Gov. Shapiro secures $153 million for SEPTA, averting fare hike planned for 2025

Gov. Josh Shapiro, in a moment suggestive of last year’s fast rebuild of a collapsed I-95 bridge, swooped into Philadelphia Friday to announce he was redirecting $153 million in federal highway funds to SEPTA, averting a significant fare increase planned for Jan. 1.

The cash amounts to a fiscal life preserver for the sixth-largest mass transit system in the U.S., after the Pennsylvania legislature failed to pass Shapiro’s proposal for a longer-lasting increase in subsidies for public transportation.

“I want to step up and create a bridge, some time and space, for the House and Senate to be able to work together, to come together on this issue of funding mass transit,” Shapiro said at a Frankford Transportation Center news conference attended by Mayor Cherelle L. Parker and an array of the Philadelphia region’s elected and appointed officials.

Earlier this month, SEPTA moved to enact a 29% across-the-board fare increase followed by deep service cuts next summer, as the agency grapples with what officials call an “unprecedented” post-pandemic financial crisis. It faces a recurring deficit of $240 million annually.

While Shapiro’s efforts have paused the 21.5% fare increase expected for Jan. 1, riders will still face an increase of 7.5% beginning Dec. 1. Shapiro said the federal cash infusion would limit service cuts, but did not provide further detail.

Squeezed by high inflation, the end of federal pandemic aid and reduced ridership because of remote work, SEPTA says it needs new (and predictable) state funding to sustain operations and retool services for the evolving needs of today’s riders. Other transit agencies in Pennsylvania and across the nation face similar fiscal challenges.

States have used the move Shapiro has triggered, known as “flexing,” since the 1980s to aid transit agencies by taking money earmarked for highway projects.

At a similar time of peril for transit in 2005, Democratic Gov. Ed Rendell redirected $412 million in federal highway funds to keep buses and trains moving in Southeastern Pennsylvania and Pittsburgh for two years. SEPTA’s then-$49.2 million deficit — roughly equivalent to today’s gap in inflation-adjusted terms — was wiped out instantly.

SEPTA welcomed the temporary boost as a reprieve from a “death spiral” of steep fare hikes and drastic service cuts, but acknowledged it still must have a share of a steady source of new funding for state transit agencies.

The flex is a “stopgap” but gives SEPTA needed relief through June 30, said Erik Johanson, the agency’s senior director of budgets and innovation. “It’s not the dedicated funding we’re looking for,” he said, though he’s grateful. “It buys you months, not years.”

Senate Majority Leader Joe Pittman (R., Ind.) and the caucus’ main negotiator on budget issues said in an interview before Shapiro’s announcement that he “appreciates the governor’s need to take care of his own political backyard,” but using the federal funds set aside for highway infrastructure projects elsewhere won’t help Republicans and Democrats reach a long-term solution.

“Flexing these dollars, No. 1, sends a message that the governor cares more about transit than he does infrastructure, and No. 2, doesn’t seem interested in sitting down and figuring out how we collaborate on real solutions to these issues,” Pittman added. “Robbing Peter to pay Paul is not the answer.”

State Senate Republicans have blocked Shapiro’s proposal to raise $1.5 billion over five years for transit operations by allocating more sales tax revenue to the Public Transportation Trust Fund. SEPTA, as the largest system, would receive about $161 million annually under that plan.

The state House, which has a Democratic majority, passed bills to provide that money three times, but they have stalled in the Senate in part because of internal disagreements among the Republicans who control the chamber about how to pay for it.

First, the GOP senators wanted new transit funding tied to new funding for roads and bridges in an overarching deal. Shapiro agreed to work on that approach.

Senate Republicans say the sales tax alone is not enough to compensate for transit’s funding woes, and the state has its own pocketbook to worry about as costs continue to outpace revenue in the state budget. Pittman has floated using skill games — slot-machine look-alikes proliferating in convenience stores, bars and corner bodegas — as a revenue stream. Democrats have not offered any other alternative plan — skill games or otherwise — to find new revenue streams, Pittman added.

But the Republican state Senate caucus is divided over what rate of tax to charge skill games, whose owners and manufacturers want to pay less and brick-and-mortar casinos, which are heavily taxed and want the upstart competitors to pay more.

Shapiro has said he is open to the possibility of using skill games as a revenue source. “But the Senate didn’t get it done,” the governor said Friday. “I’m not here today to point any fingers, because I’m just saying facts.”

SEPTA’s financial crunch is “a crisis of his own making,” Senate President Pro Tempore Kim Ward, the top Republican in the chamber, said of Shapiro, arguing it stemmed from his own priorities in state budget deliberations.

“Gov. Shapiro and House Democrats prioritized education over mass transit by approving the largest budget increase ever for a traditional education system that continues to trap Philadelphia’s kids in failing schools,” Ward said. Both Democrats and Republicans were tasked by a state court to invest more money equitably across districts, after finding the long-standing system unconstitutional.

SEPTA’s $153 million will come from seven different interstate infrastructure projects across the state, said state Transportation Secretary Mike Carroll: on I-79 in Mercer County; I-80 in Columbia County; I-95 in Philadelphia; on I-83 in York County; two I-80 projects in Jefferson County and another on I-70 in Washington County.

Changing the money from those projects to SEPTA must be authorized by the Delaware Valley Regional Planning Commission, the federally designated metropolitan planning organization that decides the state’s Transportation Improvement Plan, Johanson said.

Then the Federal Highway Administration and the Federal Transit Agency have to approve, and the money is shifted to FTA and given as a grant for preventive maintenance, which allows spending of federal money for local operating expenses, he said.

“The projects will only be delayed, not canceled,” Carroll said, adding that the work has not even been put out to bid yet.

But transportation funding has often been fraught in Pennsylvania and other states with big urban centers amid rural areas, and huge needs for both road and bridge repairs and public transportation and usually not enough to make everyone happy.

Rendell faced political blowback from Republican lawmakers by using the flex option in 2005 and again in 2010, when he redirected a smaller amount of highway money to Pittsburgh’s struggling transit authority. The move appeared to pit rural drivers against urban transit users. At one point, legislation was introduced to prohibit such transfers.

Shapiro reminded the several hundred people inside the bus depot that his administration has negotiated $330.5 million in additional state funding in for roads and bridges with both parties.

Naomi Wildflower, a Kensington social worker, testified Thursday on a City Council resolution supporting a flex, which passed. Her family does not own a car.

“Even though I barely use state highways, a staggering amount of my tax dollars go towards them,” she said. “So, I am asking Gov. Shapiro to use highway flex funds to support the hundreds of thousands of Pennsylvanians who rely on SEPTA, even if there are many more Pennsylvanians who do not use it at all.”