Explainer: What’s Up With the MBTA’s Finances? How Money Impacts Your Ride

By Kyle Davi
BU News Service

Money makes the world go ‘round. But for America’s fifth largest public transportation system, the phrase goes more like this: Money can make the city slow down.

That’s because Boston’s transit system, the MBTA (aka the “T”), is famous for lackluster service and reliability. At the core of these issues are the T’s finances.

Most of the MBTA’s funding comes from two sources: internal revenue (fares, advertisements, and real estate) and government subsidies (sales tax and other assistance).

A repair backlog of more than $7 billion and cumulative debt of $9 billion are plaguing the service.

Around 25 percent of the MBTA’s annual budget goes toward paying down the T’s debt. Therefore, less money is being used to maintain the system, let alone improve it.

As a rider, this also means the money you are giving to the MBTA isn’t completely going towards your current service.

So, how did the T get into this financial mess?

In 1964, the MBTA was formed by taking over financially failing transit companies that operated in the Greater Boston Area. In doing so, the authority inherited billions of dollars in debt from the start.

However, further debt accumulation was prevented by the state Legislature, which would introduce a bill at the end of each year eliminating any deficit in the T’s budget.

What really kicked-started the current mess was when the Legislature decided to stop balancing the T’s books.

In 2000, the “Forward Funding” law was passed with the objective of making the T self-sufficient. A dedicated funding stream was set up: a penny of every nickel collected by the state sales tax would go directly to the MBTA.

But as part of the law, the MBTA was shackled with $3.8 billion in debt from the notorious “Big Dig” starting in the 1990s.

This megaproject saw major roads in Boston rerouted underground, but also extended rail accessibility throughout the Greater Boston Area. The T’s Green Line was pushed into Medford and the commuter rail system was expanded in multiple directions to provide greater access to public transportation.

After years with no consequences for operational deficits, alongside stunted growth in sales tax revenue and exponential increases in operational costs, the T started accumulating debt rapidly.

With millions piling up, there was a glimmer of hope in 2013 when a new statewide gas tax was proposed. Known as the “Automatic Gas Tax,” it would annually adjust the statewide gas tax automatically to combat inflation.

After fierce debate between then-Gov. Deval Patrick and the state Legislature, voters were given a chance to let their voices be heard. A question to repeal the gas tax was placed on the 2014 ballot, and the repeal passed with around 53 percent of the vote.

Then came the infamous winter of 2014-15. With several feet of snow blanketing Boston and work crews unable to keep up and maintain aging equipment, the MBTA was forced to suspend service.

In the aftermath, a state government report found that the T was in “severe financial distress,” blaming the situation on “poor workplace culture that encourages inefficiency and lack of accountability.”

Gov. Charlie Baker responded by creating a Fiscal and Management Control Board to oversee the MBTA. But after multiple failed attempts to save money through privatization, officials are still scrambling for answers to the T’s financial woes.

One such answer may come in 2018 with the “Millionaire Tax” ballot initiative. If approved by voters, revenue from the tax would go toward public education and the MBTA.