenue without offending the anti-tax contingent (n.b. the authors briefly touch on raising taxes, but it’s nowhere near the central thesis). At the end of the day though, it’s really all trying to squeeze blood from stones. Anything short of taxing the higher brackets at reasonably higher rates is never going to produce the kind of significant public funding necessary to maintain and develop these resources.

    10 votes
  2. scroll_lock
    (edited )
    Link
    This is a report by Yonah Freemark and Lindiwe Rennert from the Urban Institute describing solutions to the funding issues faced by many transit agencies in the United States. You can read the...

    This is a report by Yonah Freemark and Lindiwe Rennert from the Urban Institute describing solutions to the funding issues faced by many transit agencies in the United States. You can read the full report here: Surmounting the Fiscal Cliff: Identifying Stable Funding Solutions for Public Transportation Systems.

    We find that agencies that previously raised much of their revenues from passenger fare collection face an uncertain future as ridership continues to recover slowly postpandemic, partly because policymakers have not assembled an adequate set of diverse funding sources for transit. Most agencies rely on just one major external source of local revenue—usually sales taxes, notable for their instability—exposing agencies to varying levels of funding as local economies shift over time. This variation forces agencies to cut service—leading, in turn, to steadily declining transit ridership. This cycle leads to more automobile traffic on the roads, higher greenhouse gas emissions in the air, and less freedom of mobility for people with the fewest resources.

    Transit agencies, however, can work with policymakers at the federal, state, and local levels to ensure agencies not only achieve financial stability but also secure the ability to expand service to meet the needs of a growing population that requires access to the equitable, environmentally supportive travel option that transit provides. With new funding, agencies can offer ever better service and carry more riders while preventing future fiscal cliffs.

    We conclude with several key recommendations. Local and state leaders can support transit agencies through these actions:

    • Leverage highway funding. The federal government allocates billions of dollars each year to state governments to spend on transportation. Most states concentrate this funding on roads, even though several programs allow them to use funds for transit projects. Moreover, federal rules allow many highway-only funds to be “flexed” to transit programs. States should work to convert these funds into support for transit capital investment—while shifting local and state funds to transit operations, growing the pot of accessible revenue.
    • Develop a diverse and more stable set of external subsidies for transit, ensuring that agencies collect revenues from more than one major source. Though sales taxes are the most common source of transit agency revenue, other sources, such as property taxes, income taxes on high-income individuals, and charges on driving, should be considered for additional support. There is added benefit in the fact that these funding options are less regressive than sales taxes.

    Transit agencies themselves can take these actions:

    • Identify ways to increase transit service to encourage additional ridership. Though more ridership is unlikely to generate substantial fare revenue increases in the short term, it can help build political support for more investment in transit using other [sources?]
    • Increase operational efficiency, not by reducing workforce or service, but by investing in improvements that speed operations and reduce energy costs, such as by dedicated bus lanes.
    • Create a rainy-day fund. Agencies should respond to year-by-year variations in tax revenue by creating resources they can pull from when funds come in lower than expected. This type of fund is routinely used by state governments to improve their fiscal stability—and it can help transit agencies achieve a balanced budget.
    4 votes