Fix Forward Funding First!

The MBTA has over $5.2 billion in outstanding principal debt and paid $351 million or 27 percent of its operating budget on debt service in FY 2006 – more than the total of all fare revenue collected. About 35 percent of the principal amount of the outstanding debt ($1.8 billion) is directly attributable to carrying out Central Artery/Tunnel [Big Dig] commitments. That debt is rightly the responsibility of the Commonwealth, not the MBTA. Level-funded over a 20-year period, this would shift about $117 million in debt payments from the MBTA to the Commonwealth. It should be emphasized that this debt must still be paid. The substance of this recommendation would transfer this obligation from the MBTA to the state budget.

From the State Transportation Finance Commission recommendations in 2007.

It's abundantly clear from many sources that the Forward Funding legislation of 2000 has been a failure and needs to be revisited before considering fare hikes and service cuts. In 2009, the MBTA Advisory Board published a review of the MBTA. This report explained, with excellent charts, how the Forward Funding failed to live up to expectations. In short,

• Sales tax revenue was far more anemic than ever imagined in the 1990s.
• Energy costs have increased dramatically more than expected.
• The Finance Plan inexplicably did not predict any increase in health care costs.
• Paratransit expenses increased due to growth, increased vendor fees, and fuel costs.

The granted portion of state sales tax revenue was supposed to make up for the debt obligations that were shoveled onto the agency. As the debt was paid down, the MBTA could manage its own finances "forward" from there, independently from any further state support. Instead, the plan backfired on all parties, and the MBTA began digging itself into a hole just to pay for maintenance and operations on top of the existing debt service. More from the review:

The only major long-term operational success of Forward Funding is the fact that the riding public paid three fare increases in the last eight years. That resulted in a cumulative $95M gain. Asking that same public in 2010 for yet another fare increase because Forward Funding did not work defies credibility. The riding public deserves to have tangible evidence that the MBTA is improving safety and service—not deteriorating further.

It is now 2012, and the MBTA is formally proposing a fare increase as well as service cuts, to cover a $163 million deficit. It is time to follow the Transportation Finance Commission's recommendations and fix forward funding first, by moving the Big Dig debt commitments back to the state budget where they belong. This could cover approximately $117 million of the projected deficit, leaving a much more manageable $46 million shortfall to be addressed.