« Chicago Olympics bid book shines brighter light on once-sketchy transportation plans | Main | Grand Red Line station, Monroe escalator rehab updates »

How to reduce the CTA's budget deficit

I was not at all surprised to read that the CTA and other transit agencies are facing big budget gaps this year.

The Trib's Getting Around column reported Monday the CTA is looking at a $155 million shortfall for 2009, on top of.a $58 million deficit for 2008.

Nope -- it shouldn't come as a shock to anyone that the CTA would be any less vulnerable to falling tax revenues due to the current economic crisis.

So what to do about it?

First, realize there should not be a sustained downturn in those sales tax and home sales transfer taxes. Those revenue projections were adequate enough before the economy tanked. So recognize that they should come back and increase once the economy resuscitates.

So let's say that takes 18 months. Thus, solutions should not necessarily be long-term in nature. To me, that means avoiding permanent service cuts if at all possible.

So where to cut? These ideas are not new, and are commonly used by businesses and governments that find themselves in funding troubles. Some of you have already suggested them as well.

Certainly the largest expense for the CTA is wages. To that end:

  • Impose an immediate hiring freeze.
  • Eliminate all scheduled merit pay increases not mandated by union contract.
  • If wage hikes are part a contract, try to renegotiate them in the short term. After all, if the CTA doesn't get enough wage cuts, then job layoffs forced by service cuts may be necessary. Call that the stick -- there is no carrot here.
  • Force those making more than $100,000 a year to take a 5% temporary pay cut. Also require them to take five days off without pay.
  • For workers making less than $100K, offer furloughs to them. Perhaps make three days off mandatory for those making between $60K and $100K.
  • Any consultant fees budgeted for but not yet contracted for should certainly be postponed.
  • The RTA reportedly has some stopgap funding it can kick in. Give that up.

Obviously, I don't have a dollar figure on how much these cuts would save. But they are a start.

Throw all the above into the abacus and see how far off we are. And I suspect we will still be short. Then, and only then, should service cuts be considered. But only as the last resort.

The CTA board meets Wednesday, Feb. 18. This is the first test of leadership for new Acting President Dorval Carter. It seems he's already looking to begin a reduction in force, judging by this item listed on the meeting agenda: "To approve an ordinance authorizing reductions in force to meet 2009 operating budget requirements."

Comments

I have an idea that I think could save a lot of money. I want to increase the speed of the buses, and therefore reduce the travel times, by having fewer stops. Would it be a disaster if the buses stopped every 1/4 mile instead of every 1/8 mile? What if instead of threatening to eliminate routes and reduce service hours, they just cut some stops in the middle of a route. Everyone is still served by a bus, but some people have to walk an extra block. And to make up for the extra walking, you get a faster bus that doesn't stop on every block. Wouldn't that be nice?

How does this help save money? Faster running times would mean that fewer buses could maintain the same service headways on a route. Fewer buses on the road means fewer drivers to pay and less money spent on fuel, maintenance, insurance, etc... Even the buses that are still on the road would improve fuel efficiency because they wouldn't be stopping and accelerating as often. Alternatively, you could keep all the buses on the road and just get a lower headway out of it. That would increase ridership and fare-box revenue.

Now I know the extra walking could potentially be tough on the elderly and disabled, but these are tough times. I think stopping every 1/4 mile is extremely reasonable.

Yet another alternative: I think more "X" routes would accomplish the same goal. Dedicate 1/3 of the existing buses on a route to an express version that stops every half-mile or mile and you could reduce the number of buses in service as well as provide a faster travel option for customers.

Why don't I ever hear about the Kennedy expressway threatening closure due to budget shortfalls? As if public transit is some lavish luxury and freeways are just, well, necessary.

And I agree, there is no reason local bus routes have to stop at every single corner.

I agree about the buses, but just be prepared to get an earful from senior citizens who can't walk far enough.

Also, why not simplify some bus routes? Yesterday someone said combine the 36 and 151. I'll bet there are a lot of bus routes that could be combined in a way that cuts costs, creates more efficient travel and doesn't cut service.

