Fiscal Year 2010 Operating Budget - Septa

Service Stabilization Fund
Prior to passage of Act 44 in July 2007, the Governor established the Transportation Funding and
Reform Commission. The Commission identified future operating and capital funding needs for
highways and transit. Act 44 represented a major milestone for transit funding in the
Commonwealth of Pennsylvania. The intent of this legislation was to create a long term funding
source which was stable, predictable and with growth potential.
Until Act 44 passed, the majority of state operating subsidies were subject to the annual budget
appropriations process. During the decade prior to Act 44, growth in operating subsidies was
very limited. SEPTA, along with all public transit agencies in the Commonwealth, experienced
very difficult challenges in balancing their operating budgets. In a number of years, SEPTA
proposed significant fare increases and severe service reductions as initial measures to balance
the Authority’s budget. Through a number of one-time actions, the majority of these actions
became unnecessary.
As the Act 44 funding program is intended to provide a long-term solution to operating subsidy
requirements, it is critically important for SEPTA to budget the subsidy funds to ensure that this
objective is achieved. The Service Stabilization Fund is necessary to: 1) ensure long-term fiscal
stability for SEPTA’s operating budget; 2) prevent a future budget crisis; and 3) maintain service
levels. Based on future projected growth in Act 44 funding and the projected growth in
SEPTA’s operating expenses and revenues, there will be fiscal years in which the growth in
expenses will exceed the growth in Act 44 funding. In those years the Service Stabilization Fund
will be used to balance the operating budget avoiding substantial fare increases and/or service
cuts. Therefore, prudent fiscal management requires that SEPTA maintain the Service
Stabilization Fund to pay for future operating expenses when operating subsidy needs inevitably
exceed the Act 44 subsidy funds allocated to SEPTA in a specific year.
Southeastern Pennsylvania Transportation Authority Page 38 Fiscal 2010 Operating Budget