PART III: Why the MBTA is Broke
FISCAL INSANITY Until 2000, the authority got its money by simply sending a bill to the legislature at the end of each year. Nobody had much incentive to innovate or find savings. So legislators came up with a plan in 2000 to make the T live within an annually balanced budget. The plan, called “forward funding,” would give the MBTA dedicated sources of revenue and force it to reform. This seemed smart.
FLAWED FUNDING FORMULA Legislators anticipated that revenue from the sales tax would grow at 3 percent a year. That wasn’t an outrageous idea; it had gone up at an even higher rate in the 1990s. To enact forward funding, lawmakers dedicated one penny out of every 5 cents of the sales tax to the MBTA. But — and this is a big but — legislators never accounted for the possibility that healthcare, fuel, energy, or, really, any costs at all might ever increase. They also didn’t adequately prepare for future T expansion — not even for projects then mandated by Beacon Hill. To make matters worse, some $3 billion of preexisting debt was piled onto the system — including $1.67 billion in borrowing related to the Big Dig that had less to do with the T and more to do with political horse-trading.
[sidebar]PERMANENT IMPLEMENTATION OF SHORT-TERM SOLUTIONS A dirty secret: The forward-funding law was designed merely as a temporary fix. “None of us were pretending that [the T] could live within that money in perpetuity,” says state Senator Stan Rosenberg, who helped shape the bill. But no one asked questions about the plan’s longevity, according to one legislative aide intimately involved in creating forward funding, who spoke on the condition of anonymity. “When [the plan] landed on people’s desks, to the extent that anyone took a look at it — and I’d probably guess in the legislature maybe three people did — the underlying assumptions were not challenged; they were not vetted,” the aide says.
LOWER TAX COLLECTIONS Since 2000, sales tax revenue hasn’t gone up at nearly the rate the state expected, and in recent years it has actually decreased. Meanwhile, the T’s operating costs have grown by about 5 percent per year since 2000. Last year, the MBTA faced a $230 million gap between expenses and revenue. The legislature stepped up with $160 million — but that wasn’t enough.
BORROWING TO CLOSE BUDGET GAPS Without the money to maintain a balanced budget, something that’s mandated by state law, the MBTA has had to keep borrowing to make ends meet. The T has refinanced and restructured its debt every year since 2002.