NJ Transit’s $1.79 billion FY 2010 operating budget, approved last week, avoids a fare hike and major service cuts despite a $62 million reduction in state operating aid. NJ Transit is filling the gap by slashing administrative costs, a laudable achievement, but one that may be hard to repeat in future years.
MTR has written before that the bigger problem is that NJ Transit lacks a dedicated source of operating funding and must annually go begging to the state legislature. Because the legislature consistently underfunds the agency, NJ Transit diverts significant funding from its capital budget to operations. In the most recent budget, diverted capital funds made up 21% of the operating budget — over $350 million in mostly borrowed money that should be going towards maintenance, new buses and train stations, and the like.
Transit agencies across the country, including those listed below, are grappling with budget cuts and rising operating costs. But NJ Transit is the largest transit provider in the country without a dedicated source of operating funds, making it especially vulnerable to fiscal woes. Here’s how some of NJ Transit’s peers keep their buses and trains running.

All figures are from 2007, the most recent year in the FTA's National Transit Database. (Note that California no longer has a dedicated state transit tax -- see below.)
Chicago’s Regional Transit Authority
The RTA was established in 1974 to provide oversight of Chicago’s transit system. A decade later, the RTA’s responsibilities shifted giving it authority over the operating and fare responsibilities for the Chicago Transit Authority, Metra commuter rail and Pace suburban bus. At that time, a county sales tax was enacted to support transit operations, and a state match of 30% of tax revenues was imposed. Cook County’s rate was set at a higher level (now 1 and 1/4 cent after a 2008 increase) than the surrounding 5 counties (now 3/4 cent) and one-third of the suburban tax revenues was set aside for the suburban counties. The tax currently brings in about $1 billion annually.
More recently, the state legislature passed in January 2008 a real estate transfer tax in the City of Chicago, which brings in between $20 and $100 million annually. The state match for both taxes amounts to approximately $300 million.
Importantly, the law which established the RTA requires that half of operating expenses be serviced through fares, advertising, investment income and concessions. This forces the RTA to periodically raise fares.
Read about Boston and Los Angeles after the jump.