How is SEPTA funded? Inside the Philadelphia transit agency's budget – and what's behind the "death spiral"
News that SEPTA is proposing major fare increases and service cuts might come as a shock to riders.
But the "transit fiscal cliff" problem has been looming for years, after the COVID-19 pandemic cratered revenues for public transit agencies around the country.
Months ago, city leaders sounded the alarm about a $240 million shortfall in SEPTA's operating budget for this fiscal year. The state provided a one-time payment of $46 million to SEPTA as legislators in Harrisburg stalled to create a permanent funding fix – which would have come from taxing skill games.
The one-time cash infusion doesn't plug the hole left in SEPTA's budgets going forward. The agency has stayed afloat because it received millions from the federal government through the CARES Act to make up for the lost revenue from declining ridership during the COVID-19 pandemic.
Revenue has steadily increased since the low point of 2021 but has not climbed back to the levels of 2019. The federal money to make up the deficits is going to run out. This is the fiscal cliff in a nutshell.
SEPTA's Chief Operating Officer Scott Sauer was blunt in a news conference on Tuesday.
"With major service cuts and fare increases, this is the beginning of what we've been saying is the 'transit death spiral,'" Sauer said. "Service cuts and fare increases resulting from fewer riders, lead to more service cuts and more fare increases, resulting in fewer riders. Until ultimately public transit is no longer relevant."
Here's a quick look at SEPTA's financial situation, in layman's terms, and why they're in this situation now.
How much money does SEPTA make?
Pre-pandemic, in 2019, SEPTA made nearly $518 million in total operating revenue – from bus, subway, trolley and Regional Rail fares, the Shared Ride Program for seniors, investment returns and other sources.
On labor alone, SEPTA spent over $1 billion that year – add in other expenses like fuel, materials and services and the expenses totaled $1.41 billion.
The budget includes a line for "deficit before subsidy." That year SEPTA ran a deficit of about $893 million.
Like many other transit agencies, the amount SEPTA makes off ticket sales, fares, passes and other passenger revenue is not enough to cover expenses.
The remaining portion of the revenue is made up from state, local and federal subsidies.
How much an agency takes in through fares versus its expenses is known as the farebox recovery rate.
In 2022, the Eno Center for Transportation, a nonpartisan think tank, calculated the farebox recovery rates for several major transit agencies around the country. The best was the Short Line, a bus service largely focused on transporting passengers from the New York suburbs and North Jersey into New York City. The Short Line had a farebox recovery rate of 85%.
SEPTA was identified as a "low farebox recovery" agency.
How much money does SEPTA need?
In April, Gov. Josh Shapiro proposed a funding increase for public transit agencies across Pennsylvania, including SEPTA. Under that proposed budget, the agency would receive an additional $161 million a year from the state.
SEPTA said that amount plus an increase in local contributions by $24 million would help avoid service cuts and fare increases, and fuel investments in adding more police officers and cleaning staff.
Even before the major service cuts and fare increases were proposed Tuesday, SEPTA did away with some credit card discounts and increased certain Regional Rail fares in an effort to raise an additional $14.4 million.
