Update, Nov. 22: Shapiro will give SEPTA $153M in federal funding to avoid cuts and fare hikes
PHILADELPHIA — Gov. Josh Shapiro said on Tuesday he will “not let SEPTA fail” as the public transit agency faces a $240 million structural deficit and warns major cuts loom.
While he praised mass transit as “critically important to those who ride it” and to local economies, the Democrat stopped short of saying what his exact course of action would be.
“We're working hard to consider what steps we can take to shore up SEPTA,” Shapiro said after an unrelated news conference, adding his administration will “have some more to say on that over the coming weeks.”
The statement is the most Shapiro has said publicly about the agency's funding woes, which it warned may only be addressed through higher fares and decreased services for hundreds of thousands of riders in Philadelphia and its suburbs. That double whammy, officials and advocates have said, could lead to a “death spiral” of decreased ridership begetting further cuts and fare hikes.
Currently, Pennsylvania provides almost $2 billion to 50-plus public transit agencies across the commonwealth. SEPTA is a prime beneficiary: It received $757 million in state sales tax money in 2023 to cover operating costs like salaries.
Still, facing high inflation, reduced ridership because of remote work, and the end of federal pandemic aid, the agency says it needs more funding to be sustainable and complete some planned service revisions.
Multiple bills to provide those dollars, authored by state House Democrats and backed by Shapiro, failed in the Republican-controlled state Senate due to closed-door disagreements on the GOP’s preferred funding mechanism: gaming expansion.
With the legislature out of session until January, transit supporters have called for Shapiro to transfer an unspecified amount of federal highway dollars to SEPTA. These funds, which numbered almost $2 billion in the 2022-23 fiscal year, are mostly from the federal gas tax; the 2021 federal Bipartisan Infrastructure Law boosted them even higher.
Alex Armlovich, a housing and transit policy analyst at the Washington, D.C.-based Niskanen Center, a centrist think tank, told Spotlight PA that the move, known as “flexing,” is legal and has been used by states since the 1980s to aid transit agencies at the expense of highway projects.
“It’s budget musical chairs” Armlovich said.
Shapiro acknowledged the calls for him to use flex funding, but said it’s only a “stopgap measure” when the state needs a “long-term solution.”
Shapiro wouldn’t be the first Democratic governor to forestall doom at transit agencies using highway dollars.
In 2005, then-Gov. Ed Rendell provided more than $400 million in highway dollars to SEPTA and other public transit agencies to forestall service cuts and fare hikes. The move was criticized at the time by legislative Republicans, who said it pitted rural drivers against urban straphangers.
That flexing of funds preceded the General Assembly agreeing to a new transportation funding scheme in 2007 through Act 44, which tied public transit dollars to tolls paid by drivers on the Pennsylvania Turnpike.
In 2010, Rendell flexed $45 million to help Pittsburgh’s struggling transit agency avoid cuts and fare hikes — which again drew pushback from the GOP.
State Sen. Dave Argall (R., Schuylkill) at the time introduced legislation that would mandate federal highway funds could not be routed to transit agencies. However, the bill never advanced out of committee.
Lawmakers reached a new transportation deal a few years later in Act 89 of 2013, which reconfigured the state’s gas tax formula and raised license and registration fees to cover increased infrastructure spending while sunsetting turnpike transfers in 2022.
While pandemic shifts in commuting patterns contributed to SEPTA’s current financial straits, the reduction in turnpike funding transfers is the real culprit of the fiscal cliff, according to Armlovich. Federal stimulus dollars only masked the effect for a few years.
“We knew they’d have this crisis in 2013 when the sunset was created,” Armlovich said.
Legislative action to address the issue will likely have to wait for next year, when the legislature returns to Harrisburg to start a new session in January. The balance of power is the same as last session, with a Republican-controlled state Senate and a one-vote Democratic majority in the state House.
Policymakers, including Shapiro and Senate Republicans, have repeatedly said the pieces are in place for another transportation deal. They’d like to tie increased transit funding with more highway dollars — all funded by the regulation and taxation of slot-like skill games.
“I know that many are willing to help, but it has to be a balanced funding package,” Argall told Spotlight PA in a text message this week.
Argall warned, however, that Shapiro flexing his executive powers in the short term could anger GOP lawmakers who oppose unilateral action, and hurt the odds of a deal.
Another piece of the puzzle, argued Armlovich, would be giving the wealthy suburban counties in SEPTA’s service area the flexibility to levy local taxes for the agency.
The Delaware Valley Regional Planning Commission, which helps direct Philadelphia’s regional infrastructure spending, made a similar argument in a letter to state lawmakers this fall. But such a move would still require state authorization, and bills to do so didn’t advance out of House committee this session.
“We realize public transportation means local participation,” Chester County Commissioner Josh Maxwell, the planning commission chair, told Spotlight PA. “To the degree we can contribute to increased access, it’s something we’re happy to discuss.”
