To follow the narrative from California’s political leaders, the state’s transit systems are still struggling because of the COVID-19 lockdowns. Ridership numbers and revenues fell dramatically as a result and have yet to fully recover. Therefore, Bay Area Rapid Transit (BART), Muni and other public systems need a state bailout and higher sales taxes to avoid severe service cutbacks – and carry them over until ridership levels return to pre-pandemic levels.
That narrative is highly flawed, but it largely explains why over the past three years lawmakers have focused almost entirely on finding additional revenues for these agencies rather than considering reforms to how those systems operate. The agencies have, for their part, routinely threatened debilitating service cutbacks if they don’t get the extra cash. They’ve generally gotten what they wanted, but it never is enough. It’s a dispiriting cycle.
A little recent history is instructive. The Legislature and Gov. Gavin Newsom in 2023 approved a $5.1-billion statewide transit bailout, with $747 million going to the Bay Area’s 27 transit agencies. In early 2024, lawmakers toyed with the idea of creating a new, massive mega-transit agency to oversee those multiple local agencies, but fortunately even California’s legislators realized that rearranging those bureaucratic deck chairs would not result in cost savings.
Later that year, San Francisco’s Muni (the city’s buses, cable cars, light rail and streetcars) boasted about its astounding ridership comeback – at 92% of pre-pandemic levels on weekends – yet nevertheless warned about inflation-driven shortfalls. The agency even threatened to shutter popular routes and the tourist-beloved cable cars. The goal seemed to be punishing residents and visitors for budget shortfalls.
After San Francisco voters failed to pass a new tax on ride-sharing companies to fund transit in November 2024, legislators concocted a plan to boost sales taxes to fund transit. At the end of session last year, Newsom signed legislation granting state permission for Bay Area counties to place a tax measure on the 2026 ballot. Newsom had also promised a $750-million loan, but the Legislature couldn’t agree on a deal before the session ended. So the governor said he’d come up with a loan proposal before January.
Politico reported last week on some of its newly emerging details: A memo from the California Department of Finance “outlines a proposal under which the state would advance funding for projects with longer completion timelines and authorize the Metropolitan Transportation Commission, the coordinating agency for Bay Area rail and bus services, to issue short-term loans using that cash.” In other words, the agencies will help keep their short-term operations afloat with money designed to fund long-term investments. This is hardly sustainable, but it does kick the can down the tracks.
A recent study co-authored by Marc Joffe, a transportation expert featured in this Free Cities Center video, found that transit systems recover only around 10% of their costs from the fare box, which suggests that even much-higher ridership won’t fill their budget holes. The bulk of the agencies’ problems relate to their inability to control spending. The study points to “a significant gap between revenue and expenses that necessitates over $10 billion in annual taxpayer subsidies” and pins the problem on “what economist William Baumol termed ‘Cost Disease.’ … [W]ithout significant policy changes, such as embracing automation and more cost-effective transit models, these subsidies will continue to grow.”
COVID-19 policies certainly caused ridership problems, but transit agencies have faced long-term ridership declines and revenue struggles since long before anyone heard of the coronavirus. As I explained for the Free Cities Center, “BART’s salaries are eye-popping, which might explain one reason the agency can’t make ends meet.” Furthermore, the public has not been flocking to transit despite massive investments. “BART had some of the nation’s lowest usage rates for major metropolitan areas before … COVID-19. Transit systems across the country had lost around 20% of their riders between 2014 and 2018,” I added.
Instead of addressing the complex root causes of their struggles, transit agencies – and California’s Bay Area ones in particular – have doubled down on their push for more revenue even as past revenue infusions inevitably prove inadequate. Transit is an important service in densely populated urban areas such as San Francisco and Oakland. But the current model isn’t working whether we judge the systems by their finances, ridership numbers or any other real-world metric (even if agencies occasionally make headway on problems such as crime.)
For whatever reason, American transit agencies have failed to focus on what customers want. “Canada, like its European and Asian counterparts, has built systems that cater to riders, not to special interest groups,” argued economist William L. Anderson in a 2023 Free Cities Center article. “Unlike the ‘park-and-ride’ system in U.S. cities, Toronto provides extensive bus services in neighborhoods that provide access to the commuter rail systems, providing clean, comfortable surroundings. European systems also make themselves commuter-friendly and reliable.”
It’s also hard to reconcile the state’s commitment to spend $100-billion-plus on a high-speed-rail system that even The New York Times calls “a multibillion-dollar nightmare.” If funding really is the only problem plaguing the state’s transit system, then why not reprogram that money to local transit projects and call it a day? But we all know all the loans, bailouts and sales taxes imaginable will not get these systems on track without fundamental changes.
That Politico report on the new loan proposals noted that, “Bay Area transit operators say their systems are on the edge of a fiscal cliff as they’ve struggled to recover from pandemic-era ridership declines and federal bailout funding dries up.” But the pandemic ended in May 2023. The highways have long been crowded again and cities and counties have long learned to wean themselves off of federal bailout funding. Until transit officials, lawmakers and the governor start looking beyond that tired narrative, they’ll never figure out how to assure a sustainable transit future.
Steven Greenhut is director of the Pacific Research Institute’s Free Cities Center. Write to him at [email protected].
