The T is Financially Broken - $75 Million Budget Deficit

The Boston Globe ran an article on the front page of the CITY section (Section B) titled "T chief declares system 'broke' despite fare hikes."

MBTA General Manager Daniel A. Grabauskas' big quote was "we're broke!" The T is $75 million in the hole in terms of it's $1.4 billion budget.

Here's the skinny:

His deputy, chief financial officer Jonathan Davis, said last week that the T could refinance some of its $8.2 billion in debt and interest payments, but cautioned that it would push future costs even higher and may not fill the entire gap.

The T is stuck in a harsh cycle of institutional poverty wrought by decades of borrowing. Of every dollar it spends, 27 cents goes to pay off debt. Because fares pay for only about a third of operating costs, the transit system has relied on state subsidies to keep the trains and buses moving. The deficits are only expected to grow in the coming years.

In the 2006 and 2007 budget years, the agency dug into its rainy day budget for a total of about $15 million. This budget year, thanks to the fare increase, it narrowly avoided doing so. Davis said that even without a deficit right now, the T has unhealthy finances, with little money set aside for emergencies, and a dependence on borrowing for major maintenance projects.

"It seems to be an annual, very difficult challenge, to meet our bottom line, while trying to maintain our level of service and the quality of service," Grabauskas said.

The T has also been a victim of rising energy and labor costs as well as slow growth in the collection of state sales tax, its primary source of money.

The T's Board is expected to meet tomorrow to discuss the budget issues. The T does not want to continue increasing fares, as it will discourage people from riding the rails.