‘Best bad solution:’ Pittsburgh Regional Transit moves ahead with plan to use capital funds to avoid service cuts

A Pittsburgh Regional Transit committee Thursday recommended approval of a plan that CEO Katharine Eagan Kelleman called “the best bad solution” to avoid devastating service cuts next year.

That plan calls for using $106.7 million in state funds earmarked for capital projects to help pay operating expenses over the next two years. Combined with some federal capital funds and local reserves, the agency expects to have enough money to get through the next two fiscal years without any service cuts or other changes.

PRT and the Southeastern Pennsylvania Transportation Authority cobbled together plans to use capital funds with Gov. Josh Shapiro and the Pennsylvania Department of Transportation after it became clear that the state Legislature wasn’t going approve more subsidy funds for public transit in the 2025-26 budget. That’s one of the major items that has prevented the state from adopting a new budget for the fiscal year that started July 1.

Transit agencies across the state are facing a financial crisis because emergency federal funds awarded during the pandemic have been spent and the 10-year state funding package for transportation expired two years ago. To avoid cuts described as “catastrophic” for PRT and SEPTA, Shapiro and the agencies decided to use a loophole that allows them to use capital funds for operating costs if they are faced with service cuts or fare increases.

The deal will cancel PRT service cuts of 35%, layoffs of 38% of management and union employees, ending service at 11 p.m. and shrinking the service area for paratransit users that had been expected to start in February. SEPTA canceled cuts it started in August.

“It means we can keep service on the streets but at what cost?” Kelleman said in an interview after the Finance Committee unanimously recommended the full board of directors approve using capital funds for operating costs when it meets next Friday. She noted that future capital needs such as a replacement for the outmoded Manchester long-term maintenance garage, another regional maintenance garage for routine work and the complete replacement of the 81 trains for the light rail system have to be started soon to allow the agency to expand operations.

Kelleman and Amy Silbermann, chief development officer, told the committee that staff is still analyzing which capital projects will be delayed but stressed that all “safety-critical” projects will continue.

Transit agencies wanted the Legislature to approve a long-term funding package for transit, but with federal cuts in social services programs and other expenses, state elected officials couldn’t agree on what to do with transit. Additionally, Senate Republicans have long said that providing more money for transit is difficult to sell to their constituents because 87% of the money goes to PRT and SEPTA.

The transit agencies countered that every county has public transit, they provide service to thousands of employees to get to work, and they employ thousands who spend a lot of money and pay a lot of taxes to support statewide programs. The agencies also spend several billion dollars on services and supplies each year, much of it in Pennsylvania.

Kelleman and Donminika Brown, the agency’s chief financial officer, outlined the new spending package based on more refined figures than the $539.3 million plan approved in June. At that time, the agency expected to use $50 million in reserve funds to balance the 2024-25 budget and projected a $100 million deficit for 2025-26.

Brown said through a hiring freeze on nonessential personnel and other savings, it only used about $10 million in reserves in 2024-25. And more precise figures put the deficit for 2025-26 at about $94 million.

To balance the budget, the agency will use about $78 million in capital funds for 2025-26. In 2025-26, Brown said, it won’t have to use any reserve funds, which stood at $369.3 million through August.

It will use the rest of the state capital funds, along with some federal capital funds and the $40 million it didn’t use in 2024-25 to balance the 2026-27 budget.

“That will be enough to get us through the next two years without cuts,” Silbermann said.

The revised capital budget reduces spending for 2025-26 from $187.9 million approved in June to $58 million. That reduction includes putting off the purchase of 30 new articulated buses and using about $30 million in federal capital funds for operating expenses in 2025-26.

“We have enough current cash to carry through any safety-critical projects,” Silbermann said.

Although staff is still reviewing which capital projects will be delayed, Kelleman and Silbermann said they expect to resume the redesign of routes and service areas for the bus system. That program is designed to reduce service on less busy routes, extend weekend and light-night service, and allow service between neighboring communities rather than requiring riders to travel into Downtown Pittsburgh to transfer to another bus.

Board members and staff stressed that the funding crisis isn’t over. Other transit agencies that can’t use capital funds for operating expenses face difficult times now, and PRT and SEPTA will be in the same spot in two years without action in Harrisburg.

“The amount of transit needs across the commonwealth remains great,” Kelleman said. “In some counties, they can’t get grandma to dialysis. Their needs remain urgent.”