I nominated the wrong Kevin yesterday in my endorsement of Kevin Kline as Dave for CTA president. The nomination should go to you, Tattler Kevin. Your recommendations are excellent. I would suggest that you tap Charles Grodin as Murray the accountant to be your CFO.

Something you and Murray could look into right away would be the parameters of the real estate contract with Jones Lang LaSalle. Is there any way to get out of it if they don't deliver certain results within a specific time frame? That consulting relationship seems like a waste in the best of times.

I predict the transit agencies will also raid from their capital budgets to cover operating shortfalls. It's very bad policy, but assuming the likes of the CTA et al get cash for things like track and signal improvements, it would appear easier to raid the capital budget, which typically funds such projects.

It's naive to think that transit agency leaders aren't furiously lobbying Springfield for more funds - perhaps via a statewide capital program, or a change in the farebox recovery ratio. After a year of sales tax and fare increases, any substantial reduction in service would be met with a huge public outcry.

I also hope there's the political courage to remove Blago's seniors ride free provision. It's simply a luxury we can't afford.

As far as a hiring freeze, they haven't yet figured out how to have less than one driver on a bus. The freeze would result in more overtime costs, unless you cut back the runs, which seems to be the direction John is going.

What I would want to see is the numbers for cutting back supervision, downtown office staff, repair staff if the jobs are being contracted out to Bus & Truck, etc.

Of course, since this is the public sector, nobody is suggesting to do like Acco...cut wages temporarily.

Since we went through all of this during 2007, and there is no more Blago with his secret bailout funds, I say that if the RTA can't oversee this situation, let Armageddon begin. Then, we might see real reform, not the pap in the 2008 RTA bill. As I mentioned yesterday, one start would be dismissing the do nothing RTA Board.

Remove excess stops along most routes. The 136 stops 3 times in front of Weiss Hospital going southbound. Northbound, it stops at Margate Fieldhouse and Argyle, which are literally 1 street (less than 1/8th of a mile) apart... Are these stops really necessary?

As for the elderly excuse, free riders lose their right to complain. But, I also don't see how these cuts would inconvenience anyone.

I'm not sure if this necessarily fixes their budget, but should be done regardless.

Really, what should happen is that the transit funds in the stimulus package should be used to shore up the operations budget. Talk of hiring freezes and cutting wages is nice and all but doing those things is just going to contribute to the economic situation getting even worse.

Stimulus funds should NOT be used to shore up the operations budget. It's irresponsible and short-sighted. It fixes the problem temporarily without tending to the root cause, that being excessive expenditures in relation to income.

I agree with going back to the reduced fare for seniors. My neighbors in the assisted living facility really don't like the free rides, but opting out of the program and paying full fare would seriously cut down on their ability to get around town.

Several of us have written that the CTA fare structure is wrong.
Cash fares must be increased to a level that will force those riders to start using smart cards.
London's Oyster Card is the one to emulate.
There, the cash fare is about double the Oyster Card fare.
The single ride magnetic swipe cards must be eliminated. They take too long to be read by the fare box & I see far too many people try to use expired ones, thus taking even more time & slowing the bus ride.
Exactly why would anyone honest put a used & expired single ride card back in a pack of never used ones?
The answer is obvious, they're trying to pull a fast one & hoping the driver will give them a pass & a free ride.

[It fixes the problem temporarily without tending to the root cause, that being excessive expenditures in relation to income.]

That's the whole point of "stimulus." It's designed to be a short-term, temporary measure. That's what the word means in an economic context.

As noted, the biggest "root cause" is the recession, which has led to shortfalls in tax revenue. Once the economy recovers, the remaining problems are a lot more manageable.

Until new revenue sources kick in, borrow from the transit worker's pension fund[with their permission of course].The workers would have even more reason for the C.T.A. to succeed ,so they would work more productively.

