Pittsburgh Regional Transit’s 10-year budget proposes huge upfront cuts to provide predictability in funding crisis

If Pittsburgh Regional Transit doesn’t get substantially more state funds for next year, it will make sweeping cuts in one fell swoop in February in an effort to sustain the agency for the next 10 years.

Officials detailed how drastic those cuts would be Thursday when they presented the agency’s proposed 2025-26 budget to its Finance Committee. The 35% cutback in service, 25-cent increase in the basic fare to $3 and elimination of 41 bus routes shouldn’t come as a surprise because CEO Katharine Eagan Kelleman and her staff have been telling state officials for months of the dire consequences if the agency doesn’t receive more state money.

PRT — and almost all transit agencies across the state — say they are approaching a “financial cliff” because the state hasn’t increased the transit subsidy for 12 years. The previous transportation bill expired two years ago, but emergency federal funding awarded during the pandemic kept agencies running.

Now that money has been mostly spent.

Gov. Josh Shapiro has proposed an increase in state sales tax revenue devoted to transit that would generate $292 million a year for five years. That hasn’t drawn much support from Senate Republicans for the second year in a row and would only generate about $42 million for PRT, which is facing a deficit of $117 million.

So while PRT continues to lobby for more funding, Kelleman and her staff devised a 10-year plan with substantial cuts at the beginning in an effort to stabilize the system at a substantially reduced level. In an interview after the meeting, Kelleman said they chose that “very conservative” approach on the theory that it would be better to provide a predictable level of reduced service for an extended period than to cut away year after year as costs go up.

“We didn’t want to go to death by a thousand cuts,” Kelleman said. “Our goal in February is going to be to provide as much dependable service as we can. We owe it to folks to be able to plan their lives.”

She compared the agency’s finances to a child’s piggy bank, telling the committee, “We can hear the change rattling now.”

Kelleman, who has a strong background in service planning, believes it would be “unfair” to the public to reduce service several years in a row.  With upfront cuts, at least businesses and families would be able to plan their lives around a predictable level of service for six to eight years instead of facing unknown changes year after year.

The spending plan proposed by Donminika Brown, the agency’s chief financial officer, is set at $538.9 million, about .64% below the current budget. The reduction is so low because the changes wouldn’t begin until February, seven months into the fiscal year.

Without cuts in February – they also include closing two bus service garages, shutting down the Silver Line on the light rail system and cutting 38% of management and union employees – the budget would have been $574.1 million, she said.

The proposed budget calls for using $65.2 million of the agency’s reserve funds, which stood at $408.4 million at the end of April. The agency wouldn’t use reserve funds to balance the budget again until the 2031-32 fiscal year because it expects that savings from the cuts would allow it to meet reduced costs.

Brown explained that the agency needs to have a substantial reserve fund because it frequently pays for services and supplies and then gets reimbursed from state or federal funds. Without the reserves, it couldn’t pay for those items, she said.

Brown estimated the cuts also would reduce ridership on the system. She predicted ridership would drop about 20% over 10 years, reducing fare revenue to only about 9% of overall revenue even with the 25-cent fare hike.

Fare revenue reached a high of about 21% of overall revenue just before the start of the pandemic in 2020.

The agency expects to adopt its budget June 27, three days before the Legislature is scheduled to pass a new state spending plan, but the state often misses that deadline. Kelleman and Brown said PRT can adjust its budget if new funding is approved, but Kelleman said it would have to be substantial, long-term funding to avoid the proposed cuts.

Chris Sandvig, executive director of transit advocate Mobilify, said he agrees with the agency’s approach to make the cuts all at once.

“I don’t think they have any choice. They don’t have any tools left,” he said. “From a fiscal responsibility standpoint, I think they have to do that.

“If they trickle out those cuts, nobody can plan for anything.”

Sandvig said the state should treat transit like a utility the public is entitled to have available.

On the capital side, Brown proposed a budget of $189.3 million, an increase of $27.3 million. That budget fluctuates from year to year based on the projects that are being funded and the availability of federal funds.

In the new year, Brown said the agency expects to spend about $9.6 million for six electric buses when it didn’t buy any this year. The agency also is starting design work for a new long-term maintenance garage to replace the outdated facility in Manchester, which is expected to cost more than $200 million.

Kelleman said the agency needs a new facility even if it reduces service. No site has been chosen yet, but she said federal officials advised the agency it must have design work available to present for grant funds.