MBTA Says $827 Million In Federal Aid Might Not Be Enough

BOSTON (State House News Service) — The MBTA will likely need to use about a quarter of the $827 million emergency federal funding it received to close a major pandemic-caused revenue gap in this year's budget, and ridership and financial estimates for the months beyond are clouded in uncertainty.

T officials will work in the coming weeks to draft a baseline model for a fiscal year 2021 operating budget, stressing Monday that whatever spending plan the agency adopts will need to be amended as conditions beyond their control are dictating the environment in which they operate.

While they create a spending plan, the MBTA will also create a cross-departmental working group tasked with outlining how a transition from the current normal -- where ridership is down more than 90 percent on the subway and 80 percent on buses -- to a post-COVID-19 surge reality will work.

"How, when, and under what circumstances the T recovers is the great unknown," said Joseph Aiello, chair of the MBTA's Fiscal and Management Control Board, during a virtual meeting on Monday. "It will be a function of decisions that are made by others about the general economy and then about what we can do in terms of best practices to attract riders back. Things are going to be changing on a moment's notice."

Short-term financial projections are slightly more favorable for the transit authority than two weeks ago. The T now expects to fall about $218 million short of its fiscal year 2020 revenue projection, not $231 million as previous estimates indicated, Chief Administrative Officer David Panagore said Monday.

That gap is the result of an expected 95 percent drop in fare revenue for April, May and June.

Transportation agencies across the country are struggling with similar challenges, and the $2.2 trillion stimulus package President Donald Trump signed in March allocated $25 billion to mass transit to blunt the pandemic's impact.

Massachusetts will receive roughly $1 billion from that package, $827 million of which will go to the MBTA, officials said Monday.

Steve Poftak, the T's general manager, said that amount will help paper over unprecedented losses but hinted that it may not go far enough to address the scope of the crisis.

"I think I'm on safe ground when I say it is unlikely to fund us at the level we would wish," he said during a virtual board meeting. "It is obviously a significant amount of money, but we're going to have to go through a pretty extensive budget development process to understand just how far that money takes us."

If the MBTA closes the entirety of its fiscal year 2020 revenue gap with the federal aid, it would have about $609 million -- which can cover lost revenue as well as operating expenses during the COVID-19 outbreak -- left to deploy in fiscal year 2021.

The budgeting process will unfold later than usual. A bill Gov. Charlie Baker signed on April 10 postpones deadlines for the FMCB by two months, until May 15 for a preliminary budget and until June 15 to submit the final spending plan to the outside Advisory Board.

Panagore recommended at least one specially scheduled FMCB meeting in the coming weeks to walk through a potential budget that accounts for the pandemic's impacts. He said the agency's financial team will create a "baseline" model that can be adjusted as information becomes available, adding that language sought by Baker allowing the T to charge capital labor costs to bonds would be "critically important" to the long-term outlook.

Aiello described budget-planning amid the uncertainty of a public health crisis as "sort of like throwing darts after your third beer."

Like the T's higher-ups, state leaders are bracing for lasting economic impacts from the weeks-long closures in public life and the historic surge in unemployment claims.

That could add to the financial hit the MBTA expects: in addition to fares, the agency is also funded by a dedicated portion of the state's sales tax, and that revenue source is suffering. T officials already expect to receive about $17 million less than expected from the sales tax in the current fiscal year, and that could drop another $25 million in a worst-case scenario.

However, by law, the T must receive a base revenue amount -- $1.063 billion in fiscal year 2020, according to Panagore's presentation -- and the allocation cannot drop below that, something that Transportation Secretary Stephanie Pollack described as a "floor" for budgeting.

"I'm not at all implying there won't be challenges or tough choices to make. There may well be when we look at the numbers," she said. "But the combination of the state base revenue amount and the ability to not need to spend the majority of your CARES money for the current fiscal year at least puts you in reasonably good stead in terms of maintaining that kind of operating budget flexibility going into FY21."

For now, Poftak said, the T will continue to run service on reduced schedules. The agency rolled out a system to screen employees for fevers, one of the most common symptoms of COVID-19, and has been working to boost access to testing for public transit employees in Foxborough. Stations are each cleaned every four to five hours, and officials are monitoring for crowding on vehicles that could pose a transmission risk.

Through Friday, the agency had spent $25.5 million on its COVID response, according to Panagore's presentation.

Planning is underway on what future service will look like, and Poftak said he would have more information to offer on that front in the coming weeks.

"One of the challenges here is none of us are sure exactly how this is going to unfold," he said.

By Chris Lisinski, State House News Service

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