February 3, 2010
On February 7 the Chicago Transit Authority (CTA) will implement layoffs and service reductions intended to reduce its FY2010 operating costs by $95.6 million. The Authority, which faced a $300.9 million deficit when crafting its FY2010 operating budget, will lay off 1,100 employees and offer less frequent service on 119 bus routes and seven train lines. The Authority’s other deficit reduction measures include $32 million in savings from salary freezes, furlough days and unpaid holidays for nonunion employees and the transfer of $90 million in capital-improvement funds into the operating budget. The Authority and its unions have not yet come to an agreement over union concessions that might lessen the number of layoffs and service reductions.
In its analysis of CTA’s proposed FY2010 budget, the Civic Federation initially supported the overall budget that included the implementation of fare increases and service reductions. The proposed budget’s fare increases were expected to generate $83.3 million in new revenues. The Federation contended that the proposed cuts and fare increases were a balanced and measured approach to addressing the Authority’s revenue shortfall.
Governor Quinn and transit officials subsequently developed a financial plan that suspended transit fare increases for two years. In order to balance the budget under the new proposal, the Regional Transportation Authority will issue general obligation bonds and transfer $83 million to the CTA in both FY2010 and FY2011 for capital expenditures. The CTA will transfer approximately $83 million capital-improvement funds into its FY2010 and FY2011 operating budgets. The CTA board enacted the proposal as a part of the Authority’s FY2010 budget.
The Civic Federation opposes borrowing to balance the CTA’s operating budget. Borrowing money will only put off the inevitable fare increases needed to balance operating budget when the $166 million in funding runs out in FY2012. This will mean even steeper fare hikes in 2012. The CTA will then also be saddled with an additional $10 million in annual debt service cost that it cannot afford, so when the transfers end after FY2011, the CTA will have an immediate $93 million hole in its FY2012 budget.
The Federation commends the CTA for taking some steps towards aligning its expenditures and revenues through service reductions and layoffs. Nevertheless, the Authority and the State will have to implement additional painful but necessary long-term solutions in order to put the budget on solid ground. The Authority should enact modest fare increases now rather than borrowing for operating expenses. Furthermore, the General Assembly should eliminate the free ride program for seniors who can afford to pay. The free ride program cost the CTA $35.8 million in 2008. If it is repealed, the CTA would save an estimated $25 million to $76 million, reducing the size of the service cuts and fare increases.