FY 2012 Operating Budget and FY 2013-2017 Financial ... - 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 onetime
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.
SEPTA was required to use $26 million from the Service Stabilization account in Fiscal Year
2010 to balance the operating budget. SEPTA deposited $20.4 million in the Service
Stabilization account in FY 2011, as a result of increased ridership revenue. It is projected
that SEPTA will be required to use additional Service Stabilization funds in Fiscal Years 2012
and 2013 in order to balance the operating budget.
SEPTA Fiscal Year 2012 Operating Budget 40