CTA board is still compensated in midst of mismanaged budget

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CTA budget problems may extend for decadesTwenty-five thousand dollars.  That is the amount each member of the Chicago Transit Board -the governing body of the Chicago Transit Authority (CTA) - receives in return for their service.  No other transportation agency, including those in New York, Philadelphia, and Washington D.C., dole out such a perk.  The seven board members, appointed by the mayor (4) and the governor (3), are not part of a private corporation but a governmental agency, entrusted with providing affordable transit to the people of this city.  However, in light of an operational budget of $1.37 billion, board compensation acts as a barometer for this troubled and debt burdened organization.

After massive personnel and service cuts in 2010, the CTA still has to deal with large structural deficits.  The measures implemented in the 2010 budget helped close the budget gap but this is not a long-term solution.  Instead, it exposed the severe revenue problem that bellies the authority.

From a revenue standpoint, the CTA will bring in roughly $612 million strictly from fares, advertisement revenue, charters, concessions, and investments.  Public funding from the Regional Transit Authority (RTA) and the state of Illinois totals $725 million for the fiscal year.  This consists of RTA disbursements from the one percent RTA sales tax, public transportation funds, and the real estate transfer tax.  The state provides reduced fare revenue, while the CTA uses $113 million in preventative maintenance funds from the Capital Improvement Program (more on this later).  Consequently, the 2011 operational budget revenues match the year's expenditures.

The balanced budget policy of the CTA is humbling at first light but a prying eye quickly spots some holes.  Since the authority is a service organization, personnel costs are, of course, its largest expenditure.  At $931 million for 20ll, these numbers may balloon in 2012.  In December, the transit workers' contracts will expire and one could expect intense negations before and after this deadline between the union and the CTA President (whoever that may be).

Nevertheless, under the "other expenses" of the operating budget there is a second major liability, pension obligations.  In 2008, the CTA issued a $1.94 billion bond to shore up pension and healthcare benefits.  In 2011, the authority expects to pay $131 million, just on the bond's interest.  Principal payments do not begin in earnest until 2012.  When the bond matures in 2040 the CTA's payments will amount to $4.8 billion on this bond alone.

Thirty years of significant repayment is an ultimate burden on the CTA's operational budget.  However, there is a separate budget, which bolsters this windfall.

Mentioned earlier, the Capital Improvement Program (CIP) is a five-year outlay of revenues and expenditures for CTA infrastructure maintenance.  From 2011-2015 the CTA will receive some $2.6 billion in federal and state grant money for this ongoing program.  The $600 million allocated for 2011 is intended for the purchase, refurbishment, and regular maintenance of trains and buses; station rehab; improved security; bond repayment; and preventative maintenance.

Unfortunately, the CIP is more of a reserve bank than an improvement vehicle.  The preventative maintenance portion of the CIP budget for 2011 is $146 million.  The CTA says that because of new trains and buses such expenditures are unnecessary, so they transferred a portion the funds to the operational budget to fill a $113 million shortfall. 

Confused?  This is mismanagement at its worse.  The CTA is cutting into its improvement funds to secure a budget.  The smoke and mirrors tactics are no help.  The authority constantly talks about the need for new state of the art equipment and technology.  These CIP funds are for that express purpose, not to shore up a separate budget.

The CTA has created a budgetary behemoth.  There are two budgets, each shrouded in mystery and deficient in transparency.  The agency's attempt to mask its problems has done nothing to help its fiscal health.  The CTA believes that revenues are key to closing these budget gaps but without personnel and updated equipment, they will fail to achieve their goals.  The only way to increase revenues it through a responsible fiscal plan, which the agency does not have.  Without the necessary reform, these temporary cuts to service may become permanent.

Filed under: corruption, Politics

Tags: CTA, Mayor Daley, Pat Quinn, RTA

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