Zach is insane. The CTA's revenue and expenditures are completely in line, assuming relatively normal economic conditions. The fact that they face a deficit in the midst of the biggest economic downturn since the Great Depression doesn't make them stupid and inefficient, any more than the decline in stock market indices across the board means that every corporation in America has a terrible business plan. In conditions like this, everyone gets pulled down regardless, and the point of stimulus is to get things moving again -- in part by not forcing government agencies to arbitrarily cut a lot of jobs.

Just to throw this out there, CTA hasn't even given cost-of-living increases to the rank-and-file since 2006; let alone anything like merit raises (ha!). There was a pay increase in 2008 that actually resulted in a slight -reduction- in take-home pay due to the accompanying drastically increased benefits contributions. The high salary increases of top execs were mostly due to them technically getting new jobs and thus new negotiated salaries; there's been no mechanism to give workers raises outside of them getting a new job.

But hey, what's another year...

The workers are paid quite a good salary considering they are not required to have a college degree. Raises are not necessary and I'd be willing to be that you could hire a lot of people as replacements in an economy like this if they don't like it. Not giving additional cost-of-living raises just helps bring their salaries down to normal.

The fact that the CTA is struggling financially is not really much of a surprise considering the fact that we are in a recession and everyone (governments, businesses, people) is struggling as well. However, given the fact that the CTA has threatened transit doomsday several times before, lawmakers and the common taxpayer are going to believe that the CTA is crying wolf because they already bailed the CTA out before with handouts and a tax increase. Unfortunately, the CTA may get hung out to dry this time since there is no one around that is willing or can afford to give them money. Even if they get some of the stimulus money to help with operating expenses, they will be right back where they started next year if the economy doesn't improve.

Since there appears to be no one around to give the CTA another bailout, what will they do? Cutting service makes them look bad from a PR standpoint and is not a very smart thing to do when ridership is up. Raising fares would be a very insensitive thing to do during the worst recession since the 1930s. Also, James Reyes' suggestion of borrowing against the transit workers' pension fund (which is losing value thanks to the bear market on Wall St.) is reckless and could dig the CTA in an even deeper hole years down the road.

Excellent point. CTA just got its pension funds into some semblance of solvency with the reforms enacted under HB656. After the structure of the pensions changed under the reform measures, CTA was able to issue bonds to add much-needed $$ to the fund. To start underfunding the pension again to finance operations would be ridiculous. Wage cuts and furloughs would make much more sense in the short term and long term.

Why are people talking like there needs to be some kind of long-term solution here? The economy sucks, everyone's in trouble. The only way to get the CTA, and a lot of other government agencies, out of their hole is to get federal money -- since we have a stupid system where states can't run deficits and therefore have to cut everything at random right when their services are most needed. If the economy hasn't recovered by next year and the CTA needs aid again, give them aid again. Why is this hard? It's not like the CTA finds itself in the midst of a major global recession because it overpaid a few people.

But, Adam, the point is that the CTA does this every year. I moved to Chicago in 2005 and I've heard it every year since then. It's tiresome and it's hard to believe. The CTA is due for some sort of overhaul considering the wastefulness that seems apparent to everyone. I don't know the solution and I'm not going to pretend I do. But I do know that I am frustrated with how the CTA is managed, how it runs and how it's always in trouble.

The way operations are funded is broken, and has been broken for some time. It needs to be fixed.

But it's like realizing that your income isn't enough to support your family. You need a new job; a new source of revenue. But getting a new job takes time, and you need the money to buy groceries and pay rent right now.

It's fine to say, "fix the root cause". That has to be done without a question. But if you stick to that matra, the immediate problem doesn't get fixed.

Eliminating bus stops seems like it would help. But which stops do you eliminate? We all think we have good instincts, but I assure you that you don't want to depend on some guy's instincts on this. And I have serious doubts that we're talking the kind of savings we need, anyway.

Cut supervisors? When the cat's away, the mice will play. Cutting supervisors and middle management was a popular way of belt-tightening in the recession of the '70s. It took us until the '90s to recover from that.

And speaking of taking a long time to recover, does anyone remember the slow zones? It wasn't that long ago. Oh... wait. We still have some. Taking money from capital funds to put towards operating expenses is how we got the slow zones in the first place!

I happen to agree that the stimulus money should be used PARTLY for operations. Partly. They really need to be used mostly for capital issues. Can you imagine what would have happened if all the money Roosevelt put into capital projects had gone to operations instead?

Maybe we shouldn't be cleaning the trains and the stations as often as we are. Yes, it's nice. But we need to maintain necessary services, not "nice". We also don't need PR people.

Come to think of it, there's a lot of flash that's been added the last couple years. That flash money could go to substance now that pretty boy is gone.

But we had a workable solution to the revenue issue! The problem is that a world-historical crisis has happened before things could normalize. I understand the frustration that some people are expressing, but this isn't "another" doomsday of the same kind -- there's a huge crisis going on!

Rusty, Everything I've heard indicates that using stimulus money for operations is the most "stimulative" -- it directly saves jobs, for instance. In the long run, if we want to solve the major infrastructure problems the country faces, we're going to need a healthy economy. Obama clearly has bigger infrastructure plans that go beyond what's in the stimulus, and that's as it should be.

Is it possible for the CTA to float short term bonds to shore up the 2008-2010 budgets?

Anon,

Virtually nobody is receiving cost of living increases in any industry. Many people are being laid off or asked to take a pay cut. You may have heard that Acco Brands is asking its employees to take a 47% pay cut over the next few months. So I don't think you are going to gain very much sympathy when you complain you are not getting cost of living increases when you already are payed very well compared to other transit systems. (I am assuming, of course, that you are a CTA employee. You don't state that explicitly but I certainly got that impression from you post.)

One thing to remember is that fuel prices have decreased rather dramatically since the CTA's budget projections. So it seems to me that the shortfall in expected tax revenue should at least be partially offset by a decrease in the expected cost of fuel. It is somewhat surprising that this hasn't been brought up yet. Jon Hilkevitch's article doesn't mention anything about whether the projected costs are coming out as planned. I would assume we will find out more about this today after the board meeting.

"we have a stupid system where states can't run deficits and therefore have to cut everything at random right when their services are most needed."

Well, it wouldn't have to be that way if states would implemented rainy day funds that they could contribute to during good economic times. Massachusetts did that in the late 1990s and early 00's. But unfortunetely it is rare for politicians to have the courage to do this. People will complain that the government is "sitting on revenue" that could instead be used either for tax cuts or to expand their favorite government program. So the elected officials decide, as usual, that the long term fiscal soundness of the state isn't worth sacrificing their political popularity.

Hoping that the states institute a rainy-day fund is not a plan -- and it would be especially controversial since Republicans are constantly insisting on tax cuts. State programs are routinely underfunded due to tax-cut mania anyway.

The real answer is to abolish the whole "state" thing. Or the Republican party -- either way.

[People will complain that the government is "sitting on revenue" that could instead be used either for tax cuts or to expand their favorite government program. So the elected officials decide, as usual, that the long term fiscal soundness of the state isn't worth sacrificing their political popularity.]

Well, that's democracy for you.

How about A , B stops for buses?

"The real answer is to abolish the whole "state" thing."

Huh? Are you suggesting we elimanate all the state governments and just have one big federal beurocracy? Wow! That is a pretty radical idea. The need to have strong state governments and to have meaningful checks and balamces between them and the federal government was sort of one of the most important factors for the framers of the constitution. And it is surprising to see this idea advocated by a progressive like yourself. There is zero chance that there would be a significant amount of effective government programs when they all must be administered by the federal government.

The typepad system must love my comments so much that it eagerly displays them twice even when I only press the post button once.

Rusty,
The CTA uses automatic passenger counters (APCs) to record exactly how many people board and alight at each bus stop. I have a GIS layer for this information for an average weekday. It wouldn't be hard to find the low-ridership stops to cut. However, since the buses don't actually stop at low ridership stops very often, it wouldn't actually help save that much money. The CTA would get more savings by consolidating stops on a high-ridership street where there is a high enough demand at minor stops to force the bus to stop regularly. High ridership routes like like Chicago Avenue, 79th Street, Halsted Street...anywhere they were previously considering BRT...would be good candidates. In fact, speeding up service with other BRT elements like off-board fare payment would also help. Why not make some high ridership routes pre-pay only like the El and go to a proof-of-payment system?

The federal government got us to the moon. It gave us Social Security, which is one of the most reliable and stable programs in the country, regardless of the propaganda. It gave us Medicare, which has a higher satisfaction rate than any private insurer. It gives us the post office, which will deliver a letter anywhere in the country in a matter of days for pennies.

The big problem making the federal government ineffective is the Senate, where representation is based strictly on states rather than actual population. The system of states rights is a relic that plays virtually no meaningful role anymore, other than undermining democracy -- for example, the Electoral College system.

Wow! What is it about the University of Chicago that creates people with views such as this? Should we get rid of all cities too? Should trash collection, police, fire, libraries, and all the school systems be handled by the federal government as well? Don't you think that local governments, who are closer to the people and understand the issues better, are more effective? Not to mention that when the entire country is dependent on whether a federal policy gets it right or wrong then we are more likely to be in a very vulnerable position when it turns out badly. It is also much more difficult to test things out and see what works and doesn't. Any action will result in the same result all over the country. And there is not even one correct decision for everybody in the country. A one-size-fits-all approach is not the best way to do things. Different solutions are required for different states and cities.

How about rolling back the huge wage increases given out by Huberman before he left. Whether the individuals were given new positions or a portion of the increase went to bolster the pension, which the employee participates in, I don't care. What isn't spoken about concerning the pension fund is that Huberman pushed, and talk about the RTA being a do nothing board the CTA board are lemmings, and the Board accepted allowing members of the Executive Pension, a pension for hacks making in excess of $100,000, to buy up to 5 years of service. So an employee could work at CTA for 6 years and buy 5 years service and get a pension. THere's your Ron Huberman, greasing the skids for his own exit. And he pushes that through when we are in a recssion bordering on depression. I say get rid of do nothing CTA departments line "Strategic Initiatives." Strategic Initiatives, get your fanny to work.

Hiring freezes always come up as an idea for cutting costs, but I'm skeptical of them, because they can make it more difficult to reorganize the system by hiring people whose skills can lead to greater cost efficiencies.

[Don't you think that local governments, who are closer to the people and understand the issues better, are more effective?]

Well, the answer to this question is exactly the same as the answer to just about every sweeping generalization out there: "In some cases yes, in some cases no."

And whenever the answer is "in some cases yes, in some cases no" the question then becomes what about most cases. In fact, I think it is generally understood that is what is being asked whenever someone asks a general question such as mine. It normally should be pretty obvious that the question does not presume that the principle applies to absolutely every instance that is being asked about, especially when there are millions of such permutations as in this case.

I am not now, nor have I ever been, a full-time student at the University of Chicago. I've taken two courses there, one in literature and one in theology.

Having local administrative units is great. Every nation in the world has such units in one form or another. Maybe they'd even line up somewhat according to current state lines. No one's saying that everything has to be run directly out of Washington, any more than there's some guy in Washington coordinating all the details of your local post office. The problem isn't having smaller units, it's the *specific form* our smaller units take -- these weird, quasi-sovereign "states."

Anyway, this is off-topic. Sorry.

[In fact, I think it is generally understood that is what is being asked whenever someone asks a general question such as mine.]

If you say so. I'm more of the "ask a stupid question, get a stupid answer" camp.

Oh, I am too. But that wasn't a stupid question so it isn't relevant here.

The comments to this entry are closed.

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d83451c39e69e2011278dee2f628a4

Listed below are links to weblogs that reference How to reduce the CTA's budget deficit:

Share news tips

Elsewhere