With Chicago's mass transit system on the fiscal precipice, what solutions are on the table?
The clock is ticking for state lawmakers to find more than $700 million for the CTA, Metra, Pace and Regional Transportation Authority before they run out of federal COVID-19 grants next year and resort to drastic cuts in service.
Lawmakers remain laser-focused on reforming the agencies as they discuss two bills to either merge the agencies or empower the RTA.
But legislators have all but refused to talk about immediate funding solutions.
“There will be no funding without reform,” state Sen. Ram Villivalam, D-Chicago, has repeatedly said when asked about potential funding solutions. He reiterated the point in a call with the Sun-Times this week.
Time is running out, though. Transit bosses say a funding solution must be figured out by the end of the spring legislative session.
Here are some of possible transit funding solutions under consideration:
Room in the budget?
Reallocating money from the state budget would be a quick stopgap solution. But this is politically challenging, said Kate Lowe, an associate professor in the Department of Urban Planning and Policy at the University of Illinois Chicago. Gov. JB Pritzker’s budget includes no new money for transit.
“Sadly, public transit is not the only thing looking for money in the state budget,” Lowe said.
What about ‘flex’ funds?
One of the quickest ways to find money may be to redirect the state’s federal highway funds to public transit in a process called “flexing.”
Most states shift very little federal money to transit. Illinois has shifted around 2%, according to one study, far behind New Jersey and California which shift between 10% and 15%.
Pennsylvania Gov. Josh Shapiro ordered $153 million in federal highway funds to be shifted to transit to avoid drastic cuts to Philadelphia’s public transit system last year.
Illinois could do the same. But it would require approval by the Illinois Department of Transportation.
“We need immediate solutions and IDOT has some capacity there,” Lowe said.
Solutions down the road?
Lawmakers are also considering a “road usage charge” that taxes motorists by how many miles they drive. It’s billed as a replacement for the motor fuel tax — which has seen dwindling returns as more electric vehicles and fuel-efficient cars hit the road. One bill proposes testing the tax on 1,000 vehicles before expanding statewide.
“But there’s no way it's going to be implementable in time to stave off cuts,” Lowe said. “And the cuts will take years to reverse.”
Proponents admit switching to a new funding model would require changes at the federal level. Until then, a proposed tax on charging stations could raise tax revenue from EV drivers.
Expand the sales tax?
A potential long-term solution would involve expanding the sales tax to also cover services, though any change to the sales tax would come long after the fiscal cliff.
The RTA already collects over $1 billion for transit each year through a sales tax that covers 29 out of 176 consumer services in the state — far fewer than most neighboring states, according to a recommendation from the Civic Federation, the Center for Tax and Budget Accountability and the Chicago Metropolitan Agency for Planning.
The groups say expanding the tax to cover services would be more fair to low-income earners. High-income households spend five times more on untaxed services than low-income households, they say.
Ralph Martire, executive director of the Center for Tax and Budget Accountability, said the state’s current narrow sales tax base is “a prescription for failure for fiscal policy.”
“Illinois has really fallen behind the rest of the nation, and has failed to employ best practices by having too narrow of a [tax] base,” he said.
How about taking another shot at progressive tax?
A potential long term solution could be a progressive income tax, Lowe said. Pritzker tried and failed to pass one in 2020. But Massachusetts’ governor has suggested using nearly $1 billion for public transit collected from the state’s 4% income tax on people making $1 million or more.
A progressive income tax would have been flexible enough to deal with this kind of funding burden, Martire said. But Illinois’ vote against implementation created more hoops for the state to jump through to meet its goals.
Are fare hikes fair?
The RTA has suggested raising fares 10% across the board, netting $50 million in annual funding. That only covers part of the budget gap.
But raising fares could hurt some of the people who rely on transit the most, Lowe said. Plus it could contribute to a “transit death spiral,” in which fare hikes lead to lower ridership and less revenue overall.
Are savings possible through reorganization?
The RTA has said it identified $63 million in potential savings through efficiencies. But it’s not nearly enough to close the budget deficit. Villavalam told the Sun-Times he wants the agencies to find nearly four times as much savings.
Is the May deadline really the deadline?
Despite transit bosses’ rush to find a budget solution by the end of spring, lawmakers are adamant that no additional taxpayer money will be called upon without proof of improved services.
Legislators are not going to be “threatened” to provide funds, state Rep. Marty Moylan, D-Des Plaines, told the Sun-Times, referring to the RTA’s “doomsday” warnings. If anyone gets laid off, “we’re going to start at the top,” Moylan said.
As reform legislation crawls its way through the statehouse, Moylan said transit agencies can wait till November’s veto session to get their answer on funding.