$1.1 Billion State Bailout Proposed for Transit Agencies Facing 'Fiscal Cliff'

After months of pleas from transit agencies and public transportation advocates, California lawmakers have released an emergency funding plan to help commuter rail and bus operators deal with their deepening financial crisis.

The proposal released late Sunday would allocate $1.1 billion from the state’s cap-and-trade funds over the next three years to help agencies facing major deficits because of the continuing effects of post-pandemic ridership and revenue losses.

That amount represents just a fraction of the more than $5 billion that local transit agencies have been seeking over the next five years to avoid what’s come to be known as their fiscal cliff. That would be enough funding over a long enough period of time to allow operators to develop new sources of revenue to finance their day-to-day operations, agencies say.

It’s also unclear exactly how the new funding will be shared among operators, whose deficit projections vary dramatically. The Los Angeles County Metropolitan Transportation Authority, the state’s biggest transit district, for instance, is facing even bigger deficits than its Bay Area peers in coming years.

Even so, Democratic state Sen. Scott Wiener of San Francisco, who has led the campaign to find new state support to help pay for day-to-day transit operations, called the plan a big win.

“This is a very, very positive step,” Wiener told KQED Monday morning. “We anticipate that this will address about half the Bay Area’s fiscal cliff over the next three years. So, of course, it would have been great to solve the entire problem in one fell swoop, but solving probably half of it is still extremely positive.”

Wiener added that he will keep pushing the state to increase support for public transportation during ongoing budget negotiations with the governor’s office. The state Constitution requires the Legislature to pass a balanced budget by midnight June 15. But lawmakers and the governor will negotiate final details — including the possibility of finding more transit funding — for the state’s 2023–24 budget, which takes effect July 1.

One potential source for more transit dollars is an approximately $1 billion surplus in federal highway funding.

Both Muni and BART, the Bay Area’s biggest transit operators, face deficits ranging into the hundreds of millions of dollars over the next several years. Like other agencies statewide, both have relied on federal COVID relief funding to restore service close to 2019 levels. Also similar to other operators, they will exhaust those federal funds sometime in 2025.

In a tweet, Muni chief Jeffrey Tumlin said the plan will buy time for transit operators to work on “other solutions.” Those other solutions could well involve tax measures — either region-wide or floated by BART and/or San Francisco alone.

BART Board President Janice Li told KQED the proposal “is the first good news we’ve had around the transit fiscal cliff in months. It gives me a lot more hope.”

But with uncertainty about how funds will be allocated, she said, “We’re still all really untangling what this means and what the continued need is.”

The Legislature’s proposal also restores $2 billion in capital funding — money used for long-term needs like buying new vehicles or improving and maintaining infrastructure — that was cut in Gov. Gavin Newsom’s budget blueprint.

The plan would allow flexibility for transit agencies to use that capital funding for immediate operating needs — an idea adopted by budget committees in both the state Assembly and Senate. But Wiener and others have warned that flexibility would carry a heavy price.

“It’s really bad policy to cannibalize transit capital funds for operations for two reasons,” Wiener said. “First, obviously, it prevents us from making all the capital improvements we need to have better and better transit. But even more important, if we use these capital funds for operations, we will forfeit billions of dollars of federal matching funds. And so it’s really important to keep the infrastructure funds for infrastructure